The current economy poses unique opportunities for new home buyers. Not only do prices remain very close to their low point, but both new purchase and mortgage refinance rates remain at or near their all time lows. In fact, most relatively qualified buyers and refinancers can expect to get a mortgage rate under five percent.
Buying a home today operates much like it has at other times. You should first get your financial house in order so that you are ready to qualify for a mortgage. Work with a lender to find out how much you can borrow, and get a prequalification letter. Once you have the letter, have a qualified real estate agent to help you identify a home which meets your budget and needs. Make an offer, negotiate a price and put the home under contract. Inspect the home to make sure that it is in good condition, negotiate any repairs, and proceed to closing. Here are a few “dos and don’ts” to make your process work better.
Do: Get a Fixed Rate Mortgage
Unless you are sure that you will be moving out of the home in a few years, getting a fixed rate mortgage will save you a great deal of money in the long term since interest rates are much more likely to go up than down. If mortgage refinance rates do move down in the future, you can always refinance to take advantage of them at that time.
Do: Buy Less House than You Can “Afford”
If you buy a less expensive house than you can afford, you can always put your savings into your mortgage, paying it off sooner. In addition, you will have more money left over to save elsewhere or spend and enjoy, while also having less to worry about if something goes wrong. Thanks to today’s low rates and prices, you can still get a lot of house for your money.
Don’t: Put A Great Deal of Money Down
Although low down loans typically carry mortgage insurance, they also they let you keep your more of your money. Instead of putting 20 percent down, look into low down loans, like FHA mortgages, and keep the rest of your down payment in the bank. Not only will that money earn you interest, but it will also serve as a cushion in the event that you run into difficulties.
Don’t: Be Slow or Picky
Once you find a house that works for you, buy it. Let your agent help you determine a reasonable price, and move forward as quickly as possible. Even in slower markets, the best homes at the best prices sell very quickly.
As you live in your new home, you will be able to improve it to better suit your family’s changing needs. In addition, you will be able to take advantage of favorable mortgage refinance rates to either refinance to a shorter mortgage and pay it off sooner or to pull money out of the home to improve it and create new value.
