If you're gearing up to buy a house this fall, then you'll want to use the next few weeks and months to your advantage and get yourself in the best position possible to land in a house you can afford.
And that's especially important now because there are more buyers than sellers, meaning more competition, more bids and -- ultimately -- home prices that continue to increase.
In fact, the National Association of Realtors reported last week that home prices in all metro areas across the United States saw increases in the second quarter of 2003 versus the second quarter last year. That, the NAR says, is a first since 1982 when the association began keeping tabs on prices. What's more, a record number of metro areas realized double-digit gains.
Economists say there are typically at least six or so metro areas that - for one reason or another - will see price decreases while the rest of the country experiences increases.
NAR President Cathy Whatley, owner of Buck & Buck Inc. in Jacksonville, Fla., said there are simply more buyers than sellers in the market.
"We have relatively lean inventories of homes available on the market in a year in which we will set a sales record," she said. "The supply-demand imbalance is the fundamental reason for the strong price gains."
The national median existing-home price was $168,900 during the second quarter, up 7.4 percent from the second quarter of 2002 when the median price was $157,300. The median is a typical market price where half of the homes sold for more and half sold for less.
With home prices on the rise, the most important thing you can do is make sure you have enough cash to cover a down payment and closing costs. The NAR says first-time buyers typically make a down payment of 6 percent on a home purchase, and 24 percent of down payment funds were gifts from relatives or friends. There are many loan programs that accept down payments of 5 or 3 percent.
If buying a house is on your fall to-do list, you should also:
Get a copy of your credit report. Potential lenders will view your credit history - how much debt you've accrued, how many accounts you have open, whether your payments are made on time, etc. - to determine whether they'll give you a loan. There are three credit reporting companies: Equifax, Experian, and Trans Union. You should get a report from each company to make sure they're accurate and clear up any problems before you apply for a loan or make an offer on a house.
Get realistic about what you can afford. While a bank may approve you for a certain amount, it doesn't necessarily mean you can afford it. Be sure to factor in other debts and expenses and long- and short-term savings goals like college for the kids and retirement for you. Lenders generally say your mortgage should be about 25 percent of your gross monthly income.
Begin thinking about homeowners' insurance now. Again, make sure your credit report is accurate - credit histories are sometimes used to determine whether a company will insure you, and, if so, at what rate. Also, the Insurance Information Institute says you should get a copy of your loss history report, such as a CLUE report from ChoicePoint or an A-PLUS report from Insurance Services Office. This is a record of home insurance claims you have filed. If you have not filed any insurance claims in the past five years, you won't have a loss history report. The better your report, the better chance you'll have of obtaining reasonably-priced insurance on the house you buy. And if you're renting, make sure you have renter's insurance - it's helpful to have insurance history when you obtain insurance for your new house.
Start browsing through the newspaper and on the Internet - get an idea of what you like, and more importantly, what you can afford.
Start interviewing agents so you'll have a good one when the time comes to start looking. Get referrals and select someone who knows your market and the neighborhoods you prefer. A good agent will notify you as soon as a home that fits your criteria goes on the market, and stays on top of the listings on a daily basis and calls you the minute a good match shows up, especially in communities where homes are listed and pending sale in the same week, or even same day.
Find a qualified inspector. You'll want to find a qualified professional affiliated with the American Society of Home Inspectors or American Association of Home Inspectors to examine your Heating and central air conditioning systems, interior plumbing, electrical systems, the roof, attic, visible insulation, walls, ceilings, floors, windows, foundations, and basements are among the key inspection points. Inspections may also include appliances and outdoor plumbing. The inspector will provide a report and if there are any major problems, they can be negotiated with the seller. Or you can back out of the deal altogether.
Keep an eye on interest rates.
Finally, keep an open mind. It's easy to start looking at houses and get discouraged because you don't see anything that matches your vision of the perfect house. Remember, you can paint the walls in any hue you'd like. And you can replace that old linoleum with tile or wood floors and choose a new carpet to replace the worn, 1970s-style flooring. Consider things that can't be easily changed -- the floor plan, the size of the house and back yard, the neighborhood. Then look beyond the old appliances and unappealing flooring. Try to truly see the house's potential.
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Written by Michele Dawson from Realty Times