The Truth About Buying Houses in Today’s Market

So you’re ready to buy a house. You’ve saved up a down payment, you’ve been paying your bills on time; you’re good to go, right? Not so fast, some lenders will say. The whole process has changed. Everything from selling your existing home (if you have one), to getting financing has changed.

A few years ago, you could have iffy credit, no down payment and be able to get financed for a home that you know you could never afford. This is not the case anymore. Lenders are much more careful about who they loan money to now. They are less likely to push for a higher amount, less likely to take a chance on people now. Credit is a big issue. Even FHA loans are becoming harder to get now; they’re becoming more strict in their credit specifications and income expectations.

Which invariably brings us to the subject of a down payment. What kind of down payment will you need? If your credit is less than perfect, you’re going to want to have at least 10% down. On a $200,000 home, that’s $20,000. With FHA loans, the down payment requirement is 3%, which is easier to reach, but can still be a daunting task. It’s a good idea to know how much you’re planning to borrow before you even begin the pre-approval process. This way, you’ll have a good idea how much you’ll have to save before you even attempt to get financing.

If you haven’t done much research, but have a decent down payment and jump into the process, you may find that your credit won’t pass the bar. Don’t worry, this is common. Many realtors work with mortgage companies and some work with brokers, but the thing that you maybe didn’t know is that lots of realtors have also teamed up with credit repair companies.

It works like this: you decide you want a house. First thing that happens is you meet with the finance people. They run your credit and look at you with dismay. There is nothing they can do at this time, however. Now, at first, you won’t hear the however; you’ve been temporarily deafened by “there’s nothing we can do for you…”. Listen to the however part. They may be recommending a credit repair company that they work with. For a fee upfront (called a retainer fee) and a monthly fee thereafter, this credit repair company will help to get negative things removed from your credit. They run your report and you may need to provide them with some proof that things have been paid or be honest and tell them the items that you didn’t pay, while they go to bat for you with the credit reporting agencies to get the bad things removed.

This is a worthwhile investment. If you do your part to improve your credit rating and do what they tell you, you can be well on your way to having truly fantastic credit. This will help you to get a better rate on everything, including your new mortgage. It’s important to remember, though, that this is not an instant fix. It may take a couple of months, but you’ve waited this long already.

In this land of sub-prime loans, three things are key: credit score, steady income and down payment. If you have good credit and a solid income, you will probably be able to skate by with a smaller down payment. There is no such thing as sub-prime anymore, so wipe it from your mind. While frustrating for a potential buyer, the process is designed to help prevent more of the current housing crisis. Try to be patient.

If you are working on fixing your credit and going through your report, when you talk to creditors, tell them to remove the item from your credit. The best way to do this is to negotiate with them, saying that you have a money order or check, give them the check number if you have to, and require that before they receive their payment, they send you a letter stating that they will remove the debt from your credit completely. Do not pay the creditor until you receive the letter. This is essentially what a credit repair company does, but with a much higher success rate and much more quickly.

So, you’ve done the hard part; fixed your credit. You’ve gotten pre-approved and you’re ready to buy. This is the fun part, but there are also rules to go with this process.

Check the market in the area in which you are looking. Make sure the homes you look at are priced appropriately. Maybe you fall in love with a home that is priced at $300,000 but just down the block an almost identical home is listed for $250,000. In this market, you don’t need to bid, or even pay the higher amount. Don’t think that the list price is what you have to pay. It’s negotiable and it’s possible to get the best deal without robbing the seller. It’s also a good idea to encourage the seller to pay some of your closing costs. Lots of listings state that the seller is willing to pay a certain amount toward the closing. Sellers expect it; take advantage of it.

Be willing to walk away. If a seller refuses to meet your price and you feel it’s a reasonable offer, don’t wait around for them to change their mind – move on. There are thousands of lovely homes out there at a price you can afford, you are not bound to this one.

Be positive. You are doing a service to the American economy. You are purchasing a home and helping to stimulate the economy. You are doing your part, so feel good about that and enjoy the process. Don’t shy away from the hassle. It get’s easier as you go and it’s well worth it in the end.