The blend of low house prices, still-low interest rates and appealing tax incentives can sure help the discerning buyers find real bargains. But the process of buying a home can be off-putting at times. The following tips can come handy:
Why Buy a House Now
Falling Prices: There has been a downfall in the home prices due to the recession.
Real Estate Investment: Investing in real estate remains as the most viable option as it not only ensures secured future but helps one reap the benefits of a comfortable living in the present as well.
Interest Rates are Reasonable: Though the interest rates have risen from their historic lows earlier this year, they are still affordable for those seeking loans.
Tax Credits are Available: The 2009 American Recovery and Reinvestment Act. enables the first-time homebuyers to get up to $8,000 back till Dec. 1, 2009, from the tax credits implemented. Besides, legislators are considering an increase in the credit to a limit of $15,000.
1. Figure out How Much you can Afford
This is the most important step when you go in for any kind of investment. The expenses for house must be kept below 35 percent of your total income. Breathing room in your budget would surely help during times of contingencies.
2. Be Ready for Down Payment
Ideally, a down payment of up to 20 percent is essential today. In case you do not have this amount, it is advisable to talk to your mortgage lender about your options.
3. Consider Your Credit Scores
You need to check your credit score before investing in a house. Credit scores range from 300 to 850, with the median U.S. credit score about 725. If your score is lagging, you can improve it by paying every bill on time and disputing any erroneous information on your report.
4. Know about Mortgage Insurance
Mortgages with less than 20 percent down payment require Private Mortgage Insurance (PMI) in case the owner defaults on the loan. When mortgage is paid up to 80 percent or less of the home's value, the home owner can request the lender to cancel the PMI and then be able to stop paying the additional amount.
5. Know about Indirect Expenses
The principal and interest on a mortgage payment are only the beginning of home-related costs. Escrow payments - the funds withdrawn to cover home insurance and taxes - and PMI can add a few hundred dollars per month to a mortgage payment.
6. Look out for Fraud by Timely House Inspection
Home inspection is a must before you go in for a deal. This would give an insight into the actual conditions of the house as some of the lowest priced homes today are "fixer-uppers" or homes sold “as is" due to foreclosure. This would also help you determine the approximate cost of fixing the problem parts in your future house.
Despite the prevailing meltdown in the market, housing remains a good long-term investment. Doing your homework on the basis of said pointers above can assure an investment made well.
By Sanghmitra Jamwal