Dealing with Financing


As the events of the last few years in the real estate industryshow, people forget about the tremendous financial responsibility of purchasinga home at their peril. Here are a few tips for dealing with the dollar signs sothat you can take down that “for sale” sign on your new home.

Get pre-approved. Sub-primes may be history, butyou’ll probably still be shown homes you can’t actually afford. By gettingpre-approved as a buyer, you can save yourself the grief of looking at housesyou can’t afford. You can also put yourself in a better position to make aserious offer when you do find the right house. Unlike pre-qualification, whichis based on a cursory review of your finances, pre-approval from a lender isbased on your actual income, debt and credit history. By doing a thoroughanalysis of your actual spending power, you’ll be less likely to get in overyour head.

Choose your mortgage carefully. Usedto be the emphasis when it came to mortgages was on paying them off as soon aspossible. Today, the debt the average person will accumulate due to creditcards, student loans, etc. means it’s better to opt for the 30-year mortgageinstead of the 15-year. This way, you have a lower monthly payment, with theoption of paying an additional principal when money is good. Additionally, whenpicking a mortgage, you usually have the option of paying additional points (aportion of the interest that you pay at closing) in exchange for a lowerinterest rate. If you plan to stay in the house for a long time—and given thecurrent real estate market, you should—taking the points will save you money.

Do your homework before bidding.Before you make an offer on a home, do some research on the sales trends ofsimilar homes in the neighborhood with sites like Zillow. Consider especiallysales of similar homes in the last three months. For instance, if homes haverecently sold for 5 percent less than the asking price, your opening bid shouldprobably be about 8 to 10 percent lower than what the seller is asking.