Ten Things You
Should Do Now If You Plan On Buying In 2004
By Michele Dawson
The decision of whether to buy a house in 2004 may
seem daunting. Will prices increase? Will interest
raises rise? How will the economy fare this year?
The process may seem overwhelming, especially
if you're buying for the first time. But many
industry experts say the general outlook appears
promising.
For starters, price increases overall are expected
to slow down a bit -- at least compared to 2003,
when the national existing home price rose 9.1
percent to $172,600; the new-home price rose 3.6
percent to $194,400. The National Association
of Realtors predicts existing home prices to rise
4.7 percent this year and new-home prices to go
up by 5.1 percent.
"Although the rate of price increase is
expected to slow next year, it will remain above
the historic norm of one-to-two percentage points
higher than the general rate of inflation,"
said David Lereah, NAR's chief economist.
The 30-year fixed-rate mortgage is projected
to average only 6.4 percent in 2004, up modestly
from an average of 5.8 percent this year -- the
lowest in four decades.
"With tame inflation, mortgage interest
rates are staying at very low levels much longer
than many people expected. This is extending the
period of favorable housing market conditions
and sustaining historically strong sales activity,"
Lereah said.
If a new house is in your 2004 plans, there are
things you can do and information you should be
armed with to put yourself in the best position
possible when the time comes to buy, including:
1. Check out your credit report. You don't want
to be shocked if there are inaccuracies in your
credit report -- or that bad debt you had in college
is still on your record. Potential lenders will
view your credit history -- how much debt you've
accrued, how many accounts you have open, whether
your payments are made on time, etc. -- to determine
whether they'll give you a loan. You should get
a report from each of the three credit reporting
companies: Equifax, Experian, and Trans Union.
2. Get pre-approved for a loan. This way you'll
know if you can get approved and how much you
can spend on a house. It also puts you in a stronger
position when you ultimately make an offer on
a house.
3. Be realistic and look at your big financial
picture. Just because a bank approves you for
a certain amount, it doesn't automatically mean
you should find a house for that amount. Factor
in other debts and expenses and long- and short-term
savings goals like college for the kids and retirement
for you. Lenders generally say your mortgage should
be about 25 percent of your gross monthly income.
And always factor in some reserve savings to put
aside each month.
4. Determine how much cash you'll have available
for a down payment and closing costs (points,
which are extra fees paid to secure a lower interest
rate), origination fees, taxes, title insurance,
and financing costs). The higher your down payment,
the lower your monthly mortgage payment and the
possibility of qualifying for a better loan.
5. Figure out how much your new bills -- utilities,
water, insurance, maintenance -- and repairs will
cost you each month.
6. Avoid making any major purchases, especially
a new vehicle. If you do, you may have a harder
time getting a loan -- or it could potentially
lower the amount you'll be approved for.
7. Keep an eye on interest rates. If they start
to creep upward, you may want to make your move.
8. Make a budget now as if you have a mortgage
payment and the monthly expenses that come with
owning a home. Put the money (or the difference
between it and your current living expenses) into
a savings account. After 6-12 months you'll know
whether you can swing the extra payments -- and
you'll have extra money for your down payment.
9. Gather your paperwork -- recent paystubs,
tax documents for the past two years, bank account
statements, etc.
10. Begin thinking about homeowners' insurance
now. Again, make sure your credit report is accurate
-- credit histories are sometimes used to determine
whether a company will insure you, and, if so,
at what rate. Also, the Insurance Information
Institute says you should get a copy of your loss
history report, such as a CLUE report from ChoicePoint
or an A-PLUS report from Insurance Services Office.
This is a record of home insurance claims you
have filed. If you have not filed any insurance
claims in the past five years, you won't have
a loss history report. The better your report,
the better chance you'll have of obtaining reasonably-priced
insurance on the house you buy. And if you're
renting, make sure you have renter's insurance
-- it's helpful to have insurance history when
you obtain insurance for your new house.
The Realty Times
Published: January 6, 2004
www.RealtyTimes.com
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