Tips for Buyers
Buying a home is a major milestone, and it is important that you acquire as much information as possible before making this investment. While my clients generally ask me questions about improving their credit and getting a lower interest rate, the outline below covers these issues in more detail.
Be Prepared & Knowledgeable
Sign a contract with a buyer’s agent who is familiar with the area in which you want to buy a home; independently search your local MLS and realtor.com; and find a mortgage broker who inspires confidence and has a solid reputation.
Before you actually visit any homes, research and select a lender such as Quicken Loans, AmeriQuest, or Wells Fargo. After you have chosen the one that is right for you, get pre-approved to determine your price range. This enables you to show potential sellers that you are a serious buyer, which can also increase your bargaining power when you find your dream home.
Understand Your Loan
There are various types of mortgages, 30 year fixed, 15 years fixed, 5/1 ARM, 3/1 ARM, etc., that you need to be familiar with before you should sign on the dotted line. While a 15 or 30 year fixed mortgage with 20% to 25% down is the best option for most first time buyers, I occasionally advise some people to get an 80 / 10 / 10 loan. Twenty percent down may seem excessive and unexpected, but paying 20% down or more towards the note allows you to avoid the PMI (Private Mortgage Insurance) cost that can be expensive. As a general rule, try to stay away from exotic loans to avoid fluctuating costs from month to month and changing interest rates. If interest rates should decline from your loan origination rate, in many instances you can refinance.
Preparing Your Credit
Everyone knows that their credit score will be an important element in determining their mortgage payments. Here are a few tips for improving your score in the months leading up to the closing. Make sure you keep the balance on your credit cards under a quarter of the total line of credit. Avoid large purchases or transfers that might appear out of the ordinary. Pay off debts such as student loans that may be keeping your score down.
Your lender will generally require two years of tax returns, a year of bank statements, W-2’s and 1099’s from the past two years, and a list of your current debts such as car and student loans. By having these documents prepared prior to the bank request you can save yourself a lot of time and avoid unnecessary stress.
Understand The Value of Homes Within Your Local Market
Many realtors will offer you comparables "Comps" on recently sold homes in your area of interest. Be sure to review these carefully, particularly the asking price of the homes, what they sold for, and the price per square foot. With this information in hand, you can submit a more competitive first offer and be perceived as a serious buyer.
After your offer is accepted, I strongly suggest using the quick, easy, and free services of LendingTree to compare interest rates for your mortgage. While you might have already found a trusted lender for your pre-approval, there is no guarantee that he will give you the best rate. One thing you can do, however, is take the best rate you receive from LendingTree and discuss this rate with your local bank and trusted lender. With this bargaining power, you can determine who really wants your business, receive the best possible interest rate, and possibly save more money in the long run.
Avoid Pricey Closing Costs
As you narrow down your list of mortgage lenders and receive some quotes on interest rates, ask your lenders for a good faith estimate so you can estimate your closing costs. Although many individuals overlook these one-time, up-front costs, they can add up quickly and are an important element in selecting a lender who is right for you.
Get an Inspection
When your offer is accepted and it seems that the process is almost over, do not get too attached and believe that the home is already yours. Although it can be a major stumbling block in the negotiations, you need to have a qualified inspector look for termites, pests, foundation problems, and numerous other things that cannot be seen when you stroll through a home. Sometimes the inspector will only find minor problems, but other times there are extremely expensive issues that may make your purchase impossible. Under no circumstances should you omit a home inspection prior to closing.
It can be expected that this milestone is going to be somewhat stressful considering the major investment and lifestyle change you are making. However, you should try to make this a fun experience. Take photos of the homes you like, both inside and out, and make notes of the pros and cons for each home. This will enable you to remember the differences between the homes in order to make your final decision.
"Wherever you go...go there with all your heart."
If you're looking for a home in the Triangle, you need a real estate expert on your side. That's why you should choose Gillooly Realty. As local area experts, we will help you find your dream home for the right price. We look forward to assisting you in your journey!