5 top tips for homebuyerss

For some buyers, it is the best of times and for others, the worst of times

Homes in many areas are selling for as little as half of what they were selling for two years ago. But, with the number of foreclosures continuing to rise in many markets, it's also hard to determine how much lower home values will drop. Also the buyer competition is fierce with multiple offers on almost every good property.

The lending situation is difficult, too. While rates on many types of loans are at historic lows, fewer people are qualifying for them. It will pay to prepare a little before you begin house hunting.

1. Put together a decent down payment, but not at the cost of your emergency savings

The less you put down, the more you're going to pay for mortgage insurance.

But be careful not to drain your bank accounts, either, in this age of financial and job uncertainty, Buyers should practice making six months of mortgage payments into a bank account to use as an emergency fund. This isn't the time to be buying a house and exhausting everything you have in the bank.

2. Choose a lender and loan officer wisely

Look for originators that are FHA certified because they have qualified by taking more steps get that status and because it gives buyers the option of an FHA loan. FHA has had more favorable rates compared to other loans lately and they require smaller down payments.

Once you have narrowed your list to three names, you should interview these loan officers or lenders and get pre-qualified with at least two of them to see what range of options they can offer. A good loan officer, will ask a lot of detailed questions about your income and assets up front, so there will be less of a chance for surprises when it is time to get approved for a specific loan.

3. Get pre-qualified as early as possible

There's no way to get good estimates on rates, unless you pre-qualify, because the lending practice has changed dramatically.

Clear this hurdle and ask for the RESPA good-faith estimates and the costs associated with those rates to use in your calculations. This is simple and doesn't require a lot of documentation. That comes later, when you get pre-approved for a purchase.

Getting pre-qualified early also can give borrowers with decent credit time to make small adjustments that will affect their credit score, and get better rates.

Credit scores are put in bracketed ranges for pricing, so missing a range by a digit or two, could set you back 1/8 to 1/4 of a point over the life of the loan add to your total closing costs.

Get all your documentation together, pay stubs, bank statements, etc., before you start looking at houses.

4. Reduce your exposure to risk

In addition to analyzing trends in value, agents should be scanning foreclosure data (from notice of defaults to bank repossessions) to make sure they know where the deals are, and whether or not there are so many foreclosures in the neighborhood that they'll pose a threat to home values in the years ahead.

In the foreclosure capitol of Stockton Ca, most properties are selling for half of what a property sold for just a few years ago, even though some properties in the area are listed for much higher.

Once you've found a property you want to make an offer on, ask for a contingency in the contract that lasts longer, through closing if you can manage it, that will allow you to get out of the deal without penalties if your financing falls through.

5. Get a rate lock

See also

• Interest
• Subprime

Buying Real Estate