Photo: Flickr via piotrpawlowski
Even though national mortgage rates have reached historic lows, prospective buyers should be as cautious as ever before locking in a loan for their dream home.That advice goes double for women, as they’ve been found to have a clear disadvantage compared to male homebuyers, according to a study published in the Journal of Finance and Economics.
“Never purchase anything, let alone a house, if you don’t know everything there is to know,” Rick Allen, founder of MortgageMarvel.com, told Business Insider. “Approach buying a home, no matter if it is $50,000 or a million dollars, like you would approach hiring employees.”
Be picky about your realtor. As Allen notes, not all real estate agents are created equally or well-versed in the same specialties. “Whether you are looking to buy a rental property, short sale, standard sale, foreclosure or a single-family unit to call home,” you should be sure you’ve picked the right person for the job, he says.
Think about a mortgage broker. If you’re carrying a less-than-stellar credit history, you might be better off eschewing realtors in favour of a mortgage broker, according to Jane Hodges, author of Rent vs. Own. “If you don’t have the perfect set of criteria, you’re going to have layers and layers and layers of fees and higher expenses, which will cut in to how much you can borrow,” she says. “A lot of people start with tire-kicking with Realtors, going to open houses. That’s OK, but what can happen when you’re led by aesthetics is that you’ll finance by any means possible.
Ask for references. Friends and coworkers can be just as helpful in finding the perfect realtor, but you shouldn’t stop there. “Conduct interviews for each agent to make sure they can accommodate what you are looking for,” Allen says. There are three crucial factors that should weigh your decision: their qualifications, how comfortable you are with them, and if you can trust them to get the job done.
Think outside the bank. “Don’t feel pressured to use the bank you’ve been with for 10 years,” Allen says. “You can enter your information to a confidential site like Mortagemarvel.com and get an accurate rate.” You can also punch in your zip code and financial information into these sites for a mortgage estimate: Zillow (www.zillow.com); Trulia (www.trulia.com); Realtor.com (www.realtor.com); and Bankrate (http://www.bankrate.com). Run the numbers on at least three different sites, just as you’d do to find the right credit card.
Get pre-approved. This involves quite a bit of paper work (you’ll need to gather pay stubs, investments, tax returns, drivers licence, social security number and all bank statements from the past two months). You’ll turn all those documents over to your mortgage broker or bank, according to Zillow, which will crunch the numbers and pre-approve you for a loan based on your overall financial health. GoBankingRates.com developed a simple cheat sheet to figure out your monthly mortgage payments once you’ve secured a loan.
Inspect your home inspector. Per Allen, “Get references for a home inspector, interview them and check their former work.” A real estate agent can refer you to a qualified home inspector, but you can check the American Society of Home Inspectors website for options as well. Money Talks News’s Brandon Ballenger makes a good case for inspecting foreclosed homes: “If you’re looking at a foreclosure or short sale, this is doubly important because if the owners couldn’t afford to keep the house, they probably couldn’t afford to maintain it properly.”
The bottom line before locking in your mortgage rate is to tread the waters carefully but quickly.
“Taking the proper steps will allow you to make an immediate decision and lock in your dream home,” Allen says. “Waiting will result in a loss and a prolonged process.”
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This story was originally published by Bankrate.