When there are changes in the economy, Smith Mountain Lake is still thriving with life and a great place to live. If you are considering buying a home on the lake this may be one of the best chances you will ever have for getting exactly the kind of real estate you have always wanted but couldn’t quite afford.
Still, it’s always a good idea to have as much information as possible before you make a major decision such as purchasing a new home. Part 2 of Stacey L. Bradford’s article is reprinted below with more tips for home buyers.
3. Skipping the Mortgage Preapproval Process
The days of easy money and low teaser rates are over. In this tight lending environment, it’s important to shop around for a mortgage and get preapproved by a lender before you even start visiting open houses. While borrowers, even ones with very low credit scores, had hundreds of options back in 2006, that’s simply not the case today. Now there are fewer lenders and many of them have stopped underwriting riskier loans in favor of more traditional fixed-rate mortgages, says Keith Gumbinger, vice president with HSH Associates Financial Publishers, a Pompton Plains, N.J. – based mortgage research firm.
Scanning the newspaper for prevailing rates won’t be all that helpful since lenders will adjust your rate based on how risky they feel you are. By getting pre-approved, you’ll not only know the type of financing available to you, but you’ll also have a better sense of what your interest rate will look like. At the moment, someone with excellent credit could qualify for a 6% interest rate on a $400,000 loan and another buyer with closer to average credit, could get charged more than half a percentage point higher, says Gumbinger.
In addition, rates are certain to fluctuate as you shop for the perfect home, so it’s a good idea to check in with your bank regularly. Given the uncertain economic environment, a bank may preapprove a mortgage one month, and then reject it the next.
Once you have a ballpark estimate for the financing that will be available to you, you can plug it into a mortgage calculator to see how much home you can afford to buy.
4. Not Budging on Your Budget
As we mentioned earlier, buyers have more negotiating power than ever. So don’t be afraid to make an offer that’s well below the asking price. That said, once you find a home you love and you’re negotiating on price, you’d be foolish to walk away from that property over just a few thousand dollars, says Brown Harris Stevens’ Clayman. Think of it this way: An extra $10,000 (on a loan valued less than $417,000) will cost you just $60 more a month.
5. Signing a Contract With Contingencies
Unfortunately, it isn’t enough to secure financing and find a place that you’re comfortable calling home. You also need to find a seller who’s ready to move quickly and who doesn’t want to include all sorts of onerous contingencies in the contract that would allow them to stay in their house for an extended period. One situation you want to avoid, for example, is when the sale is dependent on the seller finding a new home first, warns Corcoran’s Comitini. The risk here is that you wait around for months only to watch the interest rate lock on your mortgage expire, thus forcing you to spend more money for the same home. Or, the deal could fall apart entirely, putting you back at square one with the real estate listings spread out on the kitchen table.
By Stacey L. Bradford,
Associate Editor, SmartMoney.com
Thanks to AOL Finance for this great find.