Where seems to be an issue right now, but how long may influence your decision. Even though no one likes to spend money on rent and get nothing out of it, sometimes you have no choice. The transaction costs of buying and selling real estate can wipe out any equity you might build up, especially if you are going to move quickly. For example, the transaction costs of selling a home may be 7%. If you sell before prices have risen by 7%, you will not only not pocket any of your equity, you may be required to bring money to the closing table.
Inflation up until now has been pretty mild in the mid-continent. Yes, on the coasts house prices went up wildly, but they have settled back and people with negative equity are all over California, Nevada and the North and east coasts. On the other hand, the coming tsunami of inflation in 2010 will make everybody wish they had tons of real estate at today's prices. There is substantial risk that the house you buy today will not sell at the same price in two years, but we don't know whether it will be down or up wildly. Your choice of where will dictate the risk, but you should be prepared for owning there over the long term.
Budgeting is not a task that anyone likes, but you have to do it. Look at your projected income over the next few years and how much of that you can spend on housing, including base allowance and base housing. Banks will not let you spend more than about 40% of your gross income on housing and you need to take account of that. Once you have a monthly housing expense guideline, go to a loan officer and find out what your credit looks like.
If you have problems on your credit report, now is the time to take care of them. If you have good credit, then get a pre-qualification or pre-approval letter from the lender. The letter will tell you what the bank will allow you to borrow. Rates right now are extremely low, but they won't stay that way for more than about six months, if the stimulus packages are put into effect. By summer I expect everybody to have regained some degree of confidence, and by year-end inflation will start to raise its ugly head. If you have bought by then, you'll be pleased at the equity you gain over the next year, because it will outstrip the mortgage rate and the transaction costs of selling.
With your letter of approval in hand you can confidently go out and make offers on houses, knowing that the bank will lend you the money. So, contact a local Realtor where you have decided to own (even if you eventually move out) and start looking. If it turns out to be the Dallas area, give us a call or use our website to find your dream home, we'll be happy to welcome you to the neighborhood.
If you do need to move on, you have a choice of selling the property or renting it out. When inflation is raging, hard assets like real estate maintain their relative value, meaning they rise in price. So, you can keep a renter in your old house while your equity rises.
Very simple...GET PRE-APPROVED FOR A LOAN! This can be done over the phone, with a KNOWN local mortgage company. This is the FIRST step, which will allow you to be aware of your borrowing power. DO NOT start looking at houses until this is done! The loan officer will be your best advisor, and will eliminate looking at properties that you cannot afford, AND, most importantly will inform you of your limits.
This HUGE MORTGAGE MESS that we're now facing as a nation occurred because CAUTION was not used by FIRST TIME BUYERS! ALWAYS get counsel from family, someone you trust, before you SIGN anything!Depending on your credit scores, debt level, savings for a down payment,and income, you will be aware of what you can AFFORD, NOT WHAT YOU WANT! Not EVERYONE should buy a home! DO NOT BE IMPULSIVE! DO NOT LOOK AT ANYTHING OUT OF YOUR PRICE RANGE! DO NOT USE THE MAXIMUM LOAN AMOUNT TO BORROW!
Secondly, interview real estate agents, find a fit, and make sure he/she is a REALTOR!. This is very important, as this person needs to be WORKING FOR YOU! Make sure you engage a BUYERS' AGENT! Ask LOTS OF QUESTIONS ABOUT EXPERIENCE, REFERENCES, and if possible, get a referral from a friend/family member who is a real estate professional! Also, remember, you can FIRE your realtor if they are not performing in your best interests!
There are great bargains out there, hope one of them has your name on it!
Find a reputable Broker/Lender and determine what you are eligible for and what you can afford..Avoid spammers and scammers find a reputable mortgage person to work with..
I give free one-on-one credit consultations. But it also includes all of the things required to become a homeowner.
The short list is:
1. Get pre-approved.
2. Find a trusted buyer's agent to represent you on the purchase.