How to navigate a tricky housing market.
Competition can be fierce among those
looking to purchase new digs, but there are ways to persuade sellers to accept an offer below their asking price. Here are tips on how to find your dream home and snag it at a reasonable price.
Know your creditworthiness.
Before diving into your search, check your credit report for errors. Consumers are entitled to one free report per year at www.annualcreditreport.com. The process for fixing mistakes can be time-consuming, so it’s important for buyers to look at their credit history several months before starting their house hunt.
Get preapproved for a mortgage.
Obtain offers from at least three mortgage lenders prior to choosing one. By doing so, you can determine your price range and avoid wasting time looking at properties you can’t afford, says Frank Donnelly, a certified financial planner and chairman of the Mortgage Bankers Association of metropolitan Washington, D.C.
Find a Realtor.
Consumers who house shop without a real estate agent or Realtor put themselves at risk, largely because a typical homebuyer doesn’t have contacts in the local market or know what homes are for sale that aren’t publicly listed. Michael Corbett, Trulia.com’s real estate expert, says most buyers also don’t know the tricks to brokering a deal, which can ultimately cost them a lot of money and aggravation.
Decide where you want to live.
Everyone’s needs in terms of a community vary, depending on their stage of life: Couples raising a family care about the school system and safety; singles pay close attention to entertainment, nightlife and job opportunities; and retirees survey the nearby hospitals, senior care and recreation activities, such as golf or tennis. Trulia.com, Zillow.com and Realtor.com are good starting points for general neighborhood information.
Survey your choices.
Scan the Internet for homes that pique your interest. Listings without photographs are easy to eliminate, as they’re usually an indication the property isn’t visually flattering. Savvy smartphone users can drive around their desired neighborhood and use a mobile app like Trulia’s, which uses GPS to pull up information on nearby houses for sale, open houses or recently sold homes.
Compare prices.
Sellers use comparable homes to determine their asking price, but buyers can use them to help determine a property’s fair market value. Focus on those that have sold within the last 60 days, Corbett says.
Do an inspection.
An inspection is a critical step for ensuring the home is safe and uncovering any areas that will require renovating. If you’re making an offer, Realtors advise clients to make it contingent on a satisfactory home inspection. Inspections that reveal needs for improvement can be used as leverage by the buyer at the closing table.
Discuss closing costs ahead of time.
They vary by market, but closing costs typically range from 1.5 to 4 percent of the purchase price. By law, prospective homebuyers are to entitled see them. Asking to view the closing costs early in the process gives you the opportunity to question ones that seem inappropriate or unreasonable.
Make an offer.
Consult your Realtor to determine your offer. Be reasonable: Homebuyers who are willing to make minor concessions appear more desirable to sellers.
Determine the down payment.
Most lenders and housing experts say homebuyers should put 20 percent down. Corbett highlights several reasons for this figure: You instantly gain a little equity, you get a lower interest rate on your mortgage and you’re “viewed as a more serious, more qualified buyer when you’re competing with other buyers for a property.”
Claim tax benefits.
Some closing costs are generally deductible, says Mark Steber, chief tax officer at Jackson Hewitt Tax Service, such as the pro-rated interest from closing until the end of the month and any mortgage points paid (as long as points are a general practice in the area and within the average points for the area).
Source: U.S. News, http://money.usnews.com