What kind of home do you want or need?

Before you get out there and start looking at houses, it’s a good idea to determine not only what you want in a house but also, more importantly, what you need. It focuses your house hunting, and saves you valuable time by only looking at houses that meet your criteria.

Here are some things to think about as you set your priorities:

• Where do you want to live?
• Do you want to live close to your family or as far from them as possible?
• What kind of schools do you want your children to go to?
• How important is it to you to be close to shopping, work, hospitals, entertainment, community amenities?
• Is the amount of traffic important to you?

Looking for a house really starts with looking for a neighborhood. Deciding where you want to live will save you a lot of time as well as miles on your odometer and is the key to narrowing your search for a home.

How long do you expect to live in your new home?

If you plan on living in your new home for only a few years, or if you don’t have children, then proximity to schools may not be an issue, but resale value may be. On the other hand, if you have a family and plan on staying put for ten years or more, schools and home size will be priorities.

What don’t you like about where you’re currently living?

Making a list of what you definitely do not want in a home will help you weed out homes without having to waste your valuable time looking at them.

What’s your lifestyle like? Do you entertain a lot? Then you’ll want a home that lends itself to that. Do you work from home? You’ll need a home with a place to create an office. Are you a gardener? Then lot size is a priority.

Keep these things in mind as you make your list of home wants and needs. And remember, your list needs to be flexible in case you can’t find a home in your price range with all the amenities you want. It’s a good idea to put the list in order of importance. For instance, an eat-in kitchen may be more important to you than a fireplace.

How much home can you afford?

Few things are more frustrating than falling in love with a home only to discover that it’s not in your price range. The best way to know how much you can afford is to find our how much money you can qualify to borrow.

There are two things you’ll want to consider doing even before talking with a home loan expert about how much you can afford to borrow:

. Check Your Credit

Check your credit by getting a copy of your credit report. Your credit report determines your credit score, which is needed for qualifying for a home loan. Order your credit report from the three major credit bureaus, check them carefully for discrepancies and errors, and have each bureau clear any errors from your report.

. Know Your Monthly Payment Amount

Be sure to calculate how much of a monthly mortgage payment you’re comfortable paying. You may qualify for a loan amount that would require a higher monthly payment than you’d like to pay. Sit down and figure out your monthly expenses for a new home.

Remember to include items such as maintenance, home improvements, taxes, insurance, and association fees if applicable.

Mortgage Basics

Simply put, a mortgage is a loan you take out to finance the purchase of your home. It’s also a legal contract stating that you promise to pay back the loan on a monthly basis. Your monthly payment typically goes toward interest, taxes and insurance as well as the loans principal.

There are literally hundreds of variations of mortgages. Fortunately, there are just a few basics you need to know in order to understand most of them.

Fixed-rate mortgages have a fixed interest rate over the term of the loan. By far, most mortgages are fixed-rate mortgages. The main advantage of a fixed-rate mortgage is that your monthly payment never changes. The disadvantage is that if interest rates fall below your fixed-rate, and you want to lower your rate and consequently your mortgage payment, you’ll have to refinance.

Adjustable-rate mortgages (ARMs) start with a lower interest rate than a fixed-rate mortgage for an introductory period—typically 1, 3, or 5 years. After that, the rate adjusts, usually annually, based on a pre-determined index. An ARM is a good choice if you’re expecting to live in your home for less than five years and can also help you qualify for a larger loan.

The term of your mortgage is the number of years you have to pay back the loan. Most people opt for 30-year terms, but 10-, 15-, 20-, and even 40-year terms are also available. The down payment is the difference between how much you borrow and the purchase price of your home. And, in spite of what most people think, you don’t need a big down payment to buy a home. There are many low and even zero down payment loans.

Get approved for your home loan before you shop.

Why apply for a mortgage when you haven’t even started looking for a house yet? You’ll be in a better position to negotiate because the seller knows that you’re already approved for your mortgage and that your offer is good. Having an approval gives you these advantages as a buyer:

• You know exactly how much home you can afford, eliminating the guesswork.
• You’re in a better position to negotiate a lower purchase price becausethe seller knows your offer is good.
• Once the appraisal and title work’s been done, you can close on a home in days, not weeks, potentially saving the seller a lot of money—another bargaining chip.
• You’re a virtual cash buyer—it’s like shopping for a home with the money in your pocket.

Tags: home buying advice, Home Buying Tips, Home Loans, mortgages

This entry was posted on Thursday, August 21st, 2008 at 10:18 pm and is filed under Home Buying Tips, Home Loans. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.