Real Estate Realities
LOS ANGELES—Finding the right home is always a challenge, given today’s economic climate. But before you go looking and walking around someone else’s living room, breakfast nook, or bedrooms, find out if you qualify for financing.
Too many would-be buyers are busy going online and looking everywhere homes are advertised before learning whether they can secure a loan. Financing should be your first priority or you’re wasting your time and everyone else’s.
Too often, buyers fall in love with a house before learning whether they will even qualify for financing. It’s essentially putting the cart before the horse. Ideally, you can visit a realtor who can help guide you through the financing process since they work with many lenders, or you can do your own research and find a suitable lender.
Federal Housing Administration loans are also a good option not only for low income buyers but for anyone that does not have the necessary 20 percent down payment to qualify for a conventional loan. These loans are especially useful due to their low rates and they allow buyers to put as little down as 3.5 percent. Because FHA loans are insured by the federal government, the buyer is required to pay an upfront mortgage insurance premium equal to 1.75 percent of the loan amount at closing. This insurance premium can be financed as part of the loan so you don’t have to pay out of pocket for it.
Even as you look for financing, it’s very important to have money available to make a down payment. Set some money aside every month that will go toward your possible home purchase. It’s important to save money if you’re serious about buying a house in the future. Look into your household budget and find out whether you can cut back on costs and begin to save money for that home you’ve been dreaming of purchasing.
It may be tricky, but draw up a list of expenses and you’ll soon find some costs that you can cut back or simply eliminate altogether. Get rid of that large Starbucks coffee you buy every morning and get rid of the telephone landline you almost never use. And dump that cable bill if you hardly ever watch cable television. It all adds up and cutting costs is never easy but once you count the cash you saved and put away for a rainy day, it could well turn into your badly needed down payment.
Also, taking care of your credit score is especially important. Get rid of those credit card balances that are hurting your credit. The revolving balance you’ve been lugging around for years could undo your carefully laid plans for your new home. Every little bit helps.
When it comes to financing in the current economic climate, it is not as difficult to find as some may think. There are more regulations so you’ll have to submit more paperwork than you would have three years ago, but it’s not an impossible proposition. As long as you take care of your credit and eliminate any revolving credit that would count against you, you will find a lender. It’s never easy, but it can be done.
David Rosenfeld is a Real Estate broker and president of Advantage Real Estate, a Real Estate and investment firm in Santa Monica, and a Rotary Club member. He has more than 20 years experience in commercial and residential property investments and financial counseling.
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