The Voice of Delaware Professional Real Estate Professionals

Stop Spending Money on Rent and Own a Home Instead

How to Stop Spending Money on Rent and Own a Home Instead

Joe Stumpf, ByReferralOnly

 

If you’ve always rented a place to live, buying a home can seem like a monumental undertaking.  This report breaks down this process into clear steps.

 

Seven Steps to Transition from Renter to Homeowner

 

Step One:  Identify Your Needs and Wants

Begin your search by considering the kind of home you need and want.  Write down your specific requirements like number of bedrooms, size of yard, floor plan, location, schools, etc.

 

Step Two:  Determine How Much You Can Realistically Afford

Consider your budget and financial obligations.  Decide what monthly house payment you can really afford.  Most mortgage consultants advise limiting your payment to no more than one-third of your net monthly income.

 

Step Three:  Get Pre-qualified or Pre-Approved By a Mortgage Consultant

 
When you know in advance the amount of loan you can obtain, you can focus on searching for houses in the targeted price range.  This can save you time when you find that perfect home, because sellers favor buyers who are pre-approved.

 

Experienced mortgage consultants can let you know what specific loan programs are best for you.  By taking a look at your financial situation and credit history, a mortgage consultant will tell you if you can qualify for the home you want, and will find a loan that best suits your needs.

 

For the approval process, you and your mortgage consultant will complete the required documentation and submit it to an underwriter.  A pre-approval is an actual loan commitment from a mortgage consultant or lending institution.  This means that you definitely qualify for a loan.  Talk to your mortgage consultant about the costs and time involved to secure pre-approval.

 

Step Four:  Work With an Experienced Real Estate Consultant

You can learn a lot about consultants by talking to them about their experience.  In a short time, you’ll be able to determine if they’re the right person to meet your needs.

 

Questions for Agents:

 

  1. In what areas of town and price      ranges do you specialize?  (Keep in      mind that some agents specialize in only one area or one price range.)

 

  1. My objective is to buy a house by      ___________.   How will you help me achieve this      goal? 

 

  1. How often will you update me with      new property listings?

 

Step Five:  Tips for Successful House Hunting

 

  1. Keep an organized record of your      research.  Write down comments about      the homes you see.  Keep track of      your likes and dislikes and offer feedback to your real estate      consultant.  Some buyers are      reluctant to tell an agent what they really think of a house; they think      the agent might take it personally.       Remember, the homes don’t belong to the agent!

 

  1. Make sure your agent is aware of      your time schedule and expectations.  Do you like to look at one or two homes      per session?  Four?  Eight?  Discuss this with your agent.

 

  1. Tell your agent about any homes      you see that interest you and that you’d like to know more about.  This includes homes you’ve      “discovered” as you explore the area and those advertised in the      newspaper.

 

  1. If you like to spend time driving      around by yourself looking at houses, ask your agent for a list of      drive-bys — homes to consider first from the outside.  Your agent can make appointments to show      you the interior of the properties that appeal to you.

 

  1. It’s important to know beforehand      whom your agent represents.  Some      agents work only for the seller. 

 

Step Six:  Make a Purchase Offer

 

Work with your real estate consultant to determine the most appropriate purchase offer.  Your consultant will present the offer on your behalf.

 

Step Seven:  Save on Your Initial Investment and Monthly Payments

There are only two major investments to consider when buying a home.  These are the initial investment, which includes down payment and closing costs, and the monthly payment, which includes principal, interest, taxes and insurance.  Here are some things to consider.

 

Initial Investment

 

  1. Choose a low or zero down payment      loan.  You don’t necessarily have to      put 20% or even 10% down.  You can      pay 5%, 3%, or even zero down on some loans.

 

  1. Some Lenders have programs to      cover your closing costs.  Ask your      mortgage consultant about them.

 

  1. As part of your offer, ask your      real estate consultant about the seller’s paying some of your closing      costs.

 

  1. Shop around for your homeowners’      insurance.  A little comparison      shopping can save you money.

 

  1. You may be able to deduct money      paid for discount points from your gross income before computing your tax.       See a CPA for more information.

 

Monthly Payments

 

  1. Get a loan that doesn’t have monthly      mortgage insurance premiums.  You      may be able to reduce or eliminate them by paying a little more at      closing.  By putting 20% or more      down, you can eliminate them entirely.       Talk to your mortgage consultant about other ways to eliminate      monthly mortgage insurance payments.

 

  1. Take advantage of rate lock      programs that are currently available.  You can generally lock in a low interest      rate 30 to 45 days in advance.  Secure      an appraisal before you lock in a rate.

 

  1. Remember that interest payments      on a primary residential mortgage are fully deductible.  Your property taxes are also deductible.      Tax rates definitely favor homeowners.       Be sure to declare both your mortgage interest and property taxes      when you file your income tax returns.

 

  1. Consider an adjustable rate      mortgage.  Adjustable rate mortgages      (or ARMs) can be as much as 3% lower than fixed rates.

 This report courtesy of

Jeff Garvey, Real Estate Consultant

GarveySells.com

Keller Williams Realty

302-463-8484

 

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