There’s little doubt that we’re in a buyer’s market and for first-time home buyers, this is great news. Just because the time is right for buying doesn’t mean you shouldn’t still try to get the best deal possible. When you consider that these tips will only save you a few percentage points off the bottom line, it doesn’t seem like a big deal at first. However, when you consider that the national average cost of a home is $180,000; these low percentages equal thousands of dollars back in your pocket.
1. Should I buy?
For starters, you need to be sure that buying a home is right for you. Can you afford the up-front costs and long term maintenance? If owning doesn’t make economic sense for you, then it doesn’t matter how good the market is. There are plenty of online tools to help you make an informed decision. Make sure you can afford to buy a home before taking on a 15 or 30 year loan.
2. Get a Government-Backed Loan
Mortgages guaranteed by the Federal Housing Administration (FHA) have become a little harder to come by in recent years, but there are still several opportunities out there for home-buyers able to put down at least 10% in down payments. Federally backed loans aren’t just for low-cost houses. Programs extend to high-income areas as well, where loans can range as high as $750,000 (in New York City). To find out how much the FHA will cover in your area, do a google search.
3. Foreclosure and Short Sales
The housing market collapse has left hundreds of thousands of homes upside down, meaning the homes are worth less than their remaining mortgages. This is bad news for those buyers and lenders, but good news for you. As little as six years ago, short sales and foreclosures were a rare find on the market, but now they account for up to 50% of homes for sale in some markets. The difference between a foreclosure and short sale is pretty simple. A foreclosure is a property that has been taken over by the bank when the owner has ceased to make payments. A short sale is when the current owner has made an agreement with the bank to sell the property for less than the remaining mortgage, in order to avoid foreclosure.
When considering a foreclosure or short sale, it’s important to remember that these properties are sold “as-is”, meaning any repairs or maintenance are up to you to complete after the purchase. There can also be a significant amount of paperwork and waiting (especially for short-sales) while the bank(s) decide whether or not to go with your offer. The good news is that you can find significant savings in these properties if you have the time and patience to see them through. For short sales, you should plan at least 60-90 days between when you make an offer to settlement.
Lisa George always goes to Iowa City Real Estate when making a real estate decision.