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Ten steps you need to take before buying a house
Buying a new house is an important step in the life of anyone. In this page I give some tips on how to simplify this important task. The idea is that you should buy your house with confidence, and avoid common problems with just a little bit of information and careful planning.
1. Compare mortgage rates from lenders
Mortgage lending is a competitive market. If you never realized this, pay attention the next time you watch TV: you will probably see several ads from lending companies. These companies will literally compete for your business if you are interested in a mortgage.
If is not hard to see the advantage for mortgage companies: the mortgage business provides a steady stream of income for lenders, most of the time for a fixed period of 30 years. And, thanks to the common mortgage contracts, the lending is secured by the property itself, so there is just a small possibility of losses for the bank.
So, it is important to shop around the several mortgage offers. Request a quote from at least five lenders, see what options they have, and try to bargain. This is the best way to get a mortgage that is advantageous in the long run.
2. Avoid Adjustable Rate Mortgages (ARM)
Whether you follow my advice on the previous item or not, please do a favor to yourself: run like crazy from what is called Adjustable Rate Mortgages (ARM). An ARM is a mortgage that my look appealing because it starts at a very small rate, which results in small monthly payments.
However, over time this type of loan will increase the annual rate, and you will see yourself in a position that will require a lot of money to pay your mortgage each month.
This time of mortgage is usually offered to people with bad credit, which usually cannot afford a normal mortgage. Sadly, these same people will not be able to make the payments when the rates raise, and therefore most of them end up losing their homes. Please, do your homework and don't be one of these people.
3. Get a copy of your credit report
One of the most important tools in the negotiation process is your credit report. The credit report gives the history of your financial life and is used by the bank to evaluate your finances.
The most important part of the report is your credit score, a number usually between 500 and 750 that is used to evaluate you credit status. The higher the credit score the better, which means that you can get good deals in mortgage plans.
Make sure that you know you credit report, and use it as a leverage to shop around. You can get free copies of your credit record from most credit recording company, such as Experian, Equifax, and TransUnion.
4. Visit the neighborhood you are interested
The next step is to make sure that you know the neighborhood where you are trying to buy a home. Visit the area you are interested to make sure that the place is really like you imagined.
Things that you need to observe are: the facilities around the neighborhood, schools, hospitals, shopping centers, and other common interest facilities. Also, make sure you go at night and observe if you can hear loud noise, and other patterns of behavior that you would find undesirable.
5. Perform a preliminary inspection of the house
Many houses that are on the market can be visited by anyone. That is what is called an open house, and gives you the opportunity to see the type of properties that are available on your local market.
Take the opportunity of visiting open houses. Also, drive around the neighborhoods and try to find houses that have been listed on newspapers or the Internet. This will give you a good idea of how are the typical properties in the region you are interested in.