Royal Oak Real Estate Specialists, also serving Berkley, Pleasant Ridge, Ferndale, Huntington Woods, Beverly Hills, Birmingham, Troy, Madison Heights, Clawson and neighboring Oakland County
Top 10 Buying Tips
Tip #1 Research Is
The Key To Discovery
Home sellers won't call you with an offer to buy a
maintenance-free home with a wonderful mortgage. You have to find the
gems yourself! Only by reading available materials, talking to friends
and experts, and spending time looking at different homes, schools, and
neighborhoods will you end up with your American dream. Avoid the nightmares
by learning how best to buy and maintain a home.
Tip #2 Make A Plan
And Get Pre-Qualified
Every important decision needs to be clearly thought
out. Developing a home buying plan can help you focus on the important
factors and organize the entire process. You may even want to use a binder
with sections on house hunting, home financing, service providers, etc.
Loan pre-qualifying helps you determine the home price you can afford
and presents you as a genuine prospect to the seller. A lender typically
uses the 28% formula (your monthly mortgage can't exceed 28% of your monthly
income) in approving your loan. Planning your actions and getting pre-qualified
will keep you out of the panic mode and allow you to take advantage of
opportunities. A thorough plan will save both time and money!
Tip #3 Value, Value,
Value
The days of 10-30% annual appreciatoin have passed.
Home buyers in the 1970's benefited tremendously from what seemed like
ever appreciating home prices. Nowadays, you're looking at slow growth
while guarding against the possibilities of falling prices, skyrocketing
ARM rates and corporate layoffs that can dramatically affect your home
values. The classic rule of buying the worst house in the best neighborhood
still applies. If you buy with an eye towards improvement, you can customize
the home to fit your needs. The saying, "make money buying a home,
not selling one," should keep you focused on the long-term importance
of the purchasing price.
Tip #4 Create A Top
10 List of Amenities
When shopping for a home, list the features (fireplace,
fenced-in yard, new appliances, etc.) that are most important to you in
deciding on which home to buy. Establishing "your criteria"
early on will save time shopping for inappropriate homes and may keep
you from buying a home on a whim -- for example, because of a circular
stairwell -- that doesn't meet your fundamental requirements. As detailed
in Tip #3, your top reason for buying a home should be the value you are
getting. Some of your top 10 amenities should logically be sacrificed
if an incredible value is available.
Tip #5 Fixed vs.
Adjustable Rate Mortgages
Which type of loan fits your particular needs? If this
will be your first home or a "transitional home" -- one you
plan to own for a short time, an ARM may be the best type of loan. If
it's going to be your dream home or one you plan to raise a family in,
then you may want the stability of a fixed rate martgage. If you choose
an ARM, the index should be based on the Cost of Funds Index if rates
are increasing, and Treasury Bills if they are decreasing. The COFI's
are less volatile over time than T-Bills; make sure the teaser rate is
understood and what the real rate would be. Whichever loan you choose,
make sure that you scrutinize all the closing costs. If you are required
to have a mortgage escrow account and private mortgage insurance, make
sure you understand the terms and cancellation procedures (AHA has publications
to assist you). Also, make sure ther are no prepayment penalties so that
you can utilize an accelerated mortgage plan. A good mortgage reduction
plan can save you tens of thousands in interest costs, and shorten your
loan term, with only small extra principal payments. For example, AHA's
Intellipay Program can cut 11 years and over $100,000 of interest payments
off a typical $150,000 30-year mortgage. If you experience negative changes
in your job, health, or marital status, you can revert to the standard
payments in your mortgage contract.
Tip #6 Sign A Contract
That Protects You
Make sure that the contract you put on a house allows
you to arrange financing, inspect the home and negotiate any problems
that you uncover. Ensuring that the contract you sign will minimize potential
legal battles will let you swim in your new pool with your family and
neighbors instead of with the sharks.
Tip #7 Put Yourself
In The Seller's Shoes
You are about to make one of the most important decisions
that will affect both your life and the life of the seller. If you take
time to understand the reasons the seller bought the home, their reasons
for selling, and the home improvements they have or have not made, you'll
be in a better position to evaluate the home and negotiate a better deal.
In the end, the home buying process excludes the professionals and comes
down to the individuals buying and selling the home. A closer look at
the seller may help you in deciding whether and for how much to buy a
particular home.
Tip #8 Develop A
Mortgage Shopping Chart
One of the biggest decisions to make before putting
a contract on a home is how to finance the purchase. There are 10,000
lenders competing for your mortgage business. The days of simply walking
into the community bank and negotiating with the loan department manager
are over. Today, you can apply for a loan over the Internet or even use
a mortgage broker to shop for your loan with hundreds of lenders. When
choosing a lender, you want to avoid apples to oranges contrasts by comparing
fixed rates to fixed rates, not fixed to ARM's. Create a chart that lists
different types of loans, fees, and at least five mortgage providers (including
a mortgage broker).
Tip #9 Get A Quality
Home Inspection
Although it is hard to believe, more people pay for
inspections before buying used cars than when making the biggest investment
of their lives -- their homes. Paying for a qualified home inspection
before you buy a home isn't just spending "a little extra" for
peace of mind; it's absolutely essential for anyone who doesn't want to
spend thousands of dollars for repairs. AHA members receive a 10% discount
from participating AmeriSpec (the largest home inspection service in North
America) franchises.
Tip #10 Hire A Skilled
Settlement Attorney
After you have jumped through the home shopping and
finance hoops, the last difficult maneuver is at the closing table. You
want an expert that will scrutinize all the documents you will sign and
can be helpful in last minute negotiations. By the time you get to settlement,
you have already pictured where your furniture will go, the best place
to drink coffee on weekends, and the spot your newspaper will land each
morning. A lawyer may help you by remaining unemotional and level-headed
when obstacles arise. AHA's Legal Referral Service can help you save 25%
on attorney's fees.
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