As the events of the last few years in the real estate industry show, people forget about the tremendous financial responsibility of purchasing a home at their peril. Here are a few tips for dealing with the dollar signs so that you can take down that “for sale” sign on your new home.
Get pre-approved. By getting pre-approved as a buyer, you can save yourself the grief of looking at houses you can’t afford. You can also put yourself in a better position to make a serious offer when you do find the right house. Unlike pre-qualification, which is based on a cursory review of your finances, pre-approval from a lender is based on your actual income, debt and credit history. By doing a thorough analysis of your actual spending power, you’ll be less likely to get in over your head. In today’s market, many sellers will not consider an offer unless the buyer has been preapproved.
Choose your mortgage carefully. Used to be the emphasis when it came to mortgages was on paying them off as soon as possible. Today, the debt the average person will accumulate due to credit cards, student loans, etc. means it’s better to opt for the 30-year mortgage instead of the 15-year. This way, you have a lower monthly payment, with the option of paying an additional principal payment when money is good. Additionally, when picking a mortgage you have the option of paying discount points to lower the mortgage rate. Jerry does not recommend doing this unless you are going to be in the home for 10 years or more. Why? Because generally it takes 6-8 years to break even on the money you paid upfront to lower your rate. Here’s an example….Let’s say that you want a lower rate on a $200,000 mortgage. You want to lower your rate by a quarter of a percent. Typically that’s going cost $1800-$2000 more…upfront. Jerry will show you how to divide the payment savings into the amount you paid upfront. You will be amazed at how long it takes to just break even. Use the money for a new couch or drapes or something else that you can enjoy in your home.
Do your homework before bidding. Jerry will provide information on recent sales in the neighborhood you are considering. The market now is considered very hot with many buyers offering even more than the listed price. Jerry will give you information that will help you make an offer that has a good chance of being accepted.