How to Stop Wasting Money On Rent
and Own A Home Instead
Buying a home can seem
like a frightening prospect. Whether it's
your first home, or your fifth, so much is
at stake — your savings, your credit rating,
your financial freedom.
It's difficult to get up
the courage to sign on the dotted line, even
if you want that home very, very badly.
How do
you determine whether or not the purchase of
a home makes sense?
What's the easiest way to examine the whole
picture, from emotions to economics?
I suggest
that you read this entire report before you
go house hunting. You'll learn how to
separate whims from true needs. You'll
discover how to prepare a game plan for your
real estate venture, how to research
effectively, choose wisely, finance
appropriately and survive the whole
procedure with your smile intact.
Seven Steps For Success:
1) Establish your needs and wants.
2) Determine how much you can afford.
3) Get pre-qualified or pre-approved by a
Lender.
4) Find a good real estate agent to help
you.
5) Find a home that meets your needs.
6) Make an offer to buy a home.
7) Save as much as you can on the purchase.
A Lender
can let you know what specific loan programs
would be best for you. They can also help
you understand what it takes to qualify for
the loan that you want.
By taking
a look at your financial situation and
looking at your credit history, a Lender can
usually give you a good idea if you can
qualify for the loan that you want.
Many
Lenders call this "Pre-qualifying a Buyer."
If you would like to be certain that you can
be approved for a loan, you may want to ask
to be pre-approved. In the approval process,
all of your documentation is completed and
submitted to an underwriter.
The
pre-approval you get back is an actual loan
commitment from a Lender. This means that
you definitely qualify for a loan. Talk to
your Lender about the costs and time
involved, as they are different for each
Lender.
The next
step is finding a home that also qualifies
for the loan.
By the
time you've done your homework and completed
the suggestions in this report, you will
have an excellent overview of how to find
and buy your dream home. And you'll have
plenty of confidence to back up your
decision to buy that special home, too.
Step One: Establish Your Needs and Wants
Begin your search for a perfect home by
making a careful assessment of the kind of a
home you need and want. I recommend that
you take the time to do this in writing.
Take
time, right now, to be as specific as you
can about your particular requirements.
Make a list including size, amenities, and
location. Then check off the things that
are most important. Follow behind those
items and star the top three things you
couldn’t live without. Save this list to
show your Realtor®.
Step Two: Determine How Much You Can Afford
Set
up a budget for yourself. Decide how much
you can really afford to invest monthly for
your house payment. Be realistic and decide
how much would be comfortable and how much
would be the highest amount you could
handle; this will be your “comfort” zone.
Keep in mind, most lenders will only allow
you to have 45-50% of your gross income of
debt including your house payment, taxes,
home insurance, and any car payments, loans,
and/or credit card payments.
Step Three: Get Pre-qualified Or Pre-approved
By A Lender
You
can save yourself a lot of time and
heartache by meeting with a Lender before
you start your search for a home. Plan on
providing your information on the last 24
months residence and employment including
contact information and income. Also gather
your last two years financial data including
W2’s, 1099’s, and tax returns. You will
need to provide the last 30 days pay stubs,
last bank statement, and information on your
last 12 months rental history.
Step Four: Find a Good Real Estate Agent to
Help You
You
can learn a lot about an agent by just
letting them "agent talk" to you about how
they help buyers. Within a few minutes, you
will probably be able to determine if their
style is compatible with yours.
Having an agent that is knowledgeable about
the mortgage side of the transaction is
beneficial to you.
Questions for agents:
Are you
knowledgeable about the area of town and
price range that we are interested in?
(Some agents specialize in only one area
or one price range.)
Do you have
the time to work with us? (This is
especially important if you're on a tight
deadline.) What procedure will the agent
follow in working with you? How often will
they update you with new property
listings?
Can you
represent me as my buyer's broker? Ask as
many questions as you can upfront. By
finding a good agent, you will save
yourself huge amounts of time and effort.
Step Five: Find A Home That Meets Your Needs
Five
Tips for Successful House Hunting:
- Keep an
organized record of all your research
data. Write down comments about the homes
that you see. Keep track of your likes and
dislikes.
- Make sure your
agent is aware of your time schedule and
expectations. Do you like to look at one
or two homes in a session? Four? Eight?
Discuss this with your agent.
- Tell your
agent about any homes you see that
interest you and that you'd like to know
more about. This includes homes you've
"discovered" as you've explored the area
yourself, or those advertised in the
newspaper.
- If you like to
spend time driving around by yourself
looking at homes, ask your agent for a
list of drive-bys — homes to consider
first from the outside. Your agent can
make appointments later to show you the
interior of those that appeal to you.
- Express your
likes and dislikes to your agent after you
look at a home. Honest communication is
essential. Many buyers are shy and afraid
to tell an agent what they really think of
a house. They think the agent might take
it personally. Remember, the homes don't
belong to the agent! You must be
straightforward about your likes and
dislikes in order for the agent to do the
best job for you.
Step Six: Make An Offer To Buy A Home
Your
real estate agent can help you make an offer
to buy the home that you want. It is
important to know beforehand whom your agent
represents. Some agents work only for the
seller. In this case the agent may not be
able to advise you what a fair offer to make
is. By looking at what homes are selling
for in the area and how long they are taking
to sell, you should be able to get a good
idea of value.
Step Seven: Save As Much As You Can On the
Purchase
There are only two major investments to
consider when buying a home. These are the
initial investment, which includes down
payment and closing costs, and the monthly
payment, which includes principal, interest,
taxes and insurance.
Here
are five ways to save on your initial
investment:
- Choose a low
down payment loan. You do not necessarily
have to put 20% or even 10% down. You can
pay 5% , 3% , or $0 down on some loans.
- Have someone
give you money to pay closing costs. A
blood relative, church or nonprofit
organization can give you money for
closing costs.
- Ask the seller
to pay some of your closing costs as part
of your offer. Sellers are usually allowed
to contribute to a buyer's closing costs.
- Shop around
for home owners insurance. Lenders
require one year to be paid in advance so
make sure you are getting a fair price but
you are well insured by a reputable
company.
- You can deduct
money paid for discount points from your
gross income before computing your tax.
See a CPA for more information.
Here
are four ways to keep you monthly payments
low:
- Get a loan
that doesn't have monthly mortgage
insurance premiums. You may be able to
reduce or eliminate them by paying a
little more at closing. By putting 20% or
more down, you can eliminate them
entirely. Also ask your mortgage broker
about programs that do not require
mortgage insurance.
- Take advantage
of rate lock programs that are currently
available. You can lock in a low interest
rate 30-45 days in advance.
- Remember that
interest payments on a primary residential
mortgage are fully deductible in most
circumstances. Your property taxes may
also be deductible. Tax rates definitely
favor homeowners.
- Choose an adjustable rate or
interest-only mortgage. Adjustable rate
mortgages (or ARMs) can be up to 3% lower
than fixed rates
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