Increasing unemployment, a poor economy, and a dismal long-term outlook may be the “perfect storm” when it comes to people searching for a new home. A general sense of malaise that is skating a thin line leading to a depression is starting to wreak havoc on the overall state of consumer confidence. This is yet another factor that has helped to fuel the various financing opportunities that are available.
This somewhat tentative real estate market has resulted in the perfect window of opportunity for any adventurous potential buyer. Some of the favorable financing variables available now include lower interest rates and prices and more tax credits. Builders across the country, including those that are building new homes in the bay area, are providing amazing incentives, including below-market rates.
For those who are considering financing a new home, there are a few tips that can help. Even if the conditions are ideal right now for new construction homes, there are still some things that need to be understood when it comes to financing a new home.
Don’t Believe Everything You Read
This is what most experts will tell anyone interested in financing a home. While business analysts and economists continue to paint a pretty convincing picture of everything being doom and gloom, the real estate market has made a significant turnaround, which means now is a great time to get a good deal.
Even though the media may be saying something different, there are things happening in the real estate market. People are purchasing new, custom homes. While this news may not be getting out, it is true and something to fully understand.
This is when buyers have to take a hint. They should not try to time the market and wait for the perfect buying opportunity. This may turn out to be a huge mistake because there is never going to be a perfect time. There is no expert out there who knows what the real estate market is going to look like in a week, not to mention six or even 12 months in the future. If a buyer is ready to make a purchase, and they have everything in order, now is the time to show around for great deals.
Do the Process Right
Having a mortgage contingency is essential. While now is a good time for buyers to look for properties, with things so uncertain in the real estate market, buyers have to have some type of mortgage contingency integrated into their contract.
In the past few years, the whole lending marketplace has evolved drastically. It was assumed that after buyers got a contract, it was certain they will receive a mortgage. This is not the case today. It is never a good idea to assume that getting a mortgage will be easy. Securing the mortgage is even more important than finding the right property.
Get to Know the Available Financing Options
There are several appealing financing options, some of which have resulted from the subpar economy. One option is FHA loans. These are provided by the Federal Housing Administration, which is a part of the Department of Housing and Urban Development. It was established to provide assistance for first-time homebuyers. The amount that a person can borrow will range based on the area and the type of home that is being purchased.
The FHA loan is an appealing option because it only requires a down payment of three percent. It is also easy to qualify for. Because the FHA insures the mortgage that is given, lenders are much more likely to provide loans to borrowers who have less than ideal credit histories. It also offers a low cost and a higher level of security.
Another financing option is to use a home builder and developer sponsored financing. They are offering much more than country club memberships and free appliances. In fact, this type of financing includes pretty impressive incentives. Builders are now competing with mortgage companies and banks to provide better financing options for buyers.
Try to Find Programs That Save a Buyer Money
Up to 75% of all developers and builders are now offering incentives. Some of these include simple financing and will save buyers along the way. Some of the options to look for include the first year of mortgage payments, deferred mortgage payments, and a chance to receive 95% financing.
Another option is deferred mortgage payments. While this is true, it can also be a mixed blessing. This is because as the interest keeps accruing on the deferred payments and at the end stage of the grace period, this deferred amount is going to be added to the actual cost of the mortgage.
Closing cost payment is also a good incentive. Buyers may be able to save several thousand dollars, depending on the cost of the house, the location, or the type of mortgage that is taken.
Lock-in or Guaranteed Mortgage Rate
When a buyer locks in an interest rate, the buyer is guaranteed that the rate will be preserved for them when they are closing the deal. If this is not locked in, they will be at the whim of the market conditions and will be obligated to accept what is available at the time. Lenders are going to take locks very seriously. If a buyer locks in a rate with their lenders, the lender will reserve the rate on their behalf.
When it comes to financing a house, there are more than a few factors to consider. Be sure to keep the information here in mind to achieve the desired results. Being informed and knowing what to consider is the best way to ensure that the right mortgage is found and that it will meet the buyer’s needs, regardless of how much they have to spend or where they are buying.
Remember, buying a house is a big deal. Learning the proper way to finance it is essential to taking the right steps and getting the desired results. It is also smart to work with a professional if needed.