If you are looking to purchase a home in the near future there are a few things to consider to prepare yourself for the big step. The Today Show’s real estate expert Barbara Corcoran shares a few tips with today’s renters on whether making the leap into homeownership is best for you.
Are You Prepared to Do the Research?
Buyers generally have the advantage in a down market, but this doesn’t mean you should walk into a transaction blindly. Prospective buyers should do their due diligence before searching the Internet for available listings. First, find a real estate professional that can guide you through the process and provide insights on the local real estate market. Next, be sure to learn the language of shopping for a new home. What is an offer? What type of mortgage should you get? You need to get a sense of what you are signing up for before you go through the process. Buying a home is an exciting process, but it requires a lot of work. Make sure you are up to the task.
What’s Your 5-Year Plan?
Knowing the answer to this question will help you decide whether renting or buyingmakes the most sense for you. If you think you might move out of the area next year, then you really shouldn’t be thinking about buying a house. To make sense financially, you typically shouldn’t buy a home unless you’re comfortable staying there for at least 5-7 years. This will allow you time to build up equity and make up for the costs of buying, selling and moving. Additionally, this answer will help you decide what kind of home you might be looking for – when the time comes.
Are You Aware of the Costs Associated?
Today’s minimum down payment requirements range from 3.5 percent on an FHA loan to 10 or even 20 percent for conventional loans. That means coming up with anywhere from $7,000 to $40,000 on a typical $200,000 house. If you are not able to meet certain down payment criteria, you will also have to pay mortgage insurance or PMI, which helps cover the bank in case you default on payments. On top of a down payment, there are also closing costs you’ll probably have to pay in cash, which can run as high as 3-4% of your total purchase price. Add that to the cost of moving and any sort of improvements to the home (paint sure adds up) – you will need to save up your pennies!
What Is My Credit Score and How Can I Improve It?
One of the best ways you can reduce your new monthly mortgage is to improve your credit score before the process actually begins. In addition to paying your bills on time, be sure to reduce your debts (especially those with high interest rates) and keep unused lines of credit open. All of these strategies can improve your score and allow you to qualify for the best mortgage interest rates available. You can check your credit score on sites likeFreeCreditScore.com a couple times a year to keep track of any improvements or any areas for improvement.
Do I Have the Right Real Estate Professional Guiding Me?
As I mentioned in the first tip, you must find a real estate professional that can guide you through the home buying process and provide insights on the local real estate market. The right professional will help make a stressful time an easier one by being your partner. He/she will help you navigate the paperwork, financing options, offer process and more.
Real estate expert Barbara Corcoran shares 5 questions you should ask yourself before you go through the home buying process.
Bridget Morrissey is a 2012-13 Woman of FIRE (Finance/Insurance/Real Estate) Recipient awarded by the Warren Group and The Commercial Record of Boston, MA and presented by LT GOV Nancy Wyman.
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