Tips for Preparing Buyers in 2009

I came across a blog article on Tips from a broker on getting yourself ready to purchase a home, and thought it was good enough to share. Make a new year's resolution to take the steps to purchase a home.



Link to artice directly: http://blog.al.com/regb/2009/01/steps_to_preparing_to_purchase.html



Steps to preparing to purchase a new home in the new year
Posted by asarchib January 11, 2009 17:06PM

We continue our series on the local real estate market with a look at getting ready to purchase a new home in the New Year.

Physical fitness is at the top of many New Year's resolution lists. But with local real estate in a buyers' market mode, some are including home-buying fitness on their tally of ways to improve their lives in 2009.
"There's a real quick list," Scott McFadden, co-owner of MortgageBanc, said of getting your financial house in order - in order to buy a new home.

• Obtain pre-qualification for a mortgage.Clean up and/or correct your credit report.Have adequate cash reserves before applying for a mortgage.
• Step number one, McFadden said, is getting pre-qualified for a mortgage loan. That's when an applicant provides verbal information about their assets, income and debt to a mortgage professional to determine the price - including monthly payments - for which he or she likely will qualify.A critical step the mortgage lender takes is running a check on the applicant's credit rating.
• Credit ratings are based on how much debt an applicant has relative to how much he or she is approved for, how long he or she has had credit and how promptly they pay back creditors. They profoundly affect how much and at what interest rate an applicant can borrow money. But sometimes they reflect errors."You would really be surprised how often there are mistakes or errors that need to be corrected," said McFadden, who has been in business since 1995 and has run thousands of credit reports.
• Even minor mistakes can drastically drop a score. "To make sure everything is correct is paramount."
• So is having enough cash on hand.McFadden said many people believe alleviating debt before applying for a mortgage is their top task, but that's not always the case."My suggestion is to not do anything until you consult your mortgage professional," he said. "Right now cash is king. Sometimes it makes more sense for people to have available more cash than less debt, because being able to put down more money gives them more options than paying down certain items."
• A rule of thumb (on an FHA loan) is have a 3.5-percent down payment and two months' mortgage payments in reserve.
• With a conventional loan, applicants need at least 5-percent down with two months' payments in reserve.If the borrower has enough money in reserve - or after he or she has secured a mortgage - they then should begin paying down debt.
• And there is a proven way to do so in the shortest amount of time."Pay off the lowest balance with the highest monthly payment and move forward accordingly," McFadden said. "If you've got a $500 balance and your payment is $250, pay that off first, then take that payment amount and pay off the next-lowest balance with the next-highest payment. Because it's not necessarily the loan that has the highest interest rate that you knock out first, and you don't have to change how your budget is spent."
• And if a purchaser has their financial house in order, now is a great time to buy, said a local Realtor."The number-one reason is without question - and this is always going to remain true - (buying a home) is the American dream in good times and bad times," said RealtySouth's Ed Coe. "Next to having a good marriage and a healthy family."And next ­- rates are lower than they've ever been since I've been in the business."The fixed interest rate Thursday on a 30-year loan was about 4.75 percent, McFadden said.
• Along with contacting a mortgage professional, Coe encouraged calling a Realtor."People that really want to buy a house if they'll call professionals they'll get some answers," he said. "If you're in a desert and you see somebody riding a camel and the camel's moving I'd ask them 'Where is the water?' The people who are out there doing business have the answers."

Have questions, need advice, ready to start looking in the market? Contact me!