Most first-time home buyers are wrapped up in the details of the home they want. That’s as it should be. However, some are not aware of details that can make a real difference in how buying a new home impacts their life.
If you are ready to buy a new home, keep these secrets in mind.
Buying A New Home
Everyone – particularly new home buyers – focus on the home they are buying and do not pay as much attention to the surrounding neighborhood. Don’t make this mistake! When you are buying a new home, you also are buying the neighborhood. The best neighborhoods have a sense of community, good schools, great access to shopping and restaurants and stable, consistent home values. Consider these issues before buying.
For example, it may make more sense to buy the average house in a stellar neighborhood rather than buying the high-end home in an average neighborhood.
Getting Pre-Approved is a Good Idea
Online sites such as Apply and Buy make it easy to get in contact with lenders who are ready to consider offering loans to people at a variety of income and credit score levels. Getting pre-approved for a home loan takes the stress out of searching for a new home. You’ll know what you can spend, which saves on time spent looking at homes you cannot afford. And you’ll have the confidence to know that your financing is already in place.
Your Type of Interest Rate Matters
Don’t go into buying a new home without understanding the difference between a fixed rate mortgage and a variable rate mortgage.
A fixed rate mortgage is just that – fixed. Once agreed upon, it does not change over the life of the loan, which is typically 30 years. A variable rate mortgage can change. Typically, the rate is lower at the beginning of the loan, but then can increase after that point.
Fixed rates usually are best for those who plan to stay in the home forever, don’t plan to pay it off early and like to have a consistent, steady budget. Variable rates may work best for those who plan to pay the loan off early or perhaps sell the property within the first five to seven years.
Take the time to research and determine which interest rate plan works best for you and your goals with the new home.
You Want to Avoid PMI
Private Mortgage Insurance is charged to those who do not pay a set amount as a down payment when buying a new home. Usually the threshold amount is 20 percent of the purchase price. Basically, it’s an extra charge to pay for insurance that protects the lender if you end up in foreclosure.
Even if you don’t have the 20 percent to put down, some programs and lenders will waive the need for PMI under certain circumstances. Make sure to ask about this before getting surprised by an extra payment for PMI.
You Want to Know Zoning Rules
Maybe you have your eye on the fixer-upper property in a great neighborhood. That’s an excellent choice! However, what if the local zoning laws don’t allow you to make the improvements to the house that you envision? Before buying a new home, be sure to check out all the zoning rules that apply to your neighborhood.
Improve Your Credit Score
Before seeking out a loan, make sure to check your credit score. Deal with any mistakes that may be bringing your score down. Also, don’t make any big purchases and make sure that all credit payments are made on time. This will help improve your chances to getting the best terms on your loan.
Keep these tips in mind and your home-buying process will go great. Just remember – none of this is that complicated once you understand how it works. Knowledge is power! Now that you have the knowledge, put it to use.