Save Money When Buying Your Home

 

Know When To Buy

Experts would say now, if you meet the following criteria: Can afford the monthly payments. Plan to stay in the house long enough for the appreciation to cover your transaction costs.  The costs of buying and selling a home include real estate commissions, lender fees, and closing costs that can amount to more than 10% of the sales price. Need a tax break.  The mortgage interest deduction can make home ownership very appealing. Prefer to be an owner rather than a renter.

Know How To Figure What You Can Afford

Roughly, it's three times your annual income.  Real estate experts strongly recommend people get prequalified by a lender as a way of calculating exactly how much of a home they can afford.  When qualifying people for a loan, lenders look at a borrower's full financial standing.  Lenders use the relationship of PITI (pincipal, interest, taxes, and insurance payments) to gross monthly income. Generally, lenders like to see the PITI not exceed 30% to 33% of the borrower's gross monthly income.  They also consider the ratio of the borrower's monthly debt payments, including the PITI to income.  Note though that some lenders have flexibility in these qualifying ratios.

Know About The Down Payment

Putting down as little as possible and taking a larger mortgage allows buyers to take full advantage of the tax benefits of homeownership.  Mortgage interest (and property taxes) are fully deductible from state and federal income taxes.

Know If You Should Buy With Nothing Down

Although some experts advise against it, home buyers interested in buying a house with nothing down can do so.  However it's not always easy finding these loans and in some cases they can be risky.  Occasionally, a builder will offer nothing-down loans to induce sales in an otherwise slow-moving project, and desperate sellers also may agree to finance the full purchase price to get out from under a property.

Know About Standard Contingencies In Offers

Most real estate purchase contracts include at least two contingencies:  A financing contingency makes the purchase conditional on the buyer's ability to obtain a loan commitment from a lender, and an inspection contingency allows the buyers to have professionals inspect the property to their satisfaction.

Know What Offers A Seller Will Consider

It's good to know if sellers will consider only offers close to, or at, full price.  While a very low offer in a normal market might be rejected immediately, in a "buyer's market" the below-market offer will usually either be accepted or generate a counteroffer.  An remember, there are always some sellers who for some reason must sell quickly and will consider a reduced price. There are other considerations: Is the offer contingent upon anything such as the sale of the buyer´s current house? Is the offer made on the house "as is," or do you want the seller to make some repairs before close of escrow? Is the offer all cash?  A cash offer at less than the asking price may be more attractive to the seller than a full-price offer with a financing contingency.