Buy A Foreclosure Home: 5 Basic Tips For Saving Money On Your First Home  

5 Basic Tips For Buying Your First Home

The home buying process can be overwhelming for a first time home buyer, giving you the feeling that your financial destiny is rapidly spinning out of control. When it comes to real estate, most people don’t have a lot of experience and even less knowledge. The fact is, buying a home is actually a simple process. All you need to do is concentrate on the basics, and the following steps will fall together more easily.

1. You’ll want to get preapproved for a mortgage as early in the process as possible. This gives you more time to understand your mortgage and all the complicated paperwork involved. This also lets the seller know that you are serious about buying, and will normally work in your favor to give you a negotiating edge - which is especially handy if there are several others interested in purchasing the home. Getting preapproved will also save you a lot of time as well. If you can’t get approved for a loan, you shouldn’t waste your time going through the process until you have your mortgage problems solved.

2. On the mortgage front, the next thing you should watch out for is to avoid prepayment penalties at all costs. A prepayment penalty means that if you buy the home then later want or need to sell it or refinance it before the prepayment penalty expires, you’ll have to thousands extra. You can find a variety of great loans that don’t include these types of penalties. If your loan officer proposes a loan that does include prepayment penalties, you should usually turn it down and look for another loan. There is one caveat to this rule. If you know beyond any doubt that you will not qualify for a better loan prior to the expiration of the prepayment penalty and thus won't be able to refinance, it is reasonable to accept what is know as a "soft" prepayment penalty in exchange for a lower interest rate. This means that you would have no penalty if you needed to sell the property

3. As the interest rate markets change over the next year or so, you should also be on the lookout for good adjustable rate mortgages. I know that you have heard many horror stories about adjustable rate mortgages, but there are some that have strict adjustment limits and easy refinancing terms and could save you thousands over a couple of years. An example of a good ARM would be an FHA adjustable rate mortgage. FHA ARM mortgages have strict adjustment limits, no negative amortization (your loan balance only goes down and never up), and a streamlined refinance process.

4. Before you purchase a home, you should always be aware of how much you can afford. You should always go over your budget and figure out how much money you can spend on a mortgage payment. If you manage your money intelligently and know your finances, this should take very little time at all. On the other hand, if you are not on top of your finances, this may take longer but you will be highly rewarded for the effort. Do not base your decision on whether or not you can afford a certain home based on whether the loan officer and real estate agent tell you that you qualify. They are able to qualify you for more than you can comfortably afford and both get paid more when you buy a more expensive home. They will not, however, help you with your payments later on.

5. Once you have your finances in order, the first thing that you should do is to familiarize yourself with home prices in the area in which you want to live. Do not make a great effort to match yourself up with a home at this time. Check prices in the area online so that you know what people are asking for homes, but then be sure to check for foreclosed homes to take advantage of today's difficult housing market. It is a buyer's real estate market. For your first home, you are better off choosing a home for investment value than trying to get the perfect dream house. You want to buy a home for at least 10% to 20% less than similar homes which have sold. This way you are primed to take advantage of buying in a down market with little risk and making out like a bandit a couple of years later when you are ready to move up. Don't expect to pay full market value for a home even when prices are depressed and then benefit from inflation to build your equity. The other homes you will want to buy will be going up too. You make your money when you buy at the right price.

The above are just a few basic tips and there are many other things you’ll need to know before you buy your very first house. The key is to educate yourself before you take action. Most first time homebuyers fail to operate from a position of strength. Many are paying the price for that in today's market. Don't let that scare you. If you concentrate on the learning the basics, you can control your destiny.

About the Author

More information on buying and financing foreclosure homes can be found at http://buyaforeclosurehome.sharp-buyer.com

Carl Pruitt is a 22 year veteran of the real estate/mortgage businesses with years of experience dealing with foreclosure homes.