Top 10 Secrets for Buyers in Todays Changing Market

    1. The tax credit for homebuyers was extended before it expired in November. You now have until the end of April for a ratified contract and until the end of June to settle and fund.


    Current homeowners looking to buy can also get a tax credit of up to $8,000, but be aware that your buyer could delay you from meeting the deadlines. Work with an experienced real estate agent and word your contract appropriately.

     

    2. Sit down and list your expenses for the past several months. Learn where you need improvement and then create a budget for your new home. Remember to take into account your new commute, energy costs, Homeowner’s Association fees and security deposits with utilities.


    If you are married, consider revising your will and living trust as well as your life and disability insurances and their respective costs. If you are buying a home and are unmarried, speak to a lawyer about a “mortgage pre-nup.”

     

    This outlines how to have one person removed from the deed and the mortgage and any monies for doing so in the event the relationship does not last as long as the mortgage. Few consider this part, but it is financially prudent to do so now for myriad reasons.


    3. List all of the features that you want in a home before looking at actual homes. This allows you to concentrate on what you really need and want rather than buying on emotion.

    Do you need three or four bedrooms? Do you have time to mow a large yard? Is the school district highly rated? Gas, electric or oil heat?


    Even if you currently do not have children, take into account that you may one day, or, when you eventually sell this home, the buyer may. In essence, imagine being at this home 5 to 10 years when designing this list.

     

    4. Despite the No. 10 reason – do NOT buy a home just to get a tax credit. That should be an extra, not the primary reason. Otherwise, you will rush into a decision that you may end up regretting. And, with real estate expected to be level for awhile followed by modest appreciation, selling quickly may be difficult.


     



     

    If you are buying solely for the tax credit, you probably should reconsider this endeavor.

    5. Obtain a copy of your credit report and check for errors. Be wary of the TV ads touting free credit scores. Most are simply trying to convince you to enroll in a paid service of little value. Moreover, two of the three credit bureaus, TransUnion and Experian, due to a lawsuit with FICO, do not give their FICO scores to consumers.

    Instead, they offer their own proprietary credit scores, but not the actual FICO scores that lenders rely upon. Equifax still gives consumers their FICO score, but it is a consumer model score, not the lender model and the actual scores may vary significantly.

     

    The key is to look for and to correct errors and then improve your score. Lenders typically utilize the middle of the three FICO scores for each borrower, so the lowest middle score is paramount. Anything above 740 is going to get you the best rates and terms. Anything under 620 will be tough, and if a lender will offer a loan at this score, the rates and fees will be significantly higher. In fact, it may be more fiscally beneficial to wait until your score is higher and risk losing the tax credit.

    6. Gather and organize all income items. At least two recent pay stubs for each borrower; the most recent two year’s W2s for each; the most recent two year’s tax returns (some people see their loan denied at the last minute because they did not file their taxes or have unrevealed expenses on their returns).

     

    Where is the down payment coming from? Provide bank statements showing that the money is in an account in the borrower’s name(s). Make certain that the statements have the bank’s name and your name and account number as well as all pages referenced.


     



     

    Some people submit the first page and the bottom of that page states “page 1 of 4.” Provide all four pages.

    Tell your HR Department to expect a verification call and to reply promptly. If you have worked at several firms in the past two years, notify former employers as well, as they may be less apt to respond and that could cost you the rate lock or even the home.


    7. Interview real estate agents and lenders. Find a real estate agent that is willing to work with you and spend time making this experience transparent and exciting. This is a major purchase, maybe the largest of your life. If a real estate agent was great with your co-worker, that does not always transfer that they may be great with you.

     

    Same with the lender. Choosing the right loan officer may actually be more important than the bank that they represent. Find a mortgage professional with several years of experience in lending, credit and economics. The loan officer needs to be able to understand where rates are heading; how to improve your scores to get the best rates; and the nuances of all loan programs.

    Some loan officers can only sell what their lender offers, not what is best for you. In addition, if the loan officer is inattentive, you pay the price. Does he own a home? Does he have a good credit score? If not, is he the best to advise you? I once asked a water treatment salesperson to leave my home because when I asked him if he owned what he was trying to sell me, he said no. No experience and maybe no faith in the product. Either way, having never owned the product, I need someone who has gone through the process and actually experienced to guide me. Also, ask both the real estate agent and the loan officer for title firm recommendations. Pick the one that you like. Sometimes, buyers just accept the one chosen for them.

     

    8. A Home Inspection is important. Ask the real estate agent and loan officer for a few names so that you may interview each. However, before you pay for the inspection (remember, it is only good for that particular home), call your insurance agent and ask them to run a CLUE report.

    CLUE stands for Comprehensive Loss Underwriting Exchange. This is a national database of claims and potential claims against that home. The home inspector may not be able to tell that basement once flooded if the contractor did a good job fixing it. He may not uncover that the neighbor’s tree falls on the roof every few years or that the other neighbor’s septic spills onto this home’s lot. The CLUE report will.

     

    Plus, ask your agent to quote you rates on your auto, homeowners and umbrella polices while he is at it. None of this will cost you and it will help with your new budget and your decision.

    9. If satisfied and approved, ask your real estate agent to make the offer and prepare to move. When your real estate agent and loan officer request anything, make it a priority to get it to them. Be prepared for some hurdles and stay in contact with the lender. You are almost home.

     

    10. Finally, stick to your guns and to your budget. If there is a counter-offer from the seller, think about your decision. There is plenty of inventory, so do not rush into any decision. Buying a home is a privilege, not a right. Make sure that you buy with this mantra in mind.


    With values low and rates still low, now may be a great time to become a homeowner, whether for the first time or fourth time. Rates may inch up, so take that into account as well.


     



     

    Follow these tips and you will be a prepared, happy and fiscally responsible homeowner. Good Luck !!!

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