Posted by Elizabeth Dennis on November 13, 2011 | No Comments
Building and maintaining good credit is essential when it comes to purchasing a house. The difference between good and bad credit can save or cost a homeowner thousands of dollars over the course of the life of a loan in terms of interest rate. Home buyers with good credit are going to be able to secure a much lower interest rate from a bank or a mortgage company than a person with much worse credit. In order to save you money, follow these tips on how to get your credit in order before purchasing a house.
Check Your Credit
One of the worst things you can do is to not keep on top of your credit report. Sometimes, mistakes do happen and you could wind up with some bad information on yours. As a result, you could see your score drop to an unacceptable level or you could wind up with a much higher interest rate. As a result, you should get a copy of your credit report at least once a year. This will allow you to make sure your it is accurate and you will not have any surprises. In addition, pull another one just before applying for a loan in order to make sure that everything is in order.
Close Some Accounts
Another good way to boost your credit is by closing store accounts. These store charge cards normally come with very high interest rates and fairly low limits. As a result, get rid of these by paying them off and closing them. You really only need one or two regular Visa or MasterCard cards in order to have the purchasing power you need.
Watch Your Limit
When buying a house, you will need some credit to play with. Therefore, it is important to not use more than 80% of the credit limit on revolving accounts. Having credit card accounts near their limit can have a drastically negative effect on your overall credit score. As a result, you will want to pay down as much as you can on your credit cards before applying for a home loan.
Re-establish Credit
If you need to re-establish your credit before buying a house, don’t just buy things you don’t need in order to show that you are now more responsible. Instead, get a secured card that reports just like a regular credit card. Use this card to purchase everyday items and at the same time, deduct the money from your checking account. That way, you will pay it off every month and your credit will be rewarded at the same time.
Put off Big Purchases
If you are thinking of making other big purchases right before buying a house, don’t. This will only have a negative effect on your overall credit. For example, if you also need a new car, put off the purchase until after you have closed on the house. The recent purchase will bring down your score and show up as a new and high debt which you have just incurred.
Posted by Elizabeth Dennis on October 16, 2011 | No Comments
Negotiating for a house can sometimes be the dreaded part about buying a house. The process can sometimes take a while or be over with in a matter of a few hours. Of course, getting the best deal means following a few rules and understanding the process at the same time.
One way to know where you should start is to request a comparable market analysis or CMA from your real estate agent. These reports show valuable information on homes in your city and you will be able to compare such items as square footage and amenities which determine a home’s price. In addition, do some research on your own to see what is selling and if prices have been going down or up.
Next, go into negotiations with a maximum price that you are willing to pay. Be sure to take into account what your monthly payment is going to be and don’t forget about private mortgage insurance, regular insurance and taxes.
When you have these pieces in place, call your broker and make an offer. Of course, you will want to start out several thousand dollars below what you are willing to pay. If your initial bid is rejected, then be prepared to adjust your bid. You can do this by increasing the amount you are willing to pay or you can make other adjustments. You may ask for certain concessions such as the willingness to pay more money if the seller will fix certain problems found in the home inspection. You may also negotiate with the seller to see if they are willing to pay closing costs.
In addition, ask for a professional appraisal of the house to be done. A good inspector will be able to give an impartial price and this quote can be an indicator of which way the negotiations will go.
There are also several other steps a buyer can take during negotiations. One is to fully understand the seller. For example, you want to make use of the seller’s fears. A thorough buyer should try and figure out why the house is on the market. You can strengthen your position as a buyer by seeing if the seller is getting a divorce, moving out of town for a job or needs to raise some cash quickly. You may find out that you can buy the house for a much lower than the asking price if the buyers needs to get out in a hurry.
When negotiating on house always remember to hold your cards tightly to your chest. Always divulge the bare minimum to a seller about yourself. Remember that knowledge is power and could be used by the seller as leverage. For example, if you want to pay cash, don’t mention that fact because sellers may see you as a person with means and hold firm on their asking price.
Next, have options when negotiating. Find another house that you would be perfectly willing to have even when negotiating a deal on another. That way you are not so desperate for the first house, that you give in to the seller’s wants.
When negotiating, you may want to start with a range of figures rather than specific price point. You don’t want to start so low that you insult the seller and negotiations are over before they even start. A price range, on the other hand will give some flexibility.
Finally, don’t let negotiations become ego driven. Remember, you are there to buy a house and not beat the seller. If you like the house and it has come down enough to fit your budget, consider it a victory. Don’t lose a house over a few thousand dollars just because your ego doesn’t want to give in.
Posted by Elizabeth Dennis on October 7, 2011 | No Comments
No ever said that buying a home was cheap. In fact, it is one of the largest and most expensive purchases you are ever going to make. Therefore, it is vital to try and save money anyway you can when it comes to purchasing a house. This advice goes for those who are looking at purchasing their first home or their fifth.
One of the easiest ways to save money is to negotiate with the seller. While you don’t want to lowball the seller and offend them, you also don’t want to offer full price, either. One way to get around this is to offer a range rather than a specific number. When making your initial offer, provide a sheet listing the needed repairs, the lower end of comparable sales in the area within the last three months and a pre-approval letter for the amount offered. Never show a pre-approval letter for more than you are offering at that moment. For example, if you are offering $275,000 on a $300,000 house and your pre-approval letter shows you qualify for the full $300,000; guess which amount the seller is going to want.
In additions, once that offer has been accepted and the inspection is complete, use that as a way to further negotiate. Also, look and see about seller contributions to closing costs. These are usually not offensive to the seller and you could save up to 3%.
Another way to save money on the cost of a home is to further reduce your closing costs by closing during the right time of the month. Say, for example, the interest is $50 a day and you close on the fifth of the month. You will have to pay interest from that day until the end of that month which could be well over $1,000. If, however, you close on the 25th of a month, you can reduce this cost to just a few hundred dollars. Don’t, however, close on the very last day of the month in case an extension is needed for a few days.
Finally, be sure to zip your lips and keep your emotions in check when looking for a house. Don’t reveal too much information about yourself as it can be used against you. Also, be sure to conceal any pressure that you might be under to find a house right away. The seller will use that information to drive the price up. In addition, while you do want to show some emotion with each house that you see, you don’t want to get too over excited about any one. This tips your hand as to which house you like the most and can put you in a losing position when it comes to negotiations. Always have another house that you would like just as much if the first one does not work out. Finally, don’t be talked into making an offer. Only do so when you are ready and make that first offer 15% below the asking price. Remember that the first offer will dictate what you pay in the end.
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