5 new rules for home buyers

Rule 1: You can't time the bottom
Face it: The house you buy today will more than likely be worth less next year. That could get you thinking about trying to time the bottom. Resist. It's harder to do than you think, and this is the best buyers have had it in two decades, with inventories up and mortgage rates low.
Pace yourself, find the perfect place and drive a hard bargain: Ignore the seller's asking price and bid 10% below what comparable homes are selling for. If the seller balks, move on. Remember that if you're trading up, your home could sit. So sell before you buy.
Real Estate Survival Guide

Rule 2: One reason to buy now - mortgage rates
Homes are plentiful and will remain so, but financing will be getting more expensive. True, the Federal Reserve has slashed interest rates, but fixed mortgages don't directly follow the Fed. They reflect the bond market's expectations about inflation, which remains a concern. The 30-year, now at 6.1%, will likely reach mid-6% by December and 7% in 2009, says Celia Chen of Moody's Economy.com.
That means there could be a penalty for waiting to buy even if prices fall more. Today a $250,000 loan would set you back $1,500 a month. At 7%, a $1,500 payment gets you only a $225,000 mortgage. As for variable-rate loans, the spread between conforming ARMs and fixed loans is too narrow to do you much good.


Rule 3: Another reason to buy - rates on big mortgages
Mortgages in amounts greater than $417,000 - the limit for buying by federally sponsored mortgage agencies - usually run a fifth of a percentage point above conventional products. But investors are shunning jumbos, which now average 7.2% and are unlikely to drop much this year, according to HSH Associates.
Certain jumbo borrowers could get relief, however. A new law allows Freddie Mac and Fannie Mae to buy loans as large as $729,750 in 71 high-priced areas. So far "jumbo conforming" loans average 6.6%. The program has gotten off to a slow start; you'll need to shop around. And unless Congress acts, this bargain will disappear at year-end.


Rule 4: Don't buy cheap; buy good schools
By now you've heard from somebody who knows somebody who got a great deal on a foreclosed property. But when you buy a house, you're also buying into a neighborhood. And foreclosures tend to be bunched in areas where residents and speculators alike took out exotic mortgages to get into homes they subsequently found they couldn't afford. That's not a recipe for stability. Prices and quality of life could both decline further.
Similarly, avoid developments that popped up in the past few years. They too likely have a lot of owners with risky loans and little equity, says Mike Larson of Weiss Research. Instead, go for areas with highly rated schools. They generally fare better during downturns, and that pattern is holding today, according to a recent study by real estate site Trulia.com.


Rule 5: Make sure your agent has your interest at heart
The real estate game has a built-in conflict of interest, since the listing agent and your agent both get paid by the seller. And these days more sellers are offering extra cash to buyer's agents.
So make sure you're not being steered to a house that's better for your agent than for you. Agree up front on his commission (typically 3%) and that any extra payments will go to you, says Jon Boyd, past president of a buyer's agent trade group.
As a professional agent I have your best interest at heart. So give me a call with all you mortgage financing needs.








By Amanda Gengler, Money Magazine

5 MISTAKES TO AVOID WHEN BUYING A HOME

According to the Today Show's Real Estate Contributor, Barbara Corcoran, there are at least five mistakes home buyers should work to avoid prior committing to a purchase of a home. By not doing so, the new homeowner could find him/herself paying far more than anticipated. They are as follows:

1) Waiting for prices to come down.

Nobody knows when the tide will turn, and based on historic data it always inevitably does. The best you can do is buy within the low and we're definitely in the low right now.

You also need to keep the interest rates in mind. If you wait for prices to come down by 10%, and interest rates go up by a half a point, your monthly payments will be the same. Historically speaking this also makes now a good time to buy. The people I would advise not to buy right now are those who don’t plan to stay in their homes for very long. If, however, you are ready to make a long-term commitment, now is as good a time as any to buy a home.

2) Picking the wrong town.

Every town has a personality, and the town that you live in should match yours.

Buying a house ought to be at least a five-year proposition for you to recoup the costs of the actual move, so you need to be careful you don’t find yourself stuck in the wrong town for five years.

Don’t plump for a town arbitrarily: Try picking up and dropping off at the local school, if that’s what you’ll be doing every day for the next five years. Buy a cup of coffee on Main Street on Sunday morning; see if it is a pleasant experience. Get school data online at homefair.com, you'll find test scores and college acceptance rates. Good schools also mean good future values.

The block determines value more than the actual home. It is always better to move into the worst house on the nicest street.

3) Not asking to see the last six months of electric and water bills.

Check to see if utility bills match what you were told, so you'll have a realistic idea of what you'll be spending. If the heating system in the house is old it may bleed money, which will mean one of two things: High bills or the high costs of replacing it. If you are already stretched on the mortgage this could land you in real trouble.


4) Falling in love with the décor.

If the house is decorated in a way you find very appealing you may find yourself instantly smitten and forget the things you are really looking for in the house. Conversely a house with unappealing décor may scare you away. Try to think more in terms of the floor plan than the surface stuff. Try to take in the size, the condition and natural light situation.


5) Buying a money pit.

Money pits always cost you more than you think. A small kitchen renovation usually costs between $25,000-$40,000. A standard bathroom renovation can cost you between $15,000-$25,000. Even painting a house costs between $7,000-10,000.

If you’ve bought a house that is in a state of total disrepair, you could end up doubling the original sticker price. Be realistic when you go into it about what you can and cannot achieve.

With a glut of properties to chose from in the market right now, there should be no reason to make any of the above mistakes. You just need to be aware of them.

Barbara Corcoran is the Real Estate contributor for the Today Show and a columnist for New York’s Daily News. She founded The Corcoran Group, one of New York’s largest and most prestigious residential real estate firms. Barbara’s Web site can be found at http://barbaracorcoran.com.