Heather

Having a dream home is everyone’s dreams. But you must think carefully when you are about to buy a house. These are some tips on buying a house or property.

1. Find out your credit rating early on to assess how strong your mortgage application is. The higher your FICO score, which ranges from 300 to 800, the better rate you’ll qualify for. Go to MyFICO.com and for a fee request a report, or request a complete credit report from a major credit reporting agency and ask that your FICO score be revealed on it.
2. If you qualify, check out first-time buyers’ programs, which often have much lower down payment requirements. These are offered by various states and local governments. You may also be able to access up to $10,000 from your 401(k) or Roth IRA without penalty. Ask your broker or employer’s human resources department for specifics regarding borrowing against those assets.
3. Get a firm estimate of how much you can expect to pay in closing costs (charges that the lender levies connected to the purchase of the house). These take in various charges that generally run between 3 to 6 percent of the money you’re borrowing. Credit unions often offer lower closing costs to their members.
4. Try not to fall in love with one particular property. It’s great to find exactly what you need, but if you get your heart set on one home, you may end up paying more than it’s worth because you’re emotionally invested. The deal may also fall apart.
5. Realtors charge the seller a percentage, usually between 5% and 7% depending on your area, on the negotiated sales price, called a commission. The buyer’s Realtor is customarily paid a percentage of the total commission paid by the seller at closing, which amounts to about half, or 2.5% to 3.5% while the seller’s Realtor receives the other half of the commission. An individual Realtor’s commission is split again with their company resulting in the actual gross commission to your Realtor being closer to 1.5% to 2% of the total. Most states require disclosure of agency (who represents whom) and buyers are wise to agree to work with a Realtor who will contractually represent the buyer’s interest alone. Realtors make their living through referrals from satisfied clients and therefore it’s not in your Realtor’s best interest to fail to negotiate the best possible price and terms for the buyer.(Example: A house offered at $100,000 could mean $3000 to the buyer’s Realtor and their company. If the Realtor negotiates a price of $95,000, it would mean a reduction in commission to the buyer’s Realtor and their company of only $250, or $125 to $150 gross to the agent–not an amount a competent agent would consider worth never getting a referral from the client in the future.) Buyers should be aware that a buyer’s Realtor can and will help the buyer seek out houses sold directly by the owner (through signs or various websites)and negotiate not only a fair price for the home but their own commission as well. Realtors make it their business to know alot about neighborhoods and home construction, costs of repair and remodeling and determining actual value of a property. Their vested interest is in having a satisfied client who will send them future business, not sharing as little information as possible to get a home sold and assuming that the doctrine of “buyer beware” is acceptable.
6. Whether you go with a realtor or not, ask the seller to agree to a home-inspection and make your contract contingent on completion of same. A seller who won’t allow a home-inspection has something to hide — walk away! A home inspection costs between $150 and $500, depending on the area, but it can prevent a $100,000 mistake. This is especially true with older homes, as you want to avoid financial landmines such as lead-paint, asbestos insulation and mold.
7. Use a real-estate lawyer to review closing documents and represent you at closing. Realtors are *not* lawyers, and are legally unable to give you legal advice. Lawyers may charge $200-$400 for the few minutes they’re actually there, but they’re paid to look out for you.
8. If you are unsure about the price, have the home appraised by a local appraiser. Never buy the most expensive house in the neighborhood! When appraising a home, appraisers will look for “comparables” or “comps”, homes in the area which have similar features, size, etc. If your home is more expensive than the comps, or the appraiser has to find comps in a different subdivision or more than 1/2 mile away, beware! Your bank may balk at financing the home, and you probably won’t see your home appreciate in value very much. If you can, buy the least expensive home in a neighborhood — as homes around you sell for more money than you paid, your home’s value increases.
9. If you can’t afford a 10%-20% downpayment on your home, but have good credit and steady income, a mortgage broker may assist you with a combination mortgage. In that, you’re taking out a first mortgage up to 80% of the value of the home, and a second mortgage for the remaining amount. While the rate on the second mortgage will be slightly higher, the interest on it is tax-deductible and combined payments should still be lower than a first mortgage with PMI. If you’re buying new, consider the Nehemiah Program to get assistance with your down-payment.