It is important for you to pre-qualify for a mortgage loan.  This will entail finding a mortgage lender representative that is seasoned (5-10 years full time experience). The company or bank that you choose is less important than the person who knows the products available, has access to them, and is willing to do whatever it takes to help you, the buyer, to get the right mortgage loan.

You have two options available for choosing a lender.  One of then is a mortgage banker, the other is a mortgage broker.  Simply, the difference is like going to a store that carries one brand of items, (Lucky Jeans, Chico, or Sony etc.) or going to a store that offers a lot of items from many manufacturers like Macy’s.  The “mortgage banker” is the first scenario; the “mortgage broker” is the second.  If you go to your local bank, they will offer you the loan packages that are available through that bank.  If you go to a mortgage broker, he/she will have packages offered from personal investors and corporations, to expansive mortgage companies such as Country Wide Mortgage. It is basically impossible to guess with accuracy what you can and can not afford.  It does not make sense for you to investigate properties that are “beyond” your budget.  What you can afford depends on a number of things!  Your income is one of them, yes, but not the only one! Credit scores, monthly debt payments, interest rates, terms of available mortgages, and percentage of loan down payment, all play a part in what you can afford.

New “first time home buyers” mortgage packages are available for some people. These can often offer excellent terms and conditions. The better the terms of the loan package, the more house you can probably afford. Some people qualify for VA or FHA loans.   These loans can be extremely beneficial to the right buyer.

Basically, when it comes to buying real estate, the first step is to find out exactly what you can do and to have a partner, the lender, to help you do it! Finding what you want and then trying to figure out if you can buy it is the WRONG approach.  Find out what you and the lender agree upon as a price point for your real estate purchase and then, find what you like within that framework.
           
When you are “pre-qualified” for a mortgage loan, you, the buyer, have a much stronger negotiating position.  The owner knows that when the offer comes in, you CAN purchase the property. You are a better buyer to deal with than the person who just “thinks” he can purchase it. Who would you rather deal with?  The person who can or the person who thinks he can?

We all want the best interest rates that we can get.  Lower interest rates mean that you have a better the financial potential and position. Getting the lowest possible interest rate often allows you to purchase a more expensive real estate for the same monthly cost as a less expensive property.  To get the lowest interest rates, you have to have excellent credit scores! 

The upper 700 scores are the golden ticket!  As your score number decreases so does the type of loan and the lower interest rate packages!

When you are in the mid 600 range, you can usually find a decent interest rate.  This is the average credit rating.  You can affect your score easily by lowering your credit card debt on any cards that you have, but leaving them open and available for use.  This shows that you have credit available but either don’t need to use it or choose not to use it.  Either way it makes you look a lot better to a potential lender.

Scores that are in the 500’s are a challenge.  You will definitely pay a high interest rate.  The types of loans and the conditions of those loans will be limited.  At these scores, you are considered a “higher risk.”  To get a mortgage loan, you will pay a premium for it in the interest rate arena.

If your score sits in the 400 to 500 range, you need to take a year and do what needs to be done to increase those scores.  Make your payments on time, lower your overall debt, and take care of the claims for “owed money” that are hindering your ability to get a mortgage loan at an affordable interest rate. It is not impossible to get a mortgage with these scores, but it will likely be very costly!

If not, when you have picked a mortgage broker or banker to assist you, allow him/her to check your credit and then ask for a copy of it. They may or may not be able to give it to you, but at least try. What every you do, do not allow everyone to check your credit!  Every time your credit is checked, your score could drop by a few points. If you are planning on purchasing real estate within a year….Get your scores UP not DOWN! Don’t go looking for new cars, appliances or whatever, where your credit has to be checked so that you can get a loan.  Every time you credit is checked, for any reason, your scores can drop!

Your mortgage banker or broker is just as important as your realtor when it comes to purchasing real estate.  They work together with you to make your dreams come true. They know what to do and how to do it.  They have the tools available and the knowledge to make wonderful things happen.  Think of them as your partners. A good mortgage lender also works closely with the realtor, so together we are able to get the job done!

How much can you afford?  Look for properties that are attainable for your budget.  A property that is $50,000 higher in asking price than what you want to spend may be purchased when all is said and done for your budgeted amount.  This is where your realtor can help you!  He/she knows the actual value of a house.  We tell you to use a “seasoned” realtor (5-10 years full time experience) because they have the experience to negotiate with facts and knowledge to help you acquire a property for the right price. Just because a property has a certain price tag, doesn’t mean that it will sell for that amount. Sometimes a property is overpriced and sometimes it’s under priced, your realtor knows the difference.

Where do you want to live? Probably not on a busy street, in the middle of an industrial area, or next to a garbage dump! Location is the MOST important part of the purchase! Location is ultimately what will drive your property value up or down! Whether you want to think about it or not, this real estate purchase will prove in time to be a major investment. Invest wisely because it will affect your future one way or the other.

Hint # 1    When you consider a property, look around!  What do you see? What do you hear?  Things that are in your line of sight that are ugly, or obtrusive, or distracting are a NEGATIVE!  If you notice them, any perspective buyer in the future will see it as well.  This is not good and it will not help to increase your property value in the future.  If you love the house, but don’t like what you see or hear….find a different house!  It is the property that increases in value….not the structure!

Hint # 2    Does the neighborhood have any reason to increase in value? Does it have a desired view? Does it have a pretty park like setting? Is it close to convenient roadways? Does it appear to be old and established or being redeveloped?  What do you know or see that makes you think that in the future, people will be willing to spend more to live where this property is located? There has to be a reason for the value of the property to increase over and above the normal yearly amount. What is it?  Your realtor may know….ask.

Hint #3    If you can, buy more land as opposed to less land. If you are comparing two houses in the same basic area, pick the one with more property.  Remember, it’s the land that appreciates not the house! BUT be careful where the land is located!  One fourth acre in town and convenient is usually worth far more that an acre way out in the sticks somewhere.

Hint #4    If you could pick any really expensive house, what would it’s location and amenities offer you? It would offer you an exclusive neighborhood.  It would be on a golf course. Or it would be on the water. It would have an awesome view.  It would have incredible styling and it would have the “wow” factor. Did you know that a home purchased within one mile of a golf course will increase in value more rapidly than one that is two miles from the course? Location!  It’s more important than you think! You can fix up the inside to create a “wow” factor, but you have to have the location to complete the package.  Land is constant, houses can be changed! Pick your property by finding something EVERYONE would desire.  Worry about the house in progressive stages.

Hint # 5   DON”T buy a fixer upper if you can not afford or do not have the inclination to fix it up.  If you can’t live in it the way it is when it is purchased, then really consider the purchase.  Purchasing a property that continually frustrates you without money, time or desire to get it in livable condition is foolish at best. Your home is very important to your well being.  Know your limitations!

Hint # 6    When something is priced “below” market value, you need to know why!  People all want to make as much money as they can when they sell real estate.  It is possible that there are things about the property that are hidden somehow that make it’s value less than surrounding houses…..ask your realtor…..typically, in real estate, things sell for their value as it relates to the market.

Hint # 7     Don’t buy the biggest house on the street or in the neighborhood!  The small houses around it will pull the value of the home down.

Hint # 8    Do buy the smaller house on the block.  The larger houses will help to raise its value AND you can add onto your home in time to make it bigger.

Hint # 9     Home owner restrictions are not to be feared!  They usually help to keep a neighborhood in good order which helps you when it’s time to sell.  Un-mowed yards, junk cars in the driveways, trash overflowing the garbage can and a host of other thoughtless neighbor situations are eliminated.  This is one of the reasons that gated communities are so popular and desirable

Everyone wants a “good deal.”  A “fixer upper” can sometimes be a great bargain.  Usually people do not have enough knowledge about home construction to be able to “gut” a house and rebuild it.  If you love to remodel and build things, then a fixer upper may be right for you.  However, there are some pitfalls that are important to recognize.

Pitfall #1  What really needs to be done to the property? You might look at a counter that you are sure you can replace handyman style BUT is there wall damage behind or under it that will need repair as well?  Perhaps you see a toilet that is cracked and leaking.  You might think, I can go to a Home Depot and buy a new toilet and fix the problem.  Think again!  What if the plumbing beneath the toilet is old and needs replacing?  Are you prepared for that added expense? 

Pitfall # 2  There is always more expense involved with “fixing something up” than you plan on spending.  This is a fact!

Pitfall # 3  Living in a home in the process of being remodeled is extremely stressful.  Everything in the home is covered with debris from the remodel.  Dust and dirt cover the homes interior.  Besides the obvious inconvenience of no stove or no cabinets or holes in the floor and walls, there is also the total disruption of the natural flow of the house.  Be sure that you can handle a chaotic home environment for twice as long as you think you can before buying a fixer upper.

Pitfall # 4 It always takes longer to do a project on a home than you think!  Set realistic goals and then add at least 50% more time to them.  That will bring you somewhere in the true ballpark.

Pitfall # 5 Once a remodel has started, EVERYONE encounters the “maybe I should do this as well” syndrome.  Watch out! You can end up not just fixing up, but completely re-building the entire house that way! If the house is in need of that much remodel, perhaps it’s a “knock down” and not a fixer upper!

Pitfall # 6 Don’t pour your money, effort and time into a house that is not going to be worth more when you are done with it!  If a house is worth $200,000 and you buy it for that. Then you spend a year of your time and put $50,000 more into it, and it will only sell for $250,000 when you are done…..DON”T BOTHER!  Take your $250,000 and buy something in better shape that you like.

Pitfall # 7 Don’t overbuild the house!  If it’s an older starter home, remodel it as a starter home, not as a high end cottage.  Look at the neighborhood!  Look at the houses on the street! Keep yourself in line with what you see or you will loose in the end.

Pitfall # 8 Don’t expect to get EASY financing for the home!  If it’s in really bad shape, a mortgage loan may not be possible.

Pitfall # 9 Don’t think that you are saving money by assessing the home yourself! Get an inspection by a licensed inspector before you buy the property! Make whatever you spend on a home pay your back!  Three hundred dollars is a huge savings to you when it uncovers a repair on a house that will cost you thousands! Especially if you didn't have a clue there was a problem!

Pitfall # 10  Fear!  If you think you can, and are willing to try, you CAN!  It might take awhile to find the right property for your skill set and energy, but it can be done.  When a “fixer upper” is purchased at the right price, in the right location, and fixable….it’s a winner!  Hard work can go a long way and pay good dividends when knowledge and experience are applied.