HOW TO KEEP THE STRESS LEVEL DOWN WHEN DEALING WITH FINANCING

Dated: 09/14/2018

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As the events of the last few years in the real estate industry show, people forget about the tremendous financial responsibility of purchasing a home at their peril. Here are a few tips for dealing with the dollar signs so that you can take down that “for sale” sign on your new home.

GET PRE-APPROVED

Sub-primes may be history, but you’ll probably still be shown homes you can’t actually afford if you don’t know how much you can afford. By getting pre-approved as a buyer, you can save yourself the grief of looking at homes you can’t afford. You can also put yourself in a better position to make a serious offer when you do find the right house. Unlike pre-qualification, which is based on a cursory review of your finances, pre-approval from a lender is based on your actual income, debt and credit history. By doing a thorough analysis of your actual spending power, you’ll be less likely to get in over your head.

CHOOSE YOUR MORTGAGE CAREFULLY

Used to be the emphasis when it came to mortgages was on paying them off as soon as possible. Today, the debt the average person will accumulate due to credit cards, student loans, etc. means it’s better to opt for the 30-year mortgage instead of the 15-year. This way, you have a lower monthly payment, with the option of paying an additional principal when money is good. Additionally, when picking a mortgage, you usually have the option of paying additional points (a portion of the interest that you pay at closing) in exchange for a lower interest rate. If you plan to stay in the house for a long time – and given the current real estate market, you should – taking the points will save you money.

DO YOUR HOMEWORK BEFORE BIDDING

Before you make an offer on a home, do some research on the sales trends of similar homes in the neighborhood with sites like this. Consider especially sales of similar homes in similar neighborhoods in the last three months. For instance, if homes have recently sold for 5 percent less than the asking price, your opening bid should probably be about 8 to 10 percent lower than what the seller is asking.

Don’t rely on sites like Zillow- the “Zestimate” is often incorrect because it doesn’t take into account the actual property- just properties in the area.  For instance, in Montgomery County, it’s not unusual to see a home in one neighborhood sell for significantly more than a “comparable” home (same square footage, same number of bedrooms and baths) right across the street in a different neighborhood. 

Not sure where to start? Ask your local Realtor for guidance and keep these top real estate tips in mind.

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Betsy Taylor

I am a Montgomery County, Maryland Realtor specializing in the Gaithersburg, Rockville, North Potomac and Germantown areas. Having lived in Montgomery County for over 25+ years, I understand the mark....

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