Ten Tips for home Buyers

What You Should Know Before Buying a Home

Source: California Housing Finance Agency

1. Before you start looking for a home, get pre-qualified for
   a loan. Banks, Credit Unions, Mortgage Bankers, and Mortgage Brokers make home loans. These lenders will take an application, process the loan documents, and see the loan through to the funding stage.
2. If you have marginal or bad credit, consult your lender. You may be able to qualify for a loan depending on how long ago and what reason(s) caused the bad credit.
   A lender should be able to advise you on whether your credit history will prevent you from qualifying for a home loan.
3. You will need a downpayment. Downpayment requirements vary between 3 to 20% or more depending on the type of loan. Many downpayment assistant programs exist. These programs may loan or grant you the funds necessary for the downpayment. Consult with
   a lender about programs available in your area.
4. You will need funds for closing costs Closing costs are charges for services related to the closing of your real estate transaction. They include, but are not limited to:
   
   
   • Escrow fees charged by company handling the transaction
   • Title policy issuance fees charged by the title insurance company
   • Mortgage insurance fees
   • Fire and homeowners insurance
   • County Recorder fees for recording your deed
   • Loan origination fees
   
   Consult your lender for an actual estimate of these costs, as well as information about loan programs which can assist in financing your closing costs.
5. Some loans have "points" and some do not. A point is a loan origination fee equivalent to 1% of the loan amount. Together with the interest rate they constitute the yield on your loan for the lender. Some lenders charge a higher interest rate to compensate for charging no points. It is important to comparison shop lenders to make sure your loan is at a competitive yield.
6. Should you select a mortgage with a fixed rate or an adjustable rate? The answer to this question depends on whether mortgage rates are at a high or a low point when you purchase, and on how long you plan to live in the home. If rates are high, an adjustable rate might be attractive since subsequent rate drops could reduce your monthly payments. Additionally, lenders may offer a below-market rate during the first few years of an adjustable mortgage to make it appealing to you. If interest rates are low you might want to take a fixed rate to protect yourself against the possibility of rising interest rates.
7. If you are a low or moderate income homebuyer, there are special programs designed to help you. These loans are available through private lenders, as well as local and state housing agencies, like the California Housing Finance Agency (CalHFA). Most lenders specializing in real estate mortgage loans are aware of these types of loan programs.
8. Try to coordinate the date you take possession of your new home and your moving date. If possible, avoid a situation where you've got to camp out with relatives or find a short-term rental because you must vacate your old house or apartment before you can move into your new digs. Moving once is enough.
9. Know when to quit. When you act on emotion, rather than reason, you may end up paying too much money. This can happen when you fall in love with a particular house and start fantasizing about how great it will be to live there. Another reason you may be driven to pay too much is that a bidding war triggers your competitive instincts and you must buy the house at all costs - which you will regret later.
10. Insist on a home inspection. The first really cold day you spend in your new house is way too late to find out that the furnace doesn't work. The one condition you should always include in an offer to purchase is a home inspection. Find out how much it will cost to fix any defects and have the seller fix them before you agree to buy or deduct the estimated cost from the final price you offer. If the seller won't help bear the costs and you want to go ahead with the purchase, make sure you can afford the necessary repairs on top of your mortgage.

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