Dealing with Financing

As most of you know,  the events over the last several years in the real estate industry shows that people forget about the tremendous financial responsibility of purchasing a home. Here are a few tips for buying your next Indianapolis home.

Get pre-approved. Sub-primes mortgages are no longer available, but you can still be shown homes you can’t actually afford. By getting pre-approved as a buyer, you can get a better idea of the price range and payment amount for the next home you purchase. You can also put yourself in a better position to make a serious offer when you do find the right house. Unlike pre-qualification, which is based on a cursory review of your finances, pre-approval from a lender is based on your actual income, debt and credit history. By doing this thorough analysis of your actual spending power, you’ll be less likely to get a home you can't afford.  Also, just because you are approved for a certain amount doesn't mean you should actually get that larger home!  Sometimes less is more.

Choose the proper mortgage, custom tailored for you. Used to be the emphasis when it came to mortgages was on paying them off as soon as possible.  If you aren't for certain how your income will be moving forward, sometimes it makes sense to go with a 30 year mortgage over a 15 year mortgage.  This way, you have a lower monthly payment, with the option of paying an additional principal when you have additional money to pay off your mortgage. Additionally, when picking a mortgage, you usually have the option of paying additional points (a portion of the interest that you pay at closing) in exchange for a lower interest rate. If you plan to stay in the house for a long time—and given the current real estate market, you should—taking the points will save you money.

Do your homework before making an offer. Before you make an offer on a home, do some research on the sales trends of similar homes in the neighborhood.  Consider especially sales of similar homes in the last six months. For instance, if homes have recently sold for 5 percent less than the asking price, your opening bid should probably be about 8 to 10 percent lower than what the seller is asking.  Of course, this is still dependent on the market itself.  If it's a fast moving market, you may have to offer list price or higher if the market has changed drastically.