Dealing with Financing

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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. Sub-primes may be history, but you’ll probably still be shown homes you can’t actually afford. 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. 

Choose your mortgage carefully. Choose your mortgage carefully, but remember that most people sell their home within 5 years, and many others refinance to change their terms. Mortgage rates are on the rise, but rates are still historically low. Right now is a great opportunity to lock in a low rate. Do know that from the time you make your offer to the time you close rates can rise unless your lender locks in the rate for you. 

Do your homework before bidding. Be sure to ask your REALTOR about price trends in the neighborhood and carefully consider comparable home sales. The length of time a home has been on the market will affect how flexible a typical seller will be with the price. If the house is just listed they are going to want to hold firm to their asking price. Also ask your REALTOR how closed prices compare to listed prices in the neighborhood. If the market is hot, houses may be selling for above asking price. Recently a lot of our local neighborhoods are going for 98% of asking price.