Dealing with Financing

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As the events of the last few years in the real estate industry show, people forget about the tremendous financial responsibility of purchasing a home at their peril. Here are a few tips for dealing with the dollar signs so that you can take down that “for sale” sign on your new home.

Get pre-approved. Sub-primes may be history, but you’ll probably still be shown homes you can’t actually afford. By getting pre-approved as a buyer, you can save yourself the grief of looking at homes that are out of your range. You can also put yourself in a better position to make a serious offer when you do find the right house. Unlike pre-qualification, which is based on a very brief review of your finances, pre-approval from a lender is based on your actual income, debt and credit history. By doing a thorough analysis of your actual spending power, you’ll be less likely to get in over your head. The pre-approval process is usually free and does not take up a lot of your time.

Choose your mortgage carefully. Used to be that the emphasis when it came to mortgages was on paying them off as soon as possible. Today, the debt the average person will accumulate due to credit cards, student loans, etc. means it’s better to opt for the 30-year mortgage instead of the 15-year. This way, you have a lower monthly payment, with the option of paying more when money is good. Additionally, when picking a mortgage, you usually have the option of paying additional points (a portion of the interest that you pay at closing) in exchange for a lower interest rate. Currently with rates being as low as they are, this is not a suggested practice.

Do your homework before placing your offer. Before you make an offer on a home, do some research on the sales trends of similar homes in the neighborhood with sites like Realtor.com. Consider especially sales of similar homes in the last six months within one mile of the property. Your Realtor can also be an excellent source of information on this as well as providing current market trends to determine what a good offer would be. .