Build a Plan of Action and Get Ready

Buying a home will probably rank as one of the biggest personal investments one can make. Being organized and in control will contribute significantly to getting the best home deal possible with the least amount of stress. It’s important to anticipate the steps required to successfully achieve your housing goal and to build a plan of action that gets you there. Before you can build a plan of action, take the time to lay the groundwork for your decision-making process. First, ask yourself how much you can afford to pay for a home. If you’re not sure on the price range, find a lender and get pre-approved. Pre-approval will let you know how much you can afford, allowing you to look for homes in your price range. Getting pre-approved also helps you to alleviate some of the anxieties that come with home buying. You know exactly what you qualify for and at what rate, you know how large your monthly mortgage payments will be, and you know how much you will have for a down payment. Once you are pre-approved, you avoid the frustration of finding homes that you think are perfect, but are not in your price range. Second, ask yourself where you want to live and what the best location for you and/or your family is. Things to consider: convenience for all family members proximity to work, school crime rate of neighborhood local transportation types of homes in neighborhood, for example condos, town homes, co-ops, newly constructed homes etc.

Importance of Inspection

As a buyer, you are entitled to know exactly what you are getting. Don’t take anything for granted, not even what you see or what the seller or listing agent tell you. A professional home inspection is something you MUST do, whether you are buying an existing home or a new one. An inspection is an opportunity to have an expert look closely at the property you are considering purchasing and getting both an oral and written opinion as to its condition. Beforehand, make sure the report will be done by a professional organization, such as a local trade organization or a national trade organization such as ASHI (American Society of Home Inspection). Not only should you never skip an inspection, but also you should be present with the inspector during the inspection. This gives you a chance to ask questions about the property and get answers that are not biased. In addition, the oral comments are typically more revealing and detailed than what you will find on the written report. Once the inspection is complete, review the inspection report carefully. You have to demand an inspection when you present your offer. It must be written in as a contingency. If you do not approve the inspection report, then do not buy the home. Most real estate contracts automatically provide an inspection contingency.

Getting a Legitimate Lender and Getting Pre-Approved

It used to be that buyers could go house shopping and when they have found their dream home, then they go to get pre-approved. However, in today’s market, that has proven to be one of the least effective methods in landing the dream home. Most lenders can pre-qualify you for a mortgage over the phone. Based on general questions about your income, debt, assets, and credit history, lenders can estimate how much mortgage you qualify for. However, being pre-qualified and pre-approved are different things. Pre-approval means that you have applied for a mortgage; you have filled out the mortgage application, received your credit report, and verified your employment, assets, etc. When you are pre-approved, you know exactly what the maximum loan amount will be. A pre-qualified letter is not verified and in essence, does not count for much if you are competing with other buyers who are pre-approved. When you are pre-approved, you and the seller know exactly how much house you can afford. It gives you credibility as an interested buyer and lets the seller know immediately that you will qualify for a loan to buy their property. In addition to being pre-approved, it’s important to be pre-approved with a legitimate lender. Legitimate lenders include: banks, mortgage bankers, credit unions, savings and loan associations, mortgage brokers, and online lenders. Some lenders to avoid: those who lose a form or misplace a file, those who gather information from you in an unorganized manner, those who are not informed about interest rates, points or costs, and those who cannot provide you with the right information.

Thinking About Buying a Foreclosure?

With the housing bubble burst and the subprime mortgage crisis, millions of homeowners found themselves unable to make their mortgage payments. Many found themselves owing more on the house than the home was worth. Many just walked away from their homes. As a result of these complicated issues, millions of homes were foreclosed. While this isn’t the only reason for which homes are foreclosed, it has been a widespread one. With all the foreclosed properties, there has also been extensive interest in buying these properties at a bargain price. It is true that foreclosed properties can be priced at a significant discount, but they are also a much riskier investment. Before making an offer on a foreclosed property, do your due diligence. Things you must do before buying a foreclosure: Do a title search - make sure that when you purchase a foreclosure that you are the only person who has any ownership claim Check for liens - find out if there are any liens against the property because you will be responsible for paying them Check for a second mortgage - you don’t want to be surprised by an extra mortgage that you will need to pay Know how good of a “bargain” you’re getting - foreclosures are sold “as is” and in many cases you will not be able to do a proper inspection. You may end up paying thousands of dollars repairing the property before it is fit to be lived in. It is also important to consider that there are different types of foreclosure properties and each type comes with its own advantages and disadvantages. The different types of foreclosure purchases are: Pre-foreclosure Auction Real Estate Owned (REO), also called “bank owned” Pre-Foreclosure A pre-foreclosure is when you buy the home directly from the homeowner, before the bank officially forecloses. This type of purchase does not require as much capital as other foreclosures. Also, since you are purchasing straight from the homeowner, you will be able to gather all of the necessary information, such as inspection reports, title information, etc. that may not be available with other foreclosure properties. Once you take over the mortgage, you will be responsible for all future payments as well as any overdue back payments. Auction A foreclosure property will usually end up at an auction. Real estate auction practices vary by state but common practice is for the auction to be held on courthouse steps, in front of the foreclosed home, or at the county clerk’s office. Real estate auctions offer the best chance for a great deal but also hold the greatest risk. Auction properties are sold as is, with no opportunity for potential buyers to perform inspections. When buying a home at auction, the buyer must pay cash, usually a cashier’s check. It is also possible that there may still be tenants living in the home. In such a case, you would be responsible for the often costly eviction process. REO Once a foreclosure has gone to auction and failed to sell, it becomes a Real Estate Owned, or bank owned, property. Most homes do not sell at auction, most fail to even get any bids. An REO property is the least likely of the foreclosure properties to represent a bargain, but it is also the least risky. The property can be fully inspected, any title issues can be found and dealt with, and the sale can be subject to a mortgage. REO properties also tend to be in better condition than other foreclosure properties. Another thing to keep in mind when purchasing a foreclosure is that some states have a redemption period that allows the original owner to buy back the property by paying the remaining balance owed. You may be able to have this redemption period waived, so check the state laws on this topic before purchasing. Still interested in buying a foreclosure property? If so, always do your research before purchasing!