As if the home buying process isnt nerve wracking enough, an unstable market presents unique challenges to future home buyers. With the steady stream of bad news, increased foreclosures and tightened restrictions on mortgages, it can be more difficult to buy a new home now than it has been in the past. Lenders are getting picky and it can spell bad news for those individuals on the house market.
If you already qualify for a mortgage, however, and have a good income with strong credit, you can be in a prime spot to purchase a home. With declining home prices and an established mortgage, the house market is not as treacherous for established homeowners as it can be for first time buyers. There are some tips and tricks, however, to help you stay within a safe area for your future home purchase despite an unstable market scenario.
Do not over reach yourself with a large mortgage. It might be great that you can afford a certain price on paper, but you need to take the time to work out how much your mortgage payments will actually be each month.
Can you afford to have this as a monthly expense while still saving for your retirement, college, increased portfolio, or a new car? What are the bills that will accompany a house that is that large? Can you afford those along with your mortgage? What are your annual taxes? Know this information before you get too caught up in a big number that will mean little to you until you break it down in monthly installments.
Real estate agent differences can affect home buying as well. All real estate agents are not the same. Some will call you regularly while others prefer to stay quiet until they have found the exact right house for you. Ask a number of questions to your potential real estate agent to find the one that is best suited to your personality.
Do they experience with title searches? Can they help you spot potential problems with the property? Having a good real estate agent that fits your personality will make all the difference in your future home shopping experience.
Even the best real estate agent can miss some things. Look online to find crime statistics, school districts, home prices and comparables. You can find an array of quality information about your future potential neighborhood by taking the time to search online.
If you are armed with this extensive knowledge, you can make better deals and know what you are getting into with your future home. Look for virtual house tours and extensive pictures. Check out the neighborhood, the annual taxes, and much more at the touch of your fingers.
Walk the Streets of your future neighborhood. No matter how much information you find online, you cant really know a neighborhood until you spend some time there. Look for open houses in the neighborhood that are not the property you are interested in to see other homes in the area, meet the neighbors.
Drive through your future neighborhood at all hours of the day to see what kind of neighbors you would have. Are there a lot of kids, working parents, or older couples? You can find this out through your frequent drives.
Negotiate with the home sellers of your future home. You do not know what the sellers situation might be and it never hurts to try to negotiate a lower price. Although it might insult them and you could lose the house forever, some home buyers have found that asking for more in their offers has been very successful for them. If the seller is under a lot of pressure to sell or has had few offers, they might be more willing to listen to your demands.
Up front, foreclosed properties might seem like a steal. They are much less expensive and can be a great deal when it comes time to sell. However, if the homeowner has been unable to make their mortgage payments, it is highly likely that they have been able to keep up with the general maintenance of the home itself.
You will have to purchase a foreclosed property as is many times and you could be stuck with a property that has larger issues than you are willing to deal with.
When you purchase your next house, get into a mortgage you can afford. Especially for first time buyers, getting a good mortgage and knowing which lenders are right for you can be tricky. There are unethical lenders out there offering deals that are literally too good to be true.
Finding a good mortgage and lender can ensure the stability of your financial portfolio and home status. If you are caught with an unsavory lender and something bad happens in the future, the status of your home and ability to secure another mortgage will come into question. You could lose everything due to bad choices made now with your mortgage company.
Get a home inspection. You need an unbiased view of the property you are about to buy. In order to ensure that you know of all your propertys potential problems up front, it pays to get a great home inspector. You want to be able to trust the person and know that what he or she says is legitimate.
If your home inspection finds problems that far exceed what you are willing to deal with, you have the opportunity to back out before it is too late. The home inspection is the smartest way to buy a home no matter what the economic situation is.
Finally, buy your home with a long term plan in mind. A home purchase is a huge investment and the savvy buyers look to find a house that will fit them now and years down the road. You can invest in your home and make any necessary upgrades to help you grow with the property, but staying with your home will help to increase your investment and make you more financially secure in the future.
If you have bad credit, consider purchasing a house through a lease purchase or rent to own. Now is a great time to purchase a house at a fixed purchase price, and rent the house until you can afford to get your own mortgage. This gives you time to raise your credit score which will lower your monthly payments by getting a better interest rate.
Here is the scene: You were downsized at work as they outsourced your entire department to a foreign country, the car broke down, and you are supporting three children with monster appetites and Ipods. You had to let some things slide and the mortgage payment was near the top of the list. Now you are stuck as the mortgage company is starting foreclosure proceedings. You are wondering if this could have been avoided and the answer is a definite yes.
The first step in foreclosure prevention is to make sure that the mortgage loan you take out is well within your capacity to repay. As home values have spiked upward many lenders have increasingly pushed a variety of creative financing options including interest only loans as well as a variety of ARMs.
Interest-only loans are great if you want to free up extra cash every month or if you are looking to flip a property and are confident it will rise in value. However, they are a two-edged sword and could carve you up financially if you're not careful. And, ARMs, especially some of the more creative kinds that reset often can jack up your payment as interest rates rise.
Like conventional mortgages, interest-only loans come in many different flavors. The rate may change annually or be fixed for a certain time period - say 5, 7, or 10 years. After that time period ends the loan then might have a variable interest rate. Consequently, your monthly payment might go up a substantial amount. And further down the road the loan could revert to a principal and interest loan.
So, what may seem like a convenient way to make lower payments initially or lock up more house may in the end become a weight so stressful that foreclosure becomes your only solution. Just make sure you'll be able to afford the payment you lock in now AND the payment you may have to make in the future. You can't necessarily count on increasing home values to cover the situation. As this is written the market is stagnant in many areas and declining in others.
In regards to avoiding foreclosure, foreclosure prevention should begin at the first sign of trouble in paying the payments, and that means any payments, not just the mortgage. If for any reason your financial situation has changed for the worse then you need to re-evaluate your budget and situation to ensure that serious situations, like foreclosure or repossession do not start to happen. Be especially cognizant of any equity you may have in your home. If you have been paying for many years you may have a substantial amount of equity that you can tap in the form of a home equity loan to pay any bills.
Look for alternate income sources in a crunch. Pick up a part-time job, sell some stuff on eBay, even rent out a room in your house for awhile for some extra cash.
If worse comes to worse borrow enough money from friends or relatives to bring your payments current and then sell your house and pay them back. This at least preserves the home equity you have built up.
Tight situations can sneak up on anyone. The key is to prepare before hand. Have an emergency fund on hand to deal with just such occurrences. Paying yourself first is almost always possible to do. Small amounts stashed away become ever larger amounts that can serve as a nice cushion.
For the vast majority of people a home is the largest and most expensive item they will ever purchase in their lifetime. Barring a windfall of extreme financial gains, most will spend the largest part of their lives paying for their home, and the last thing anyone wants is to lose what they have worked to own for so long.
The first step you should take if you find yourself in a situation where you cannot pay the mortgage is to contact the bank or finance company that holds the note. The fact is financial institutions do not want your home; they are in the business of making money and have little interest in owning property. So, they want money and most times they are willing to work with their customers to see that they can keep their home and continue making the payments. This is especially true for those customers who have a long standing good relationship with the company.
If for some reason this does not work then you should contact one of the many foreclosure prevention services that are around today. They can speak on your behalf with the company that holds the note and will work with them and you to make sure that the home does not go into foreclosure providing that you hold up your end of the bargain, which in most cases means paying a smaller payment amount then normal until such a time that you can once again begin making the full amount. Many times these companies can also get your interest rate lowered and also help to stop any late fees that may be imposed.
Many of the mortgage companies that are currently in operation have foreclosure prevention program options. If you call the company and explain the situation they may tell you that it is best to enter this program that is offered. This is a way for you to avoid losing your house while still making an honest attempt to make the payments as required.
You should be sure to deal with only respectable companies that are willing to help with the minimum of fees that are involved. Be wary of companies that offer to pay off your mortgage to give you a better rate and some cash in your pocket. Most often they are predatory lenders that will raise the rate to an extreme amount. This is all stated in their fine print which they will neglect to mention while you are signing the papers.
Other avenues for finding a loan to avoid foreclosure are the new p2p, or peer to peer lending sites that are cropping up. Prosper and Zopa are two of the better known p2p lending networks. Here, others, like yourself, come together to lend and borrow money. At Prosper, for instance, you post the amount of the loan you're interested in receiving and the interest you're willing to pay and others bid on funding your loan. The prosper loans involve no collateral, so you don't risk your home. These unsecured loans, if funded, are for three years.
When all is said and done, however, there is one method that can ward off foreclosure, if you start soon enough. That is pay yourself first...
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