May 30th, 2013
Thursday’s bond market has opened relatively flat despite the release of some favorable economic news, but we should still see an improvement in this morning’s mortgage rates of approximately .250 – .375 of a discount point due to a rally during late afternoon trading Wednesday.
Added to this are worries that the Federal Reserve may start to slow its stimulus efforts, and we’re starting to see higher mortgage rates. The Mortgage Bankers Association stated that interest rates on a fixed 30-year mortgage increased to an average 3.90% which is the largest jump in 14 months.
This decreased the amount of mortgage applications even though people are still trying to buy homes. And because we’re starting to see a recovery of jobs, more people want to purchase a house. And since there aren’t a lot of houses to buy, home prices will continue to skyrocket.
So, let’s look at some mistakes to avoid if you’re a first time homeowner:
This is like looking for caviar when you’re on a beans and rice diet. You should know what you can comfortably afford today before you ask a Realtor to pull listings. The best way to achieve this is by sitting down and writing down your average expenses, looking for things you may want to give up for a little while, and getting pre-approved by a reputable mortgage loan officer. (And before you apply for pre-approval, you’ve been working on improving your credit score so there are no surprises, right?)
When you do find some good houses, have your Realtor find out the average expenses for gas, electric, water, and garbage. You can also estimate your property taxes. This gives you a better long term picture of how much the home will cost you.
Finally, contact your insurance agent for an estimate on homeowners insurance, and if you will need additional coverage for earthquakes or floods.
You’re focused on buying a home, so planning ahead for when you may sell it may never cross your mind. But a house is also an investment. And your life will change. If you don’t have kids, you may buy a fun house in a neighborhood that doesn’t have good schools. If you decide to have kids, you’ll need to either look into private schools, or selling that fun house and buying in a different neighborhood.
When you get older, you may not want a house with three flights of stairs, or four bedrooms and three baths.
Additionally, you should drive around the neighborhood to hunt out other potential issues like a factory nearby, or a large park that gets a lot of people on weekends (and they all want to park in front of your home).
As a first time homebuyer, you lean towards trusting what your real estate agent advises because you assume they have your best interests at heart. Usually, yes, but remember that they may not fully understand your situation and make recommendations that aren’t. So trust advice but verify. Don’t be afraid to ask questions or see if there are any other options.
And finally, a verbal agreement isn’t worth the paper it’s printed on not to mention it’s non binding. Get every part of the offer in writing when the seller agrees to your bid. If it’s not under contract, then the seller is free to reject your bid and accept one that comes in afterwards.
Put together a team of professionals to work with you, and always think with your head. It’s easy to lose focus when you buy your first home.