As we are moving into today’s fast changing world of the internet, real estate professionals are often at a loss for where they should start in order to get the most bang for their money. With the real estate market cooling off at the current financial downturn, many people are finding themselves in an awkward situation that the value of their property is less than what they own on the mortgage. Uncertain economic times, changing legislation, the proliferation of new development and lack of time make it more difficult for consumers to use their resources effectively.
Buying property is essentially the biggest financial commitment of our lives. With inventory diminishing daily and multiple offers being extremely common, it is of great importance that we position ourself to have the “Best Chance” to get our offer accepted. We enhance our chance of buying property of our choice by getting pre-approval for the purchase. This takes very little time and is of great value. At this time, identify the price range for which we qualify that fits our lifestyle.
Be prepared to preview a new property quickly. When buying property, time is essence and be sure to always be prepared and ready to be on the go. Homes sell sometimes in hours. Be prepared to make decisions quickly and be accessible to change the terms instantly. It is a must that buyer and agent must have instant communication access. Maintain instant access to each other via office phone, email, fax, handphone or sms. Whether we are buying property for investment or to live in, extreme care should be exercised to ensure our purchasing experience is stress free and risk free. These few buying tips will make us aware of some of the pitfalls and ways to avoid them.
If we intend living in the property that we intend to buy, we must ensure that the said property really suit at our needs. If we have young children or elderly people living with us, we might wish to avoid stairs and prefer a level floor. Do we intend to install a pool in the future? Is the garden too big or too small? Will we need more bedrooms in the near future?
Can we deflate the joy of buying a new home more than worrying about being turned down for a mortgage loan? Avoid disappointment by sharpening our credentials before we go hunting for a loan. The following steps apply to both spouses if both our incomes are being used to qualify for a loan:
1. Job stability – Lenders look for stability of employment. Two years in the same job or at least the same occupation is considered the minimum. It is usually best not to change employment if we have a home purchase in mind unless it’s going to increase our income. Whatever we do, don’t start a new business within two years before applying for a mortgage. As much as everyone else loves an entrepreneur, lenders do not.
2. Credit – Lenders judge on how we have paid back our previous loans. Our credit report will show our lender all of our past and current debt. It will also show if WE paid on a timely basis. The best advice is to make all of our credit payments on time. We will be asked to explain any late payments on our credit cards, car payment, or mortgage. Don’t say we forgot. Lenders don’t accept this as a reason to be late. If we presently have a mortgage, be sure we don’t make payments after the thirty days’ grace period. Conventional lenders will not offer us a mortgage if we have been delinquent in the past twelve months.
3. Don’t buy anything new – If we know we are going to be buying a new home, it is not wise to go out and buy a car or make other major purchases on credit. Our total monthly bills will be added up to see if we can afford the home payment. The higher our monthly bills, the lower the amount of mortgage for which we will be qualified. Don’t buy anything even if we are going to pay cash. Lenders like to see money in the bank.
4. Savings – When we start thinking about purchasing a home, all of our efforts should be directed to saving money. The more we put down on the purchase price, the lower our monthly payments. A larger down payment also makes it easier to qualify for a loan. There are also many costs associated with home loans that generally add up to about 5% of the total loan amount. The lender is going to verify that we have enough money to pay these closing costs in addition to our down payment. In today’s market there are also loans available that have no closing costs if we are willing to pay a higher interest rate or included in the principal amount. A good idea when money is tight at closing, but it could be more expensive if we live in the home for a long period of time. Don’t get our down payment money from a sock under the mattress. We should be able to show that we saved the money ourself so it is best to keep all of our savings in one account. The lender is going to want to see at least two consecutive months of bank statements verifying our savings.
5. Income – Our income is one of the most important ingredients for qualifying for a home loan since it will be used to determine the amount of mortgage we can afford. Our employer will be asked to verify our employment by completing a written verification form. Alternatively, we can provide a current payroll check stub and two year’s tax returns to prove our income. If we are self-employed, we will be required to provide a copy of two years tax returns. For qualifying purposes, only the income we show on our tax return will be considered.
6. Shop around – Talk to several lenders. Work with someone who we are comfortable with, who has intelligent responses to our questions and does not use high pressure tactics. Look for a lender that has several different types of loans to offer and then ask lots of questions.
7. Educate ourself – Learn as much as we can about mortgage financing and we can save tens of thousands of dollars over our lifetime. Read articles, search the internet, check out books from the library, attend lender seminars for new home buyers or ask our local financial institution for information that may be available.
8. Alternatives – If all attempts to finance our new home fail, ask the Real Estate Agent to identify property where the seller is willing to stretch the financing with no problem on outsourcing for end financing.
Above all, make sure we understand and are comfortable with every aspect of the transaction. The real estate agent or realtor can be an invaluable asset in helping us to make educated decisions on buying property.