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Making it affordable: Nine tips for first time home buyers
It seems that everyone loves a good real estate story. The media is filled with reports about soaring property values and home owners of modest means becoming instant millionaires when they sell. As a result, many first time home buyers, afraid of missing out, will rush into buying decisions and achieve less-than-spectacular results. As a first time buyer, your biggest challenge is to balance livability and profitability in a way that makes sense for you and your family. Remember, you are buying a home first and an investment second. Of course, there's no foolproof formula for buyer success, but there are steps you can take to stack the odds in your favor: Tip 1: Don't bet on market timing If you're waiting for prices to drop in places like Southern California, Washington D.C. or Miami, you may be waiting a very long time. In regions that are built out with limited room to expand, it's not realistic to assume property values will fall dramatically. Of course, prices in the nation's super-heated residential markets (much of California, Nassau-Suffolk Counties in New York, South Florida) should cool down at some point, but there's no guarantee that higher interest rates won't eat up any savings from a price correction. If your personal circumstances say it's time to buy, high prices alone shouldn't keep you on the sidelines. Current interest rates are still historically low, so you may consider locking in a mortgage before rates head north. Even in booming markets, there are good deals for those willing to devote some time and energy to finding them. Tip 2: Leverage free and low-cost resources There's an abundance of free and low-cost resources for homebuyers on the Web. A Web search can turn up helpful articles, buyer guides, online tools and purchase/ refinance calculators. Keep an eye out for helpful tools like step-by-step guides and checklists to help organize your search. Some Web sites now offer online tools to help you estimate home prices and search for undervalued properties. Many offers on the Web for free property valuations actually are come-ons from real estate brokers looking for seller listings, so check first to see what strings are attached. Tip 3: Check out the new models Real estate's old guard seems to be under assault at every turn today as traditional brokers battle competition from discount and Web-based brokers. Today, buyers have more options than ever before. You can use a full-service broker, discount broker or buy without a broker. To make buying more affordable, consider the homebuyer rebate programs that are becoming more popular. Rebates can help offset closing costs, which are a real obstacle for many first-time buyers. Be aware that some states currently ban real estate rebates all together, and others limit rebates to credits applied to closing costs. Rebate fans around the nation are keeping a close eye on Kentucky, as the Justice Department recently sued the Kentucky Real Estate Commission for violating antitrust laws. Kentucky is one of 15 states that ban or limit real estate rebates. Tip 4: Lock in a realistic budget To save time and trouble, first time buyers should have a realistic budget in mind before they shop for homes. One way to determine how much house you can afford is to get "pre-approved" by a lender. Pre-approval means you know exactly how much of a loan you'll qualify for, so you can limit your search to homes in the right price range. Pre-approval also boosts your credibility and negotiation position with sellers. Most lenders will offer pre-approval as a no-obligation free service, in hopes of winning your business. Tip 5: Buying - personal decision, business transaction The Department of Housing and Urban Development (HUD) advises home buyers to create a wish list to help focus priorities. That way, you'll remember that a spectacular foyer is nice-to-have, but safety and services are essential. Having clear goals will help keep you from getting carried away with emotional factors. Sellers who love their homes tend to ask too much, and buyers who fall in love can end up overpaying. With a little research, you can get can get an objective estimate of property value to make sure the seller has set a fair asking price. There are tools and resources on the Web to help you better understand home valuations. Tip 6: Don't let closing costs surprise you Once you understand the buying process, you should understand and budget for transaction costs. In addition to your down payment, buyers pay most of the closing costs when purchasing a home, including things like inspection fees, title insurance, taxes and more. Closing fees can add up to 5-7 percent of purchase price, and must be paid before you get the keys. Your lender can provide what's called a "good faith" estimate of your closing costs. Most closing costs are not negotiable but some are. When you're comparing lenders, don't be shy?ask which fees are negotiable, then ask if any discounts are available. Finally, be cautious about "no-cost" closing promotions because the lender may be simply passing on the costs in the form of a higher interest rate. Tip 7: Build a support team Buying a home is a big investment and a big decision, but you don't have to go it alone. Remember, at each step of the way, there are people and resources to help you. Use the Internet and ask friends for referrals. Don't be afraid to pick up the phone and call real estate professionals, mortgage providers, title companies and insurers to ask questions. These professionals should be good resources to help you learn more about home buying, because they want to earn your business. If they are not helpful, then you have also learned something important?that they don't deserve your business. Tip 8: Clean up your credit Low credit ratings mean that buyers won't qualify for the best available interest rates and fees, which could mean considerable extra expense each month for the life of the loan. Most financial institutions today offer risk-based lending - lower credit risk for lenders means better mortgage deals for customers. Credit reports frequently contain inaccurate information, which can hurt a buyer's purchasing power. First-time buyers should check their credit scores and fix any problems before applying for financing. Tip 9: Begin with the end in mind Author Stephen Covey's advice for effective living also applies to effective home buying. Resale may not your primary consideration, but it's an important factor. Can you buy in an up-and-coming neighborhood or region? How is the "commutability" from your new home to local employers? How good are the local schools? A few queries to your favorite search engine will turn up free or inexpensive school rating services. Also be on the lookout for outdated features when you buy. If the those small closets and harvest gold appliances seem out of step now, you can bet that they won't look any better to prospective buyers in a few years. Charles Warnock is Marketing Communications Manager at Homekeys, a South-Florida based provider of real estate technology and services. He writes often on real estate, finance, interactive marketing and business development. For more information, visit http://www.homekeys.net
MORE RESOURCES: South Florida home prices are rising, but experts see market correction - South Florida Sun Sentinel South Florida home prices are rising, but experts see market correction South Florida Sun Sentinel 10 Real Estate Charts Showing What's Next for Housing: Ivy Zelman Business Insider Real-estate agent explains new fees to homebuyers, he's not worried Business Insider Dr. Phil left speechless after real estate agent claims that squatting is justified by colonization New York Post Inside Chris Pratt and Katherine Schwarzenegger's Real Estate Portfolio Architectural Digest Prologis Warns of Slowing Industrial Real-Estate Market The Wall Street Journal Inside Bill Gates' real estate, from his Seattle to Florida houses Business Insider Local man allegedly poses as real estate agent in '20, steals over $7K | Hot Springs Sentinel Record Hot Springs Sentinel Real estate transfers: April 19, 2024 RiverheadLOCAL Real Estate Sales Include Two Falconer Commercial Properties Jamestown Post Journal Dodge County real estate transfers Fremont Tribune Real Estate Listings Are Going Green: 5 Eco-Friendly Sales Features on the Rise Right Now Realtor.com News OT Real Estate Spotlight of the Week: 4218 Edgewood Court The Owensboro Times Real-Estate Agents, Investment Advisers Chafe at New Anti-Money-Laundering Rules The Wall Street Journal Hot Tips for Home Buyers and Sellers Right Now Kiplinger's Personal Finance Westmoreland County Real Estate Transfers | Real Estate | latrobebulletinnews.com latrobebulletinnews.com Big Tech Is Downsizing Workspace in Another Blow to Office Real Estate The Wall Street Journal Real estate expert says several factors impact farmland prices brownfieldagnews.com The HYM Investment Group, Cathexis and National Real Estate Advisors Announce Pre-Leasing at Amaya Boston Real Estate Times A repurposed mill, church, and a library: 3 nontraditional homes for sale in Baltimore The Baltimore Banner The Michael Houck Real Estate Guide for April 20 and 21 Oil City News Massachusetts real estate transactions for Hampden, Hampshire and Franklin counties April 21, 2024 edition MassLive.com Co-op Assessments: Do You Have to Pay What They Say? 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(NYSE:ARE) Decreased by Zacks Research Defense World Darien and Rowayton Real Estate Report: April 11 to 18 darienite.com How Real Estate Helped Taylor Swift Become A Billionaire Yahoo Finance TikTok’s Origin Story: Court Files Show Role of GOP Megadonor Jeff Yass The New York Times China home prices slumped in March as property crisis drags on Business Insider Downtime: Pairing wine and real estate RichmondBizSense Blackstone Earnings Rise as Investment Giant Projects Commercial Real Estate Recovery - CoStar Group Fannie Mae, Freddie Mac clarify real estate commission rules National Mortgage News Real estate mogul concerned how Americans will deal with squatters: ‘Something really bad is going to happen’ Fox Business Dream Industrial Real Estate Invest Trst (TSE:DIR.UN) Stock Price Passes Below 200-Day Moving Average of $13.02 Defense World Banks Believe They Are Well-Prepared for Commercial Real Estate Fallout The Wall Street Journal Robert Bailey on Real Estate TPG Online Daily Robin Hunden of Hunden Partners honored with Jeffrey D. 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