With
interest rates hovering around their thirty year lows,
a multitude of flexible and low cost loan programs are
available as well as a wide variety of assistance programs
that can help virtually anybody experience the joy of
homeownership. In short, the economic environment simply
couldn’t be better to buy your first home.
However, if you have always been a renter than you
probably aren’t as well informed of the intimate
processes of obtaining a home mortgage, as you’d
like to be. To guide you through this exciting but often
confusing time, this report details six tips that will
help make your purchase a much smoother experience,
save you money and eliminate your anxieties.
1) Get Pre-approved Before Starting Your Search
Before you begin your home search, before you make one
single decision regarding a home purchase, get pre-approved
by a mortgage professional. Pre-approval is free and
will give you a definite advantage in the buying process.
During the evaluation stage, it will clarify your financial
situation, indicating how much home you can afford.
This may influence your decision for location, narrowing
your search. You’ll also know exactly how much
home you can afford, further clarifying your search.
Pre-approval will also give you a step up on your competition.
Homebuyers that are pre-approved have increased leverage
with Realtors and sellers over buyers who are not. Essentially
a pre-approved buyer becomes a “cash” buyer.
2) Shop Around For A Mortgage Professional
Like most industries, the quality of mortgage professionals
can and does vary significantly. With the advancements
in lending practices, consolidation between companies
and aggressive start-ups there is significant awareness
of the value of your business. So don’t immediately
settle on the first lender you talk to. Shop your mortgage
around to at least three lenders until you find one
that you completely and unconditionally trust.
While rates are certainly one of the most significant
factors in choosing a lender, compare closing costs,
are their “points” involved or not (which
is the percentage of the mortgage that the originator
takes as commission) and how long is your pre-qualification
good for. Traditionally, to get a prime rate you had
to pay “points” at the closing, but this
isn’t true anymore. Also, the pre-qualification
should be good for at least three months and up to six
months. In the past, some lenders only approved you
for one month.
3) Don’t Become Fixated On The Interest
Rate Alone!
Be careful! The lowest interest rate does not always
translate to the best deal. Look at the loan programs
that are being offered, not just the rate. There are
several factors that have to be taken into account when
evaluating programs – the loan type (fixed or
adjustable), the loan term (15 year or 30 year), the
rate and the down payment requirement.
Adjustable Rate Mortgage’s (ARM’s) are
typically very low at the beginning but can escalate
quickly. These are good for short-term purchases, but
long-term mortgage holders are typically better off
with a fixed rate.
If you can afford it, you may consider a fifteen-year
mortgage. Typically the monthly payments are only 20%
higher, and you cut off half the duration of your loan.
Additionally, your credit will play a big part in what
program will be offered to you. “A” paper,
lender lingo for an applicant who has perfect credit
may find a 6.5% rate with only 10% down. But if you
have some credit history problems, sometimes referred
to as “B” or “C” paper, you
may find that to receive the prime rate you need 20%
down. So shop around!
4) Clean Up Your Credit
By getting pre-qualified, you will be made aware of
any potential credit problems in your credit history.
Don’t despair if the credit report is not stellar.
Even if an incident cannot be taken off the report,
by knowing the background of your financial history
your lender may be able to put your financial situation
in a better light when submitting the actual loan application.
Review your credit report carefully. It is very common
for non-payments to be listed that are not even yours.
Your mortgage professional will help you address problems
showing up on the credit report. Many times, a simple
letter to the creditor explaining the circumstances
at the time of the incident will rectify the situation.
However this may take a few months, so start early.
5) Get A Realtor
As a first time homebuyer, the biggest mistake you can
make is believing that you can save money if you do
not use a Realtor ®. Although the seller pays the
commissions, some listing agents will tell you they
can represent both you and the seller fairly. While
in some cases this may certainly be true, it’s
better to be safe than sorry. Get a real estate agent
that represents your interests solely. A buyer agent
will make sure the home is inspected properly, do diligence
on any hidden discovery and more times than not the
money they save you on negotiating the price of your
new home will more than off-set any reduction in price
due to the commissions not being paid by the seller.
6) What Do You Want In A Home?
There will be many decisions as you start this process.
Your Realtor will take you to several different homes,
some you will like, some you won’t but most will
land somewhere in between.
“You love this home except it doesn’t have…”
or “That home would be perfect if it only had…”
will be common phrases during this process.
Decide now what features you feel are “necessities”
in a home and which features are items that would be
“nice to have”. This list will no doubt
change the farther along you go but the list will be
extremely useful as you begin to look at homes. It will
also be useful to the Realtor so he can better qualify
the homes that he shows you.
We sincerely hope these tips are of value to you.
If there is any way we can be of service to you please
contact our office. We would consider it a privilege
to be of service to you! |
San Jose MLS Search 
