Expect the Worst When Home Prices Rise

Those seeking a mortgage fast to purchase now may need to consider what will happen to the real estate market upon a rebound.

People have been feeling stuck in their homes, unable to move for many years now.  As prices fell, more and more homes went underwater.  (Click here for more information on underwater mortgages) Now there is huge amount of Americans that want to move the second they can sell their home to cover their mortgage.

What does this mean for the value of my future or current home?

Once prices rise, all of the people on the fence will likely put their home on the market at the same time.  Also, banks who have been waiting for a recovery will be eager to put inventory on the market too.  This will result in an over supply of homes on the market causing prices to fall again.  Sellers unable to sell quickly will end up in a market flooded with homes and eventually many will pull their homes back off the market due to another price decline.

Those looking to purchase during this time of price increase then decrease will need to consider pulling the trigger quickly on any home they want to buy at the bottom.  Prices will likely increase after this dip, shaking out those willing to sell at lower prices and leaving those only willing to sell at higher prices.  However, be careful… There could be multiple spikes and dips due to the amount of inventory on the market and people eager to sell their home at a price that will pay off their current mortgage.

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House Hunting Tips You Won’t Hear From Other Mortgage Professionals

  • Find a realtor that won’t mind submitting multiple low offers in this slow market. Some people have started to fish for a home. To do this, soon-to-be home buyers take all the homes in their price range and submit offers (with lots of contingencies) on all of them at 35-50% of their asking price. Fishers wait patiently until a seller bites and then they hook them.
  • 100% financing and interest-only mortgages were popular but you need a down payment to purchase in 2012. Expect 10-20% down payment unless you qualify for a first-time buyer program.
  • Find a mortgage professional that will explain all of the pros and cons of your mortgage options. No matter the mortgage program you choose, there are good and bad aspects that must be weighed. The system is simple. Financial institutions know that your home will often be your biggest asset. Lending institutions will work with you to find the best program for you because they want you to make the interest payments. Lenders want you to be successful so that you will pay more interest on the next home. So you must choose, either get pre-approved for a mortgage or sit out.
  • Full list

Click here for more house hunting tips.

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5 Essential Questions to Ask Yourself Prior to Purchasing a New Home

Ask Yourself Prior to Purchase

Buying your first house is a huge decision and there are multiple factors to consider. This article will outline 5 questions each future homeowner should ask.

How long do you plan on living in the home?

Americans usually live in homes for about seven to nine years. Each future homeowner needs to decide if they plan to move in just a few years or stick it out for the long haul. Usually, the shorter amount of time that you live in a home, the less time your home has to appreciate in value. Also, in a market where home prices continue to decline in certain markets, future homeowners need to assess the risk of a short-term buy.  The length of time future homeowners plan to live in their first home will impact the mortgage option of best fit.  Homeowners that stay in their homes for more than 10 years, a long-term fixed-rate mortgage might be the best choice. If you know that will be imminent within 5 years then an adjustable rate mortgage or ARM might be the best choice. There are many options to choose within these basic categories. Talk with your mortgage professional about the other options available and the loan products they have access to.

Will the home you are about to buy meet your future needs?

Many life changes can affect the first time home buyer. Some will plan to have kids within the next couple of years.  Do you plan to start a business and run it out of your home? These types of questions need to be asked prior to taking the plunge. Be sure that the home you purchase will meet your needs for years to come. In other words, you don’t want to outgrow the house too fast.

How do your finances look to lending institutions?

If you have more issues on your credit report, many lenders will still provide you with a home loan, but because you are more of a lending risk, you will have to pay higher interest rates and fees.

Where do first time homeowners find the down payment and closing costs?

Most homebuyers need to pay for the down payment and closing costs to complete real estate financing. Usually, you do not need a large down payment if credit scores are high. Multiple mortgage options offer a zero down and low down payment home loans If you have less than perfect credit, coming up with 10-20% of the property cost for a down payment will open multiple mortgage options. In a slower market, many homebuyers will negotiate that the seller pays for all closing costs.

Do you know what the ongoing costs of home ownership are?

There are multiple ongoing costs of homeownership that need to be considered. Some of these costs include maintenance, improvements, insurance, taxes, HOA fees, and more. If you are concerned about these costs, you may need to look for home loan options that minimize fees and lower mortgage payments. Make your realtor and mortgage lender aware of any concerns you have.

Click here for a complete checklist before you buy a home.

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