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Tip #1: Research Is
The Key To Discovery
Home sellers won't call you with an offer to buy a
maintenance-free home with a wonderful mortgage. You have to find the gems
yourself! Only by reading available materials,
talking to friends and experts, and
spending time looking at different homes, schools,
and neighborhoods will you end up with your American dream.
Avoid the nightmares by learning how best to buy and maintain a home.
Tip #2: Make A Plan
And Get Pre-Qualified
Every important decision
needs to be clearly thought out. Developing a home buying plan
can help you focus on the important factors and organize the entire
process. You may even want to use a binder with sections on house hunting,
home financing, service providers, etc. Loan pre-qualifying helps you
determine the home price you can afford and presents you as a genuine
prospect to the seller. A lender typically uses
the 28% formula (your monthly mortgage can't exceed 28% of your
monthly income) in approving your loan.
Planning your actions and getting pre-qualified will keep you out of the
panic mode and allow you to take advantage of opportunities.
A thorough plan will save both time and money!
Tip #3: Value, Value,
Value
The days of 10-30% annual
appreciation have passed. Home buyers in the 1970's benefited
tremendously from what seemed like ever appreciating home prices.
Nowadays, you're looking at slow growth while guarding against the
possibilities of falling prices, skyrocketing ARM rates and corporate
layoffs that can dramatically affect your home values. The classic rule of
buying the worst house in the best neighborhood still applies. If you buy
with an eye towards improvement, you can customize the home to fit your
needs. The saying, "make money buying a home, not selling one," should
keep you focused on the long-term importance of the purchasing price.
Tip #4: Create A Top
10 List of Amenities
When shopping for a home,
list the features (fireplace, fenced-in yard, new appliances,
etc.) that are most important to you in deciding
on which home to buy. Establishing "your criteria" early on
will save time shopping for inappropriate homes and may keep you from
buying a home on a whim -- for example, because of a circular stairwell --
that doesn't meet your fundamental requirements. As detailed in Tip #3,
your top reason for buying a home should be the value you are getting.
Some of your top 10 amenities should logically be sacrificed if an
incredible value is available.
Tip #5: Fixed vs.
Adjustable Rate Mortgages
Which type of loan fits
your particular needs? If this will be your first home or a
"transitional home" -- one you plan to own for a short time, an ARM may be
the best type of loan. If it's going to be your dream home or one you plan
to raise a family in, then you may want the stability of a fixed rate
mortgage. If you choose an ARM, the index should be based on the Cost of
Funds Index if rates are increasing, and Treasury Bills if they are
decreasing. The COFI's are less volatile over time than T-Bills; make sure
the teaser rate is understood and what the real rate would be.
Whichever loan you choose,
make sure that you scrutinize all the closing costs. If you are
required to have a mortgage escrow account and private mortgage insurance,
make sure you understand the terms and cancellation procedures. Also, make
sure there are no prepayment penalties so that you can utilize an
accelerated mortgage plan. A good mortgage reduction plan can save you
tens of thousands in interest costs, and shorten your loan term, with only
small extra principal payments. If you experience negative changes in your
job, health, or marital status, you can revert to the standard payments in
your mortgage contract.
Tip #6: Sign A
Contract That Protects You
Make sure that the contract
you put on a house allows you to arrange financing, inspect the home and
negotiate any problems that you uncover. Ensuring that the
contract you sign will minimize potential legal battles will let you swim
in your new pool with your family and neighbors instead of with the
sharks.
Tip #7: Put Yourself
In The Seller's Shoes
You are about to make one of the most important
decisions that will affect both your life and the life of the seller.
If you take time to understand the reasons the
seller bought the home, their reasons for selling, and the home
improvements they have or have not made, you'll be in a better position to
evaluate the home and negotiate a better deal. In the end, the
home buying process excludes the professionals and comes down to the
individuals buying and selling the home. A closer look at the seller may
help you in deciding whether and for how much to buy a particular home.
Tip #8: Develop A
Mortgage Shopping Chart
One of the biggest decisions to make before putting
a contract on a home is how to finance the purchase. There are 10,000
lenders competing for your mortgage business. The days of simply walking
into the community bank and negotiating with the loan department manager
are over. Today, you can apply for a loan over the Internet or even use a
mortgage broker to shop for your loan with hundreds of lenders.
When choosing a lender, you want to avoid apples to
oranges contrasts by comparing fixed rates to fixed rates, not fixed to
ARM's. Create a chart that lists different types of loans,
fees, and at least five mortgage providers (including a mortgage broker).
Tip #9: Get A Quality
Home Inspection
Although it is hard to believe, more people pay for
inspections before buying used cars than when making the biggest
investment of their lives -- their homes. Paying
for a qualified home inspection before you buy a home isn't just spending
"a little extra" for peace of mind; it's absolutely essential for anyone
who doesn't want to spend thousands of dollars for repairs.
Tip#10:
Peace of Mind: Home
Protection Plans
To protect both yourself as a buyer, and well as the
seller, it is a good idea to purchase a home protection plan. What
exactly is it? A home warranty,
or home protection plan, is
a service contract, normally for one year, which
protects homeowners against the cost of unexpected repairs or replacement
on their major systems and appliances that break down due to normal wear
and tear. A negotiable contract between the buyers and sellers
which do not overlap or replace homeowner's insurance policy, this type of
warranty can save the new homeowner lots of headaches, as well as put
seller's fears to rest. The warranty covers mechanical breakdowns, while
insurance typically repairs the related damage, for example: if a hot
water heater burst and destroyed a wall in your home, the warranty would
repair the water heater and your insurance would pay to fix the wall.
Information provided by The
American Homeowners Association, Copyright© 1998
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Jason Diep ~ Broker, Estates
Division
Realty Estate Properties
GL BAL
Investment & Funding
PHONE 888-226-1044
Email: jd@globalfund.us
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