Since inventories of both new construction homes and re-sale properties are high, prices are pretty much at bottom in the Twin Cities area, and both our local housing market and housing markets across the country are still testing the bottom following the real estate recession that wiped out more than $4 trillion worth of homeowner equity since 2006, anyone thinking of buying real estate soon, should really get off the fence and get going.
1. Know the Tax Incentive Program
It is anticipated that Congress will be passing the newly extended home buyer tax credit to ALL buyers, but at a reduced rate of $6500.00 to those who are current homeowners wishing to move up. There will be income limits and other criteria as well. The $8000.00 tax credit for first time home buyers (those who have not owned a home for a period of 3 years) will be extended as well. Now is the time! Purchase Agreements need to be negotiated and signed prior to the end of April per the Senate version. There may be more tweaks before it's final, but rest assured buyers will need to move quickly!
While many potential buyers believe now is the time, at the same time, tighter lending restrictions have made it harder to qualify for a mortgage loan, keeping the dream of home ownership out of reach for all but the most credit worthy consumers.
As such, Barry Zigas, director of housing policy for the Consumer Federation of America, says those looking to benefit from the buyer's market today must come to the table prepared, armed with a clean financial bill of health and plenty of research to ensure they get the best deal on their purchase.
If the price is right and you plan to stay put for the near term, and you're able to get good financing, he notes, there's no real reason to wait.
2. Get Your Credit Report
Your first order of business is to obtain a copy of your credit report from the three major reporting agencies, Equifax, TransUnion and Experian.
It's free and the earlier in the process you review it, the more time you'll have to correct any errors and make changes that can improve your score.
These reports are not always accurate. They may include old credit lines that you closed, other people's information or other incorrect information with a potential to hurt your credit.
In our current market, you'll need a credit score of 720 or better to land the lowest rates. If your score is under 660 you will undoubtedly have a difficult time in getting a loan with favorable terms.
You can help raise your score by paying future bills on time, eliminating lines of credit and paying off any outstanding debts you may have, including student loans, car loans and credit card balances.
3. Know Your Purchasing Power
You will need to determine how much you can reasonably afford to spend on a home and a good mortgage loan officer can help you here. Typically your trusted Realtor can refer you to a great loan officer that she (or he) has worked with and knows can give you the best loan and closing costs package there is. Ask your Realtor who she (or he) recommends.
The amount you qualify for depends, of course, on interest rates, your credit history and any existing debt.
4. Making An Offer
When you do find your dream home, don't rush in.
Together with your trusted Realtor, research the neighborhood, recent sales, competition, schools, etc. very carefully to be sure your offer is within range of comparable sales in the area.
And don't be afraid to play hardball. Sellers in this market are likely to give you what you ask for, within reason.
Make sure you get an inspection and if problems come to light you may be able to ask the seller to correct them or make a contribution towards any repairs.
In the current market, you can also ask for seller contributions toward your closing costs (Note: there may be lender imposed limits so be sure to work with your loan officer and Realtor on this point)!
Be aware that with prices down as much as they are in the local Twin Cities marketplace, there may be many more interested and qualified buyers than you may think. Therefore, be careful in making a low-ball offer and be prepared for a bidding war.
5. Getting Your Loan in Place
In our current market qualifying for a mortgage loan can be the most difficult part of your task.
You will need to show and document steady employment, have good credit history, and have a low debt-to-income-ratio in order to qualify. If you should fall short in one area, you may be able to make up for it with a larger down payment or higher interest rates. Be prepared!
Despite the credit crunch and disappearance of zero down and no-doc loan programs, the Federal Housing Administration still offers programs for cash-strapped borrowers with little money for a down payment. FHA-insured loans require a 3.5 percent down payment, far less than most conventional loans require. Be sure to get all the options available, then weigh each one to determine which works best for your situation.
6. Buy Your Dream Home!
Buyers who are in it for the long haul are sure to benefit from this confluence of factors: Low prices, higher inventory, low interest rates, and great bargaining power.
Trying to bet on the ups and downs of the market is not reasonable in this market. Check with your trusted Realtor, if a house is comfortably within your reach it is time to move on it.
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