The neighborhood that was reaching for the $700,000’s in 2006 has now dipped to the low $500,000’s making the purchase of these home much more doable with a conventional or FHA loan. Good news for first time buyers.
#1: Just because it’s a buyer’s market doesn’t mean you should buy right now
Don’t let the lucrative market dictate a buying decision if the time isn’t absolutely right. Potential homebuyers need to ask themselves if they have a good credit score, if their job is secure and if they can stay in the home for a few years. If the answer to these questions is “no,” it might make more sense to wait until life and finances are more stable.
#2: The cost of owning a home is more than just the purchase price
On top of a mortgage payment, there are several monthly fees and expenses any first-time buyer should consider when becoming a homeowner: insurance, property taxes, utilities and maintenance. Think about scaling back the home price in order to better budget for the entire package.
#3: Programs are out there to help first-time buyers
A sizeable down payment is great to have for a home purchase, but not everyone can afford to fork over 20 percent upfront. Fortunately, there are many federal, state and local programs geared toward helping first-time homebuyers with down payments, interest rates and loan terms sure to make the whole process and affordability a bit easier.
#4: Foreclosures and short sales present great deals, but proceed with caution
Buying a foreclosed or short sale home can be a risky proposition for a first-time buyer. Foreclosures are often sold “as-is,” while a short sale transaction can be lengthier and more complicated than a typical home purchase. First-timers should consult an agent or attorney with specialization in these areas.
#5: Getting pre-approved for a loan gives you more buying power
Obtaining lender pre-approvals are important because it establishes a homebuyer’s maximum purchase price, shows sellers that the buyer is serious about buying a home and lets the homebuyer compare interest rates and terms to find the best deal.
#6: Good school districts boost property value
One of the most important aspects of a home’s value is the neighborhood where it’s located. Even if the homebuyer does not have kids, buying a home near sought-after schools can help the resale value.
#7: You may be able to access your tax credit upfront
Buyers using FHA-insured mortgages can apply their tax credit toward their home purchase immediately, rather than waiting until they file their income taxes to receive a refund. Prospective buyers who believe they qualify for the credit are also allowed to reduce their income tax withholding, therefore increasing their take-home pay.
#8: Not all real estate agents represent buyers
There are three types of agents: listing agents, who represent sellers and help them get the best price; buyers’ agents, who represent buyers and protect their interests; and agents who represent either (or both). Often, first-time buyers prefer to work excl usively with a buyer’s agent so there are no possible conflicts of interest.
#9: Doing your homework can help you make a competitive offer
Before buying the home, determine the property’s market value by having the realtor conduct a comparative market analysis. This report will show what buyers were willing to pay for similar homes in the area, giving a good idea of what will make a fair offer.
#10: It’s important to have a back-out plan
Before signing on the dotted line, make sure to have a contingency plan in case things don’t go as planned in the home inspection or appraisal. If the home has a major flaw or doesn’t appraise for the purchase price, an escape plan allows the contract to be voided.