There’s no denying that people are a little wary about putting money into purchasing a new property these days thanks to a recession economy with an uncertain outlook. And yet, with both housing prices and interest rates dipping unbelievably low, the family that can afford to risk it has a huge advantage over people that were buying just a few short years ago. In truth, any house you invest in now is only going to increase in value, so if you can find a way to swing it, now is an excellent time to think about buying a home or even a rental property. But you still need to get all of your ducks in a row to ensure that you get the best deal. So here are a few tips to get you on the right track.
- Check your credit score. Although associated costs have dropped, mortgage lenders are pretty skittish about handing out loans these days. If your credit isn’t top notch, you may not be able to secure the rates you’re looking for (or get approved for a loan at all). So you need to do everything you can to build up your credit score before you start loan proceedings. Start by ordering a free credit report to check your rating, and then identify any black marks and do what you can to clear them up. Once your score is in a favorable range you should have no problem securing the loan you need to buy a house.
- Set a budget and save. If your credit score is right where you want it to be, it’s time to think about what you want to spend (not what you can get approved for, but what you can actually afford). This means analyzing your current budget to see what kind of monthly mortgage payments you can manage. You should also begin saving for a down payment. This could not only help to lower your monthly payments; it is also required in most states.
- Negotiate with lenders. Getting pre-approved for a loan may not be a problem, especially if you have a sizeable down payment. But getting the best rates might not be so easy. You need to know what the prime rate is and how different lenders are using it to calculate the interest rate on your loan. You’ll also need to consider fixed versus variable rates. Keep in mind that a fixed rate may be higher, but the market is not going to get much lower at this point, so you probably stand to lose on a variable rate over time (unless you have an option to fix it at a later date). Knowledge here will help you to negotiate with lenders for the best rate.
- Do your homework. Loan approval is only the first step in purchasing a home. From there you need to find the right one. You’ll want to consider the area (check crime rates, school districts, and county sales and property tax rates, for example) as well as specific homes (age, size, proximity to public services, etc.). A good real estate agent can help you here.
- Don’t ignore DIYs. Fixer-upper homes may not be terribly appealing, especially in a market that is flooded with options), but you can still get a bigger discount on homes that need a little TLC to further reduce your expenditure and increase the potential for your investment to pay off. So if you can manage a little DIY, this could still be a good option.
Jamie Harris is a contributing writer for www.limaonecapital.com/, the premier hard money lenders GA.
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