Many of you have been sitting on the sidelines of the real estate market several years. Maybe you thought prices would continue to decline or interest rates would drop below zero. More likely you just didn’t think.
But prices are NOT going to continue to decline and in fact they have begun a substantial rebound. And the federal reserve has signaled it will gradually begin winding down its financial support for artificially low interest rates.
From my perspective, prices are still attractive and rates are still a giveaway, so this spring might be just the right time to start your search for a new or resale home. To get started in the right direction:
• Find out about your credit score now.
It will be critically important in determining if you will be approved for a loan, and what its terms will be. Your credit score reflects what a computer program calculates is the likelihood you will repay future financial obligations on time. Above 750, you are solid gold. Below 620, you may not be able to qualify for a home loan. Examine your credit reports for free at annualcreditreport.com and get a free look at your score at creditkarma.com. Learn more at myfico.com.
• Stop spending and start saving.
For a home loan, you will need a cash down payment of 5, 10 , or 20 percent of the purchase price. The larger your down payment, the easier it is to qualify and the better the interest rate will be. After you buy, you will encounter a multitude of expenses for furnishing your house, and the more cash you have on hand, the better off you will be.
• Meet with a lender and get prequalified.
Ask your banker or accountant for a reputable home lender, and ask for a free prequalification. Don’t sign anything agreeing to use them as your lender (it’s way too soon) and certainly don’t pay them anything. (This service should be free.)
• Find an experienced Realtor who lives in the area where you want to live.
Interview several and look for a good personality fit. Again, don’t sign anything. Talk with these agents about the areas you plan to look and share the results of your loan prequalification.
• Begin looking at homes with your real estate professional.
Your agent is responsible for showing you hand-selected homes for sale in a price range you can afford that meet your wants and needs. If the agent is truly listening to your reactions, his ability to locate the perfect house will improve with each house you visit. I recommend you take notes and a digital picture of each house as a reminder of what you did and did not like. You may need to make some compromises.
• When you are ready to make an offer, ask for a CMA.
My friend Clark Howard always says to "shop and compare" before buying anything. That certainly applies to houses. Once you find a house you like, ask your agent for a Competitive Market Analysis, a list of homes similar to your target home that have sold in the past 12 to 18 months. Make a fair offer and stick with it. Remember, there is no such thing as the last house.
• Once your offer is accepted, have the house inspected.
You should hire an independent home inspector, preferably not one recommended by the seller or any agent in the transaction. I have been impressed with members of the American Society of Home Inspectors (ASHI). It pays to shop and compare. I strongly recommend that you be present during the full inspection. You will learn a lot about your home!
• Finalize the details and close the sale.
In Georgia, you will almost surely attend a closing supervised by a real estate attorney. Remember he or she is not representing you, but the lender. I think it's a good idea to have your own independent real estate attorney review the settlement statement and closing documents with you at least 24 hours before the actual settlement.
Finally, make sure you purchase owner's title insurance. It is not included in closing costs, and is important in making sure you don't have title problems in the future.
