In any fluctuating market, it’s smart to buy when you can get a commodity cheaply. This applies to real estate as well. Negotiating a good purchase price is only the beginning. Loan costs, parameters and circumstances change frequently. But you definitely have extra leverage when buying in a slow market.
Here are some tips to get the best deal possible on your new home:
Choose the Lender That Works for You
You’re not tied to your seller’s lending institution. Although mortgage brokers fund over half of U.S. home loans, you can borrow from S&L’s, individuals, banks and even your mutual fund provider.
Mortgage brokers can provide you with many options, as they deal with hundreds of lenders. Obviously, the quality of your deal will depend on the competency and contacts of the broker that you choose. Mortgage bankers are tied to one or more banks. Your local bank branch may give you a good rate if you open or maintain an account there.Savings and loans exist mainly to make home loans (building, buying or improving)
Lock in a Great Rate
Loan gurus favor this strategy, because the Feds tend to lower interest rates in a declining real estate market. On a home loan of $500,000 or more, you can save a bundle if you hit the rate just right. But you can lose out completely if you hit an uptrend. Your loan will cost more if you lock the rate, because the lender is assuming that uptrend risk.
These are the variables in a loan lock:
Points
Interest
Duration of lock
There’s no downside, if rates go south again. Although lenders won’t advertise this fact, you’re always free to pursue a different loan or a better rate.
Get the Seller to Reduce Your Interest Rate
Mortgage buydowns tend to be more favorable for buyers than ARMs (Adjustable Rate Mortgages), because interest rates increase more gradually, and then become fixed. Key points of mortgage buydowns:
Monthly outlay includes principal and interestLower overall payment for a specified number of yearsSeller pays lump sum to lower interest rate5-10% down is common
Try the New, Improved FHA if You’ve Had Credit Problems
Born in the Depression, the FHA insures home loans against default. Their 2006 loan limits range from $200 to half a million dollars. One big advantage to this type of loan is that you can get one within a few years of a foreclosure or bankruptcy. Other advantages:
Eased debt-ratio restrictions
FICO scores not applicable
As low as 3% down
Interest rates are fixed
More lenient repair requirements (sellers love this one!)
