Foreclosed Homes: 5 Easy Tips For A Great Deal On Your First Home

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Home \| Finance \| Others \| Foreclosed Homes: 5 ... Foreclosed Homes: 5 Easy Tips For A Great Deal On Your First Home Submitted by Brenda on 2008-04-11 and viewed 654 times.

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The home buying process can be overwhelming for a first time home buyer, giving you the feeling that your financial destiny is rapidly spinning out of control. When it comes to real estate, most people don’t have a lot of experience and even less knowledge. Buying a foreclosure home can be even more confusing. The fact is, buying a home is actually a simple process. All you need to do is concentrate on the basics, and the following steps will fall together more easily.

The home buying process can be overwhelming for a first time home buyer, giving you the feeling that your financial destiny is rapidly spinning out of control. When it comes to real estate, most people don’t have a lot of experience and even less knowledge. Buying a foreclosure home can be even more confusing. The fact is, buying a home is actually a simple process. All you need to do is concentrate on the basics, and the following steps will fall together more easily.

1. You need to get preapproved for a mortgage prior to looking at any homes. This gives you the maximum possible time to understand all the complicated paperwork and terms of your mortgage. Preapproval also shows the seller that you are a serious qualified buyer. This gives you an edge in negotiations. Particularly when competing with other buyers for the best deals. Preapproval for your mortgage will also give you time to solve any approval problems. This can prevent wasting time looking and falling in love with homes before you are able to buy.

2. The next thing you should do is beware of any prepayment penalties in the mortgage options you are presented with. A prepayment penalty means that you will be required to pay thousands extra if you sell or refinance the home during the first few years. There are many great loan programs, even available to borrowers with bad credit, that do not include prepayment penalties. If your loan officer presents you with a loan program which includes a prepayment penalty, you should strongly question why and usually turn it down and look for another loan. However, if your credit is bad enough that you know you will not qualify for a better loan any time soon, you may get a better interest rate if you accept a "soft prepayment penalty" in order to get a lower interest rate. What this means is that you will not be require to pay a penalty if you sell the home. Only if you refinance.

3. As the interest rate markets change over the next year or so, you should also be on the lookout for good adjustable rate mortgages. I know that you have heard many horror stories about adjustable rate mortgages, but there are some that have strict adjustment limits and easy refinancing terms and could save you thousands over a couple of years. An example of a good ARM would be an FHA adjustable rate mortgage. FHA ARM mortgages have strict adjustment limits, no negative amortization (your loan balance only goes down and never up), and a streamlined refinance process.

4. Before purchasing a home, decide how much you can afford. Review your family budget and determine how much you are realistically comfortable paying on a mortgage. If you already manage your finances well, this should be a fast process. It may take a little longer if your finances are not organized, but it will be a highly productive effort. You should have your finances in order before buying a home anyway. In any case, DO NOT rely on your loan officer and real estate broker to tell you how much you should pay. They can very easily get you qualified for a home you cannot comfortably afford and each gets more profit when you buy a higher priced home. However, neither of them will be around to help make the payments later.

5. Once you have your finances in order, the first thing that you should do is to familiarize yourself with home prices in the area in which you want to live. Do not make a great effort to match yourself up with a home at this time. Check prices in the area online so that you know what people are asking for homes, but then be sure to check for foreclosed homes to take advantage of today’s difficult housing market. It is a buyer’s real estate market. For your first home, you are better off choosing a home for investment value than trying to get the perfect dream house. You want to buy a home for at least 10% to 20% less than similar homes which have sold. This way you are primed to take advantage of buying in a down market with little risk and making out like a bandit a couple of years later when you are ready to move up. Don’t expect to pay full market value for a home even when prices are depressed and then benefit from inflation to build your equity. The other homes you will want to buy will be going up too. You make your money when you buy at the right price.

The items listed above are just a few basic tips and there is much more you will need to learn to get the best deal on your first home. It is crucial to educate yourself before you get into the market. Most first time homebuyers skip this step and severely handicap themselves right out of the gate. Many previous buyers are paying the price for that in today’s real estate market. Don’t be scared out of the market by their mistakes. Educate yourself and you can still come out ahead.

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