(Image by James Perkins)
The sun is shining, flowers are blooming, and the spring home buying season is well under way — and going strong if the latest indicators have anything to say about it.
According to the Mortgage Bankers Association, mortgage applications have risen consecutively for the last three weeks, rising another 1.7 percent for week ending May 4.
The rise in mortgage applications has a lot to do with the record low rates on fixed rate mortgages. Freddie Mac reported 30-year fixed rate mortgage rates have dropped to 3.83 percent, the lowest since they began in the 1950s. And the 15-year fixed —a great option for homeowners looking to save on a refinance— dropped to 3.05 percent, beating last week’s record low of 3.07 percent.
Factor in a recent report from the National Association of Realtors (NAR) —which expects total home sales to rise 7 to 10 percent this year, and 2012 looks promising for the housing market.
With record low mortgage rates, the dream of owning a home is more affordable than ever. If you’re in the market to buy a house, here are ten commandments for home buyers you should know.
1. Know that you are ready to be a home buyer. Are you prepared to take responsibility for maintaining a home? There’s more to it than making a monthly mortgage payment. Upkeep can be pricey, and the responsibility is all yours as the homeowner.
2. Have a financial plan. A home is likely the biggest ticket item you will ever buy. Make sure that you have a financial plan that works with all of the costs and benefits associated (repairs, new furniture, property taxes, mortgage, tax benefits) with your new home.
3. Know your credit standing. Before you apply for a mortgage, it’s important to know where you stand from a credit perspective. To start, get your free credit report cards from AnnualCreditReport.com. Dispute any inaccuracies and once you’ve confirmed that all of your information is up-to-date and accurate, get your free credit score from Credit Sesame. When it comes to saving money and qualifying for a mortgage loan, the higher your credit score, the better your chances of approval and the lower your rate will be.
4. Know what you want. How many bedrooms do you need? Bathrooms? What are you looking for in terms of a backyard, living area, do you want a dining room? Visualize your life in your ideal home. Distinguish between “needs” versus “wants.” Be prepared to make some tradeoffs, but know the areas where you will not compromise. This will help you narrow your search.
5. Do your research and review the market and neighborhoods. Research neighborhoods, school districts, listings and more can be found through online tools like RedFin and Zillow. It’s important to have a good idea of what you want, even before you sign on with a real estate agent.
6. Understand what you qualify to buy. Get pre-approved, not pre-qualified. Pre-qualified entails being reviewed by a loan officer. Getting pre-approved entails conditional approval by a mortgage underwriter based on selecting a property. Make sure you understand the difference.
7. Don’t buy more home than you need. McMansions are out. Buy within your means. If we’ve learned anything in the last few years, living within our means is not only a commandment, but should also be considered a golden rule.
8. Organize your finances. Your loan officer is going to want a lot of documents for your loan processing. This includes bank statements, pay stubs, and two years of W-2s and tax returns. Make sure you have them at your fingertips.
9. Have the money that you need in the bank. Be prepared and ready for your loan closing. Don’t wait until the last minute to know where your down payment will come from.
10. Avoid major purchases before you close on your new home. It may be tempting, but you should avoid buying new furniture or major appliances before your loan closing. When you apply for a mortgage loan, the lender will pull your credit score to start the process. It will take an average of 30 days or so to process the loan and close, at which time the lender will pull your credit score at the end of the process. If you go and charge large purchases, it could have a major impact on your credit and credit score, possibly causing you to lose the loan. Be sure to check out the Credit Sesame Mortgage Payment Calculator and Mortgage Comparison Calculator.