buying a home
With the help of your real estate agent – and these tips – you can become a savvy home buyer without breaking your budget.
1. Get pre-approved for your home loan: This means, fill out a loan application and go through the process of securing financing. When you’re ready to seriously evaluate real estate, you’ll know exactly how much home you can afford. This helps to prove to a seller that your offer is sincere.
2. Explore creative financing options: During the home loan pre-approval process, ask about ways to get creative with your financing. Low down payment options, first and second mortgage combinations and first time homebuyer programs might help you afford more funding. Many lenders are now offering interest-only home mortgages; just make sure you thoroughly evaluate the terms for this type of home loan.
3. Sell your existing home first: Although selling your existing home before finding new real estate to buy can be a little nerve racking, any inconvenience will be offset by your ability to make an offer with cash in hand. Contingent purchases are not recommended when negotiating to buy a home. Having your financing in order and your bags packed will give you the advantage in a competitive market.
4. Look for vacant real estate: Perhaps a seller’s job has transferred him out of the area. Or maybe a family purchased a new home before putting their existing one on the market. In any case, a vacant home could be just the deal for a savvy home buyer, so have your real estate agent look for vacant property in your preferred neighbourhoods. Keep in mind, the longer a house stays empty, the greater your negotiating power will be.
5. Consider cosmetic fixer-uppers: If you’re handy with a paintbrush, a toolset and gardening equipment, consider buying real estate in need of cosmetic repairs. Property which lacks curb appeal needs minor handiwork or the yard overhauled could end up being the home of your dreams for a price you can afford. You just need to look beyond the needed cosmetic work to see the potential of a fixer-upper.
6. Buy a home that’s a major remodel project: If you want to live on a lake but can’t afford a home mortgage, investigate to see if there is a dilapidated cottage for sale. In time you’ll need to gut the existing home and build from the ground up or contract significant home improvements. But in the end your property value will skyrocket. And if your carpentry and other construction skills are well-developed, you can save even more and accrue “sweat equity” during your remodel by doing much of the work yourself.
7. Don’t discount bank foreclosures: One person’s loss could be your gain if you buy real estate in foreclosure. Although the search for a decent foreclosure may take a while, your real estate agent should be able to help. The U.S. Department of Housing and Urban Development can be an excellent resource for foreclosed properties. Because HUD houses are sold at market value, your best bet will be homes that need cosmetic work or even major repair.
8. Land with a manufactured home: Sometimes, to buy a home on a budget, you need to look beyond conventional homes. Even if your desire is to buy real estate, you may have to settle for a piece of property in an outlying area with a mobile or manufactured home. Discuss this option with your real estate agent and try to keep an open mind about this possibility.
9. An older, smaller home: Older homes are typically priced much less than newer construction and don’t tend to create buyer bidding wars. If you can enjoy life in an older and smaller home in a neighborhood or suburb off the beaten path, this could be your ticket to real estate ownership.
10. The cheapest house in the best neighborhood: You have your heart set on a specific – and expensive – neighborhood. Maybe it’s the schools you’re interested in. Or perhaps it’s the close proximity to downtown or the waterfront. In any case, a budget-savvy buyer will look for the least expensive home for sale in the neighborhood. If you’re not in a hurry, you can even play the waiting game to see what properties come on the market. Your real estate agent can be a real asset in this case by investigating potential sellers.
Buying real estate without breaking your budget will require research and compromise. On moving day, however, you’ll have the satisfaction of knowing your homework paid off!
Buying the right house at the right price with the right loan isn’t simple. But it’s easier if you have the right team.
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A proposed rule intended to prevent the kind of reckless lending and borrowing that heaped so many toxic mortgages into the marketplace in recent years has alarmed some groups, who argue the unintended consequences could worsen the nation’s housing troubles.
The plan would require homeowners to make down payments of at least 20 percent of the cost of a home.
Barry Zigas, director of Housing Policy for the Consumer Federation of America in Washington, D.C. said recently, “It’s a good thing to have more equity in your house, but it’s not a good thing for the federal government to set a 20 percent down payment as the gold standard of mortgage underwriting.”
As proposed, the 20 percent down payment requirement, which grew out of the Dodd-Frank regulatory overhaul enacted in July, would not apply to all residential mortgages.
It is intended to apply to mortgages banks plan to package as mortgage-backed securities to sell to investors. If lenders do not require a borrower to make the 20 percent minimum down payment, the financial institutions would be required to hold at least 5 percent of the value of the loan on their books, a move to make sure they, too, would lose if a loan goes bad.
Groups that oppose the proposal say banks will either decide not to lend money to people who don’t have 20 percent or will charge higher interest and fees to offset the bank’s cost of holding the 5 percent reserve.
It is unclear how soon the rule would impact the housing market, if it is approved. Most home loans in this country are insured by federal agencies, such as Federal Housing Administration with its 3.5 percent down payment. Those mortgages would continue to be exempt from the 20 percent requirements.
The new rule establishing guidelines for the Qualified Residential Mortgage rule would be a complete pendulum swing from the days of easy credit, which gave birth to mortgage innovations that fueled the housing boom.
The 5 percent risk retention rule would make sure that if lenders did not require borrowers to put 20 percent down, the lender would still have a stake in the loan being repaid.
Some analysts are convinced that if the rule is approved, home prices could decline and more people with homes underwater — the houses are worth less than the owners owe — will walk away, creating a bigger overhang of unsold properties.
What do you think? Will a minimum 20 percent down rule cripple the already fragile housing market? We’d love to hear from you. Sound off by clicking the comment link below. Your email address will never appear on our website or shared with any third parties.
Tags: banks, buying a home, home equity, home loans, mortgages
When it comes to houses, there are deals – and then there are steals.
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Tags: bank owned property, buying a home, home prices, reo's
Given the recent experience in housing is real estate an asset that should be abandoned? Obviously not but that mentality has grown dramatically within many segments of our nation.
Can you blame people for never wanting to venture back into the real estate market? No. It is understandable but it is not real estate’s fault. Very regrettably, far too many people did not fully understand and appreciate the dynamics at work in the real estate market, nor did they appreciate the risks involved in the mortgage finance space. That said, real estate ownership should not be abandoned.
Sentiment is growing that owning real estate as an asset is no longer wise. Bloomberg highlights this reality in writing, Americans Shun Cheapest Homes in 40 Years As Owning Loses Appeal.
While this thought process may be understandable, it is this type of thinking which is a strong indication that real estate is likely approaching a time to buy. That said, while some may want to speculate in real estate for a quick flip, it’s not likely that we will see a sharp bounce in real estate. It is more likely that we’ll see a continued gradual mild erosion in prices after the crash that has occurred. From there, we will likely experience a market with flat to mild upticks in prices for a number of years as the excess housing supply is absorbed.
Homes once again need to be viewed not merely as an asset but as a place of value in which lives and relationships develop, careers can grow, and people prosper emotionally.
As forecasted by many, it would seem to be a good point of entry for buyers who are well positioned to make a solid down payment and live well within their means and ability of making monthly payments.