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Guidelines for Home Buyers |
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Recently, the National Association of Realtors estimated that buyers will purchase 6.18 million homes this year. The strong economy, coupled with low mortgage rates and rising incomes, permit many Americans to invest in real estate. Before you look: ¨ Know what you want in a home. Take into consideration your lifestyle and life choices, as well as the length of time you will own the home.¨ Get a copy of your credit report. Close unnecessary open credit accounts, notify credit bureaus of any errors and prepare explanations for accounts with less-than-perfect payment records. ¨ Enlist a professional real estate agent. Finding a qualified real estate agent can be a complicated task. ¨ Determine what you can actually afford. Your monthly mortgage payment should not exceed 25-36% of the combined household gross income. ¨ Determine what type of loan to use. See if you qualify for an FHA, VA or other government loans and if you prefer a fixed mortgage or an adjustable rate mortgage (ARM). You can discuss this with your Realtor. ¨ Secure a preapproval letter. Do not confuse this with prequalification. Prequalified buyers typically talk to a lender on the telephone but the information provided is not verified. In contrast, being preapproved demonstrates to the seller that you can afford to finance the home. Most lenders provide preapproval for little or no charge. ¨ Avoid paying points. Each point equals one percent of the loan value and is paid at the time of the closing. Sometimes, another party (e.g. an employer of a relocating employee or the seller) offers to pay points as an incentive; the buyer secures a lower interest mortgage and can deduct the points, regardless of who absorbs the cost. During the search: ¨ Ask your agent to check the MLS several times a day. Real estate agents can list your search criteria and use the Multiple Listing Service (MLS) database to track houses you already have visited.¨ Understand the asking price. In a seller's market, the asking price is often the minimum bid and sellers may receive multiple offers. In a buyer's market, homes usually sell for less than the asking price. The longer a home is on the market, the more likely the seller will negotiate price. ¨ Research the home. Look up information at City Hall and talk to neighbors. ¨ Keep a flexible schedule. Be prepared to view a home on a moment's notice and keep your checkbook on hand to make an offer. Once you find your dream home: ¨ Allow your agent to negotiate on your behalf. The agent has the experience, knowledge, and emotional detachment needed to close the deal.¨ Insist on a professional home inspection. The inspector can determine if the home has any problems and an appraiser can determine if it is valued correctly. Mortgage companies require an appraisal to protect their investment. ¨ Ask for an estimate of closing costs and the approximate total monthly payment. Monthly costs include principle, interest, taxes and insurance (including title, homeowners and PMI if paying less than 20% down), and assessments for condominium ownership. ¨ Avoid consolidating credit card debt and closing costs into this mortgage. There is no reason to pay 30 years of interest for charges normally paid off within months.
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