Tip 1: What’s needed to purchase?
You will need three things to buy a house -- good income, good credit, and some cash. And if you lack any one of those, sometimes even if you lack two, there is often a way around it.
After all, if you have enough cash, income and credit won't matter. You can simply pay cash for your home. If that's your situation, in fact, you're in a strong negotiating position and can sometimes buy at a bargain figure, because you represent a sure thing, a simple transaction, for the seller.
So what if you have good income and credit, but lack money for down payment and closing costs? Several options are open to you. For starters, veterans can obtain a VA-guaranteed loan with no down payment at all. And if you can find sellers who agree, the VA will allow them to furnish the cash outlay you need, covering everything from bank points to your prepaid property taxes.
Any buyer can apply for an FHA-insured mortgage, with down payment of less than three percent. New regulations allow the down payment to be furnished by a relative. Some of your closing costs (prepaid mortgage insurance premium for example) may be financed along with the rest of the loan. And a cooperative seller may agree to cover some of your other costs.
Or perhaps you'll find a seller willing to "take back" financing -- let you pay month by month on a mortgage, with nothing down and minimal closing costs. You'll need a sterling credit record and really dependable income before a seller is likely to take such a chance on you, and it will help if the seller doesn't need immediate cash. Small income properties owned by elderly landlords who are tired of managing tenants are likely bets.
In recent years, many new programs have offered special opportunities for those who can't meet the usual credit qualifications for mortgage loans. Some of these programs are federal; others are state-sponsored or even local. Some require you to receive credit counseling and attend education seminars on how to manage money. Your real estate agent should have information on what is available in your area.
Written by Edith Lank
Tip 2: Don’t buy if you can’t stay put!
- If you can't commit to remaining in one place for five years or more, then owning is probably not for you, at least not yet. With slow appreciation and the costs of buying and selling a home, you may end up losing money if you sell any sooner.
- Start by shoring up your credit. Since you most likely will need to get a mortgage to buy a house, you must make sure your credit history is as clean as possible. A few months before you start house hunting, get copies of your credit report. Make sure the facts are correct. Fix any problems you discover.
- Aim for a home you can really afford. The rule of thumb is that you can buy housing that runs about two-and-one-half times your annual salary. But you'll do better to use one of the Internet's many calculators to get a better handle on your income, debts, and expenses and how those affect what you can afford.
- Don't worry if you can't put down the usual 20 percent. There are a variety of public and private lenders who, if you qualify, offer low-interest mortgages that require a down payment as small as 3 percent of the purchase price.
- Buy in a district with good schools. This advice applies even if you don't -- and won't -- have school-age children. Reason: When it comes time to sell, you'll learn that strong school districts are a top priority for many home buyers -- thus helping to boost property values.
- Get professional help. Even though the Internet gives buyers unprecedented access to home listings, it's still a good idea to use an agent. Look for an exclusive buyer agent, if possible, who will have your interests at heart and can help you with strategies during the bidding process.
- Choose carefully between points and rate. When picking a mortgage, you usually have the option of paying additional points -- a portion of the interest that you pay at closing -- in exchange for a lower interest rate. If you stay in the house for a long time -- say five to seven years or more -- it's usually a better deal to take the points. The lower interest rate will save you more in the long run.
- When house hunting, bring your camera. Or at least a notebook to jot down reminders, since after you look at a half-dozen or so houses the details begin to blur in your mind. The best choice would either be an electronic camera that lets you take notes right on the image, or a Polaroid so that you can scribble comments in the margins.
- Do your homework before bidding. Your opening bid should be based on the sales trend of similar homes in the neighborhood. So before making it, consider sales of similar homes in the last three months. If homes have recently sold at 5 percent less than the asking price, you should make a bid that's about eight to 10 percent lower than what the seller is asking.
- Hire a home inspector. Sure, your lender will require a home appraisal anyway. But that's just the bank's way of determining whether the house is worth the price you've agreed to pay. Separately, you should hire your own home inspector -- preferably an engineer with experience in doing home surveys in the area where you are buying. His or her job will be to point out potential problems that could require costly repairs down the road.