From Lake Michigan to the Ohio River and everywhere in between, Indiana offers a diverse landscape of areas to call home. Whether you like living in the city or prefer the suburbs, or you are looking for lakefront property to rest and relax or country living to farm or raise livestock, Indiana offers it all in an affordable package that you can call Home!
Are you finally ready to stop paying rent forever?
With interest rates hovering just above their thirty-year lows, a multitude of flexible and low-cost loan programs are available that can help many past renters and first-time buyers experience the joy of homeownership. In short, the economic environment simply couldn’t be better to stop paying rent and buy your first or next home. However, if you have always been a renter, 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 Preapproved Before Starting Your Search
Before you begin your home search, before you make one single decision regarding a home purchase, get preapproved by a mortgage professional. Preapproval 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.
Preapproval will also give you a step up on your competition. Homebuyers that are preapproved have increased leverage with Realtors and sellers over buyers who are not. Essentially a preapproved buyer becomes a “cash” buyer.
2) Choose Your Mortgage Professional Carefully
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.
A few unscrupulous lenders will make promises that they are unable to keep just to get you in their door, then hit you with a higher rate or charge you discount points at closing. They know that many borrowers are uncomfortable walking away from the closing or disputing the lender’s agreement with the seller, the Realtors and others in attendance and the documents on the table.
Since a home is often the largest purchase you will ever make, be sure that your chosen loan officer follows a Code of Ethics and that you choose one that you completely and unconditionally trust.
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 years or 30 years), the rate and the down payment requirement. The 2 most important questions to ask are “How much will I pay at closing?” and “What is the monthly payment?”
Adjustable Rate Mortgage’s (ARM’s) are typically lower at the beginning but can escalate quickly. These are good for short-term purchases. Traditionally, long-term mortgage holders may be better off with a fixed rate if it will help them sleep better at night knowing that their principal and interest payment will always be the same.
An applicant who has very good credit (over 760 FICO) may find their monthly out-of-pocket costs below someone with a 620 score. The phrase to remember is that “higher risk equals higher rates”, meaning that your credit score is very important.
In the past, a potential homebuyer would have needed 20% down before a lender would even consider giving them a loan. Now there are programs that offer 100% financing for someone with decent credit. The key is to make sure that your loan officer is getting you into the best loan program for your particular situation.
4) Clean Up Your Credit
By getting prequalified, you will be made aware of any potential 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. A large number (about 79%) of credit reports contain errors and identity theft is on the rise. Your mortgage professional will help you address problems that show 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.
A good mortgage professional will take the time to carefully go over your credit report with you and can provide tips and hints that may help you raise your score. They will also tell you not to make any large purchases that can lower your score before you complete the purchase of your home.
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 the due diligence on any hidden issues, and more times than not, the money they save you on negotiating the price of your new home will more than offset 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.
“I 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 or she can better qualify the homes that he shows you.