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5 Tips to Keep in Mind When Buying a Home
Buying a home can be a stressful situation whether you are a first-time buyer, purchasing your second home or even looking for the perfect place to spend your retirement. With all the variables involved, it is easy for something to slip through the cracks during the process. The following 5 tips from the American Homeowners Foundation and the American Homeowners Grassroots Alliance, will add peace of mind to the home buying process.
Tip 1- Always have a home inspection contingency in your offer and always hire a professional home inspector to provide you a written report, along with "ball park" estimates or ranges of repair costs. If the inspection turns up problems that weren't readily noticeable, you can use it and the ball park estimates for negotiating leverage to get the seller to make the repairs or provide you a commensurate price reduction.
Tip 2- Learn as much as possible about the seller's circumstances. There may be mutually beneficial opportunities. For example, if you might face difficulty qualifying for a big enough mortgage, and the seller is worried about college costs for his or her sixth grader, the seller might be interested in accepting a second trust for part of the purchase price if the interest rate is above what they could otherwise earn and the loan is paid off the summer before the child's freshman college year. From your perspective, the rate will likely be less than you could get from a traditional lender.
Tip 3- Research your mortgage options well before you make an offer. You won't have enough time in the five days sellers normally allow to get all of your paperwork together, determine the best kind of mortgage, who is offering the best rates etc. Consider getting a contingent letter of approval for a loan, or an actual loan commitment prior to making an offer. The former is not actually a loan commitment, but rather a contingent approval for a loan up to a certain amount. While it has relatively little enforceable value, it nevertheless can impress a seller, who might be more willing to accept a lower offer because of the perceived financial capabilities of the seller. It's also possible to get approved by a lender with a longer term "lock" on the interest rate in order to protect you from subsequent rate increases. While this should substantially increase your negotiating leverage, keep in mind that you pay more directly or indirectly for the longer commitment, either in terms of the rate and/or points.
Tip 4- Learn how to negotiate like a pro. There's more money involved in this negotiation than just about any other area you'll encounter. Even if you're using a buyer's agent, you're part of the team, and you'll have to make the ultimate decisions about how much to offer and how much to compromise on a counter offer.
Tip 5- Study. These tips are only the beginning. You'll need to learn a lot more if you want to get the best possible deal. Read as much as you can on home buying, on negotiating, on neighborhoods in your area that might fit your needs, and on factors that impact long term appreciation like schools, infrastructure, major new business expansions or closing etc. Keep copies of everything you send the lender and everything the lender sends you.
Courtesy of the American Homeowners Foundation and the American Homeowners Grassroots Alliance, www.AmericanHomeowners.org.