The economy and job uncertainty might be causing you to have some unsettling doubts if you're considering buying your first home right now. However, with housing prices still falling and mortgage rates still near all time lows, there are a lot of deals to be uncovered. Here are some tips that first-time buyers can use to take advantage of the slumping housing market:
1. Know your market to determine what to offer for a home. Markets vary by location. So, you'll need to focus your research on the market area where you're planning to buy. A local real estate agent can provide you a listing of the houses within your price range in the area and a listing of the comparable (comp) homes that were recently sold in the area. Make sure to ask that the list includes both the price the comp homes were originally listed for and the final selling price. Once you have the list, you can compare the list price and selling price to determine if sellers in the area are trending toward accepting price reductions and to what degree. Another point to consider is whether the home you're interested in buying has had several price reductions or has been on the market for several weeks or months. If so, then the homeowner might be more open to price negotiations.
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2. Know your credit score. Never go into the home-buying process without knowing your credit score. Your number will be a significant factor in obtaining financing and a low interest rate. If your credit score is bad, or even just fair, you should spend a few months paying down your existing financial obligations before you look for a home.
3. Get a pre-approval. It's best to get pre-approved for a mortgage before house-hunting. Evaluate your financial situation and apply for a mortgage with the lender of your choosing. After you're pre-approved for a specific mortgage amount, you'll not only know what your price point will be, but you'll also be signaling sellers that you're a serious contender to buy their home.
4. Consider a Federal Housing Authority (FHA) loan. You can borrow up to $729,750 dollars through an FHA loan, depending on local market prices. And, FHA loans have a much lower down payment requirement of 3 percent.
5. Don't expect everything the first time. More often than not, a starter home won't be your ideal home and it won't have a lot of bells and whistles. Your budget will most likely be congruent with a modest home. As you build equity and savings, you can look for all the posh upgrades the next time around.
6. Look for hidden gems. Many buyers have a hard time imagining what a poorly kept or poorly decorated home would look like with a little TLC or their own personal touches. Keep an open mind to the potential in these homes. Plus, the seller might be willing to negotiate if their home has been overlooked by other unimaginative buyers. For example, you might ask the seller to sweeten the deal by paying your closing costs. This savings will free up funds for you to make minor aesthetic improvements or to help you with your moving expenses.
7. Inspect before you buy. Never buy a home without getting it inspected. Including an inspection contingency clause in your contract to purchase will give you the right to have a professional home inspector look at the home and provide you with a listing of any needed repairs or problems. If these impact what the home is worth to you, then you can make a counter-offer to subtract the cost of the repairs from the original amount you offered. Just make sure that you get several estimates from professional contractors for the repairs so that you'll subtract an adequate amount to pay for them.