Before You Look For Your New Home:

By: Matt Schaub

1. Decide on the kind of home you're looking for.
Know a) what you want and, b) what you need in your new home. This will save valuable time and energy. Focus on your specific requirements, and you'll have a personalized game plan. You'll be headed towards your very special goal: the home that's right for you.

2. Ask yourself: "Where do I really want to live?"
Answer this, and your priorities will be clear to you. Is being close to a school a big factor? How about shopping? Access to entertainment, medical care, and major transportation thoroughfares might also be considered. Specific neighborhoods will begin to attract your attention.

3. Think about how long you expect to live in your new home.
Are you raising a family? Are more children on the way? Or maybe resale value is your main concern. These are just a couple of items that can come into play when you think about the length of time you'll be living in your new home.

4. Start a "negative checklist."
What DON'T you want in your new home? Write these things down as you think of them. First place to begin: your current residence. What do you want to change or eliminate? This could include proximity to neighbors, the size of the kitchen . . . all sorts of factors. By setting your priorities, you'll be focused on finding what's best for you.

5. Consider lifestyle.
Do you work from your home? Then you'd better be sure your new home is the right place for your in-home office. Maybe you're a gardener. In that case, a yard may take on added importance. And what about entertaining? Make your list, and prioritize your needs. You'll quickly see what features are most significant to you. If you are unable to find a home in a particular price range, this list will help you decide which features you might be able to live without, and which are necessary parts of the life you want to lead.

6. Price-wise: is it in the ballpark?
You love the house you're looking at. It's by the right schools, and there's an island in the kitchen where you can visualize yourself preparing your favorite meals. And then you discover - it's out of your price range. Few things are more frustrating. So here's something to keep in mind: the best way to know how much you can afford is to find out how much money you can qualify to borrow.

There are two things you'll want to consider doing before talking with a home loan expert about how much you can afford to borrow:

a) Find out your credit score
You can get your credit score. How? Some companies that help you find the lender that meets your requirements will obtain your credit report for you. This is provided at no extra charge - simply check their online form. Your credit report determines your credit score, which is needed to qualify for a home loan. The three major credit bureaus, which can individually provide you with your reports, can also be contacted. Any errors that happen to appear on your credit report should be corrected.

b) Decide on a monthly payment amount
Do you know how much of a monthly mortgage payment you're comfortable with? You may qualify for a loan amount that requires a monthly payment greater than your budget really allows. Sit down and figure out your monthly expenses for your home. Items such as maintenance, home improvements, taxes, insurance, and association fees, if applicable, should all be considered.

7) About Mortgages
A mortgage is a loan you take out to finance the purchase of your home. It's also a legal contract: you promise to pay back that loan on a monthly basis. Your monthly payment typically goes toward interest, taxes and insurance as well as the loan's "principal," or the original sum.

There are hundreds of variations of mortgages, but by reviewing the key points below, you'll learn most of what you need to know:

- Fixed-rate mortgages: These have a set or "fixed" interest rate over the entire term of the loan. Most mortgages are fixed-rate. The main advantage of a fixed-rate mortgage is that your monthly payment never changes. The disadvantage is that if interest rates fall below your fixed-rate, and you want to lower your rate (and your mortgage payment), you'll have to refinance.

- Adjustable-rate mortgages (ARMs): ARMs start with a lower interest rate than a fixed-rate mortgage for a certain period-typically 1, 3, or 5 years. After this period, the rate adjusts, usually annually. That adjustment is based on a pre-determined index. An ARM is a good choice if you're expecting to live in your home for less than five years. It can also help you qualify for a larger loan.

- Term: The "term" of your mortgage is the number of years you have to pay back the loan. 30-year terms are very common, but 10, 15, 20, and 40-year terms are also available.

- Down payment: This is the difference between how much you borrow and the purchase price of your home. The down payment needed to purchase is often much less than many people realize. In fact, very low and even zero down payment loans may be an option.

Understanding these basic points should encourage you to get approved for a home loan before you begin to look for your new home. And getting that pre-approval is a very smart move. The next section explains why in greater detail.

8) Getting approved before you start to look - a smart approach
When you're already approved for a mortgage, the seller knows your offer is good. That puts you in a much better position to negotiate for a lower purchase price on your new home. 4 main reasons why pre-approval is good for you, the buyer:

1) You know exactly how much home you can afford. No guesswork!
2) You're in a better position to negotiate a lower purchase price.
3) Once the appraisal and title work is done, you can close on a home in days, not
weeks. This can save the seller a lot of money. That's another bargaining chip - for
you, the buyer.
4) When you're pre-approved, it's as if you're shopping for a home with the money
you need right in your pocket. You're a virtual cash buyer!

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