Seven Tips For Homebuyers

Talk to Builders

While the notion of buying a distressed property, such as a foreclosure or bank-owned home, at bargain basement prices may appeal, Fadel says consumers should tread with caution.

Many come with legal headaches, not to mention costly surprises such as mold damage, structural problems or damaged ceilings or roofs. 

Plus, in today’s competitive market, he notes, it’s hardly necessary to take any risk at all.

“Many builders across America are willing to take 20 to 30 percent below what they would have accepted a year ago, even below their construction costs to clear out inventory, and these are brand new homes that come with a ten-year warranty in many cases,” he says. “You don’t have to buy someone else’s headache.”

Making An Offer

When you do find your dream home, don’t rush in.

Research the neighborhood carefully and talk with realtors to be sure your offer is within range of comparable sales in the area.

Web sites such as Zillow.com, Homekeys.com and Realtor.com, which provide online estimates of a house’s market value, can help. Look at recent transactions that closed and are published in local newspapers.

And don’t be afraid to play hardball. Sellers in this market are likely to give you what you ask for, within reason.

“If the inspection turns up problems with the house, it’s reasonable to ask the seller to finance them or make a contribution towards the repairs,” says Zigas.

You can also ask for concessions, in which the seller contributes money towards your closing costs (up to certain limits)—unheard of in the seller’s market of a few years ago, but par for the course today.

At the same time, with prices down as much as they air in some markets, there may be more interested and qualified buyers than you think so be careful in making a low-ball offer and be prepared for a bidding war.

Getting A Loan

These days, securing a mortgage can be the hardest part of the equation.

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Generally speaking, you’ll need to document a steady employment history, have good credit history, and have a low debt-to-income-ratio to even qualify.

If you fall short in any one area, be prepared to make up for it with a larger down payment or higher interest rates.

Despite the credit crunch and disappearance of zero down and no-doc loan programs, the Federal Housing Administration still offers programs for cash-strapped borrowers with little money for a down payment.

FHA-insured loans require a 3.5 percent down payment, far less than most conventional loans require. They also allow for higher debt ratios and they offer greater flexibility on both the borrower’s credit rating and the source of their down payment (which can include gifts).

Such loans have no income limit, but do come with a maximum loan amount, which ranges from $271,050 in lower cost parts of the country to $729,750 in higher priced markets.

Before signing anything, says Zigas, consumers should research all options available, from adjustable rate loans to points that lower your interest rate, to be sure they’re getting the loan that’s best for them.

Ready, Set Buy

Homebuyers who are in it for the long haul and know their market are almost sure to benefit from a confluence of factors, including low interest rates, better bargaining power and discount prices.

Those who have their financial house in order may want to consider jumping in, says Zigas.

“Trying to bet on the market’s ups and downs is not a reasonable strategy [for home buyers],” he says. “If a house is comfortably within your reach, yeah, it might go down [in price] some more, but if the community is strong it’ll come back and you get to live in the house in the meantime [building equity and benefiting from tax deductions].  If they do their research, then it might be the right time to buy.”