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Tips for First-time Home Buyers

Buying a new home is an exciting adventure that requires careful planning and budgeting. Real Estate agents often break market conditions into two classifications i.e. a “Buyer’s Market” or a “Seller’s Market”.

In the first eight years of the new millennium much of the world experienced a housing bubble. During this time the world was awash in liquidity and the real estate market was considered to be a seller’s market. Property was thought to “always appreciate” and so it was in high demand.

First-time Home BuyersIn a typical sellers market homes receive multiple offers often within days or even hours of being listed. This would result in the price being bid up above the seller’s initial asking price.

According to Investopedia:

Seller’s Market:

In a seller’s market in commodities, the seller–because of the scarcity of underlying commodities or goods–is able to obtain better conditions for the sale, or higher prices.

Beginning around 2008 housing market began topping and then crashed creating a buyer’s market. Initially lack of mortgage funds made it difficult for anyone without cash to buy a home. Then a rash of bankruptcies and foreclosures flooded the market with houses forcing the price down and making more houses worth less than the amount owed on them. This resulted in more foreclosures and a “snowball” effect. In this market sellers had to work much harder to sell their properties.

Buyer’s Market:

A situation in which supply exceeds demand, giving purchasers an advantage over sellers in price negotiations. Buyer’s Market is commonly used to describe real estate markets, but it applies to any type of market where there is more product available than there are people who want to buy it. The opposite of a buyer’s market is a seller’s: market a situation in which demand exceeds supply and owners have an advantage over buyers in price negotiations.

Currently the Real Estate market around the country is “mixed” that means that depending on the location some areas are buyers markets while others are seller’s markets depending on local supply and demand.

A buyer’s market will provide more flexibility in financing and room for negotiation. First-time home buyers can benefit from a few tips on navigating the higher standards of mortgages and what to look for in that first new house.

Prepare for Financial Contingencies

The purchase of a home is usually the largest purchases made in your lifetime. This requires careful planning of finances prior to approval. The best course is to ensure that you have at least a 20% down payment toward the purchase price. Many loans charge extra fees and private mortgage insurance on loans for under 20% equity at the start.

However if you have a good credit rating you may be able to secure a loan with as little as 3% down.

However, loans for those with less than stellar credit can often be negotiated in a buyer’s market by putting money down beyond the 20% or by using one of the Federal loan guarantee programs such as FHA.

Shop Around for the Best Rates

Shopping for mortgage rates is an excellent idea. Credit pulls while checking on rates will not negatively impact your credit report as long as they are consecutive mortgage pulls. This allows you to find the best possible mortgage loan package available.

Research Common Repairs for Negotiation

A list of comparable homes in your area can be drafted by a real estate professional. Now is the time to begin considering what repairs are reasonable and fall on the potential homeowner with these homes in your area. It’s important to note that specific loans are stricter on the nature of cosmetic issues in a home. For example, FHA approved loans require lead paint inspection and certification in homes built prior to 1978.

Consider consulting a real estate professional on common repairs noted in your area. This can help the negotiation process in your market early when shopping for a home and considering potential budget pitfalls down the road.

Research Every Mortgage Option

Some of the most overlooked parts of a home purchase are the types of mortgage products used for financing. For example, military members and families can purchase homes with reasonable rates through the Veteran’s Administration. VA loans from places like Low VA Rates have competitive rates and a quick closing process with proper credit requirements.

There are a few additional mortgage products on the market for first-time homebuyers:

FHA

These loans are backed by the Federal Housing Administration and are another popular first-time homebuyer option due to lowered credit and down payment options.

Traditional

Traditional mortgages may require less paperwork with good credit and a solid down payment.

USDA

Buyers can take advantage of rural property with these loans. Additional paperwork may be required. However, the advantage is reasonable property prices in growing areas.

Find the best loan for your particular circumstance, and be sure to contact professionals with any questions you have. Asking for a little help during your purchasing stage could save you bundles in the long run.

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About Tim McMahon

Work by editor and author, Tim McMahon, has been featured in Bloomberg, CBS News, Wall Street Journal, Christian Science Monitor, Forbes, Washington Post, Drudge Report, The Atlantic, Business Insider, American Thinker, Lew Rockwell, Huffington Post, Rolling Stone, Oakland Press, Free Republic, Education World, Realty Trac, Reason, Coin News, and Council for Economic Education. Connect with Tim on Google+