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Business // Thinking Smart
David S. Chang

Real Estate Part 2: Buying A Home

Buying a house can be extremely exciting yet stressful at the same time. Here are some tips you need to know when buying a home. A good real estate agent will be able to help navigate you through this process, but it is good to understand as much as you can as well.

* Know how much you can afford. Most people will need to take out a mortgage to purchase a house. The rule of thumb is to not go over 2.5 times your annual salary and/or more than 30 percent of your monthly gross income. You can go to artofthinkingsmart.com under financial calculators to see how much house you can afford.

Bottom line is to keep your debt and payments down as much as possible. Many homebuyers bought more home than they could afford, which contributed to the recent housing crisis. Make sure you take into account insurance, taxes and other housing-related expenses not included in your mortgage. Unless getting a VA loan (for veterans) or a FHA (first-time buyer) loan, you will have to pay up to a 20 percent down payment. Make sure you have this saved up!

* Get pre-approved. Keep a good credit score so you can get the best interest rate possible. The difference in credit scores can mean several hundred dollars a month in extra interest payments.

Obtain mortgage quotes from several lenders to get the best interest rate. You can go to a mortgage banker (with a bank) or a mortgage broker (shop around from different lenders) for comparison. Make sure you apply within a two-week period so your credit score isn’t lowered. After you choose your lender, get a pre-approval amount so you know exactly the amount you can afford in shopping for houses.

* Do homework before bidding. When in the search process, try to keep your emotions out of the process and don’t rush into any decisions. Chances are this will be the most expensive purchase in your life, so you want to avoid any mistakes. Research the home prices, neighborhoods, schools, home design, crime statistics, traffic situation, proximity to shopping and other amenities. This may be the only home you live in for the rest of your life, or if you decide to sell in the future you want to make sure you can get a high resale value. Learn as much as you can about the house and the sellers, including how long the house has been on the market, original asking price and even what the sellers paid for the house. Based on all this information, you can make a good offer and help in the negotiation process. A good real estate agent can help you here.

* Hire a home inspector. After you have picked the home you want, hire a home inspector to ensure that the contract is contingent on the outcome. Even consider additional assessments above and beyond the standard one. A few extra hundred dollars now can save you quite a bit in the future. Get a detailed report from the inspector on potential problems that could require very expensive repairs in the future.

After you have taken the necessary precautions and your offer is accepted, the best part comes next: Sign the contract and move in!

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