Impact of Our Economy on Buyers – Especially First Timers

For a long time now, most people have been worried about the economy and how it will effect them.  The unemployment rate is rising and so are the number of foreclosures.  The worry of job security and tightening of credit standards have kept many buyers out of the market.  Most buyers still in the market are looking for homes lower in price than before, and this is causing the average sale price of homes to be lower across the board.  On top of this, more homes selling at foreclosure prices will eventually bring the rest of home prices down.  Out of the buyers who are left, some sit back for the prices to drop lower.  This causes bumps in the road as the market trys to stabalize.  The truth is that the ones that wait too long are going to miss the opportunities that exsist now.  While prices of homes are still low and interest rates have now dropped this week again, too many buyers are not taking advantage of this.  Read here where New Orleans City Business reported this week, "Average Rate on 15 Yr Mortgage Dips Below 4%".  This article reports that the average 15yr fixed mortgage dropped to 3.97% while the average 30yr fixed mortgage fell to 4.88%.  The yield on U.S. Treasury bonds fell due to worries that the crisis in Japan could slow economic growth, which the rates followed.

What every first time home buyer should know

So what should the first time homebuyer do?  Be prepared!  Education and planning is the key and remember to get help.  Consult your Realtor for advice even if you don't believe you are ready to buy yet.  Here are Do's and Don'ts to follow:

Do:

Save your money now while you are planning.  Save money now and don't wait.  Most first time homebuyers are using FHA loans becasue they only need a 3.5% downpayment, but also remember you will also need money for closing costs and pre-paid items such as homeowner's insurance. 

Gather a team you trust.  Assemble a professional team to get you through the technicalities of home buying.  Start with finding a Realtor. Interview this person to make sure they are knowledgable and that you feel comfortable with them.  Then your Realtor can help you to continue to build your team to include a mortgage specialist and then later a home inspector and title company.  Ask around for referrals and meet with them in advance so that you are comfortable relying on their advice when you need it most.

Know what you can afford.  Only you with the help of your Realtor and lender can properly determine what you can afford.  Mortgage standards are still constantly changing and your bank or mortgage company of choice can help you keep up with the most recent requirements.  They will also run your credit report.  A good mortgage specialist will not only let you know if your credit is up to standards, but also give you suggestions to get you ready if it is not.  You want a credit score minimum of 640, but the higher the better.

Choose the right option for you.  After you know what you can afford, narrow down your search by figuring out what type of home suits you best.  Ask yourself questions such as do you want: a house or a condo?  A new home or older home?  Is more square footage worth a longer commute?  Are you looking to renovate or move right in?  In the city or a smaller community?  You may also want to drive around in the towns your are considering to find the neighborhoods you like and will feel comfortable in.


Don’t:

Skip the home inspection. You may know a handy guy, but the best way to see if your dream home will turn into a nightmare is by having, before you purchase your home, a home inspector identify any potential problems and determine whether or not any upgrades need to be made.

Buy more than you need.  Even if you can afford a more expensive home, choosing one that you love at a lower price point allows you to keep some breathing room in your budget. A fourth bedroom that you never use is just another room to clean and heat!


 
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