1. You Need A Large Down Payment
The first step to buy a home in Albuquerque NM for many home buyers is to get pre-qualified or pre-approved for a mortgage. Home buyers need a good lender to understand the different home loans they may be qualified.
There are many different types of loans and all different down payment requirements:
- In Albuquerque, there is a first time home buyers program that allows first time home buyers to buy a home with an out of pocket payment of $500 to $1000.
- There is another home loan called the Next Home, this home allows home buyers to purchase a home for as little as ½% down payment.
- Federal Housing Administration (FHA) loans require a down payment of only 3.5%.
- If you are a Veteran or active service and meet the VA requirements, you can purchase a home with 0 down payment.
- There are conventional loans with down payments of 3%, 5%, or 10%
- You will also need closing cost with all these loans except the first time home buyers loan and the VA home loan.
- Keep in mind that if you don’t pay 20 percent down, you’ll may be required to pay private mortgage insurance (PMI).
2. Only Up Front Cost Is Down Payment
When purchasing a home you will need enough cash to pay the earnest money deposit, down payment, closing costs, moving costs, and possibly repairs after you purchase the home. In addition, you may want to purchase new furniture or appliances. Buyers need to make sure they have enough money to cover all these costs.
It is important that buyers do not purchase anything on credit during the home buying process. Buying something on credit might change your financial ability to qualify for a home loan.
3. You Need Excellent Credit
You don’t have to have excellent credit, you just need good credit. In most cases you can get a loan with a credit score of 640 or higher, in some cases you can qualify for a loan with a credit score as low as 580. In order to get the best mortgage rates available, you usually have to have excellent credit. The lower your credit, the higher the interest rate you will pay, if it’s low enough, you will not be offered a loan at all.
4. Income Determines How Much You Can Borrow To Buy A Home
In fact it is a combination of your income, credit score, and your debt. Lenders will calculate something called debt to income ratio. There is a cap on your debt to income ratio. If your debt to income ratio is too high, you will not be able to get a mortgage.
5. Pre-Qualification Is The Same As Pre-Approval
Pre-qualification and pre-approval are not the same thing. To get pre-qualified, you provide your lender basic financial information about you, such as income, debts, assets, and employment history. The lender uses this information so they can determine what kind of loan you can qualify for and estimate how much you’d be eligible to borrow.
But not until the lender is ready to give you a loan by verifying the information you pro provided are you actually pre-approved. You’ll have to complete a mortgage application after your lender evaluates your financial background and credit ratings.
Sellers and real estate agents will not take you serious as a home buyer if you have not been pre-qualified or pre-approved. And many agents won't show you homes with out first being pre-qualified. This way agents know what price range to show you homes in. Get pre-approved to put yourself in the best buying position.
6. Seller Pays Buyer’s Closing Costs
Closing costs are usually paid by the seller and the buyer. Everything is negotiable in real estate transactions. In some cases the seller may be willing to pay some or most of the buyers closing costs. However, it must be negotiated and the seller must agree to pay the buyers closing costs. The type of real estate market, sales price, and seller’s motivation determine whether they are willing to pay buyers closing costs.
It’s important to understand the amount of money you need upfront for costs such as a down payment, escrow impounds, credit report, loan origination fees, recording fees, title services, property taxes, and property insurance. Typically, closing costs are 2 to 5 percent of the purchase price of the home.
7. Listing Price Is The Selling Price
The price a home sells for is dependent on the current real estate market. In a sellers’ market, it is common for homes to sell above listing price. In a buyer’s market, it is common for homes to sell for less than list price.
The motivation and the amount of equity in the home plays a big role in the sales price. Motivated sellers will sell their home for less than asking price. On the other hand some sellers do not have enough equity to sell their home without writing a check at closing. These sellers will over price their home in hope that some “sucker” will buy their homes.
An experienced real estate agent with knowledge of the market can help you make the right decision when it comes to making an offer.
8. All Agents Are The Same
Real estate agents are just like any other profession. There are great real estate agents and some, not so great. You need an agent that knows the market and has a lot of experience. Experience comes in the form of how many transactions do the complete per year. Some real estate agents work only part time as a real estate agent. Find an agent with experience, one you can trust, and one you can work with.
9. Seller Will Make Repairs Based On The Inspection Report
It is critical to get the appropriate home inspections prior to purchasing a home. After inspections, your real estate agent will assist you as much as they can when it comes to negotiating repairs to be made by the seller.
The buyer and seller must come to an agreement acceptable to each other. If the buyer and seller cannot reach an agreement, the purchase agreement is terminated and the buyer will have their earnest money returned to them. This is clearly defined in the Real Estate Association of New Mexico Purchase Agreement used by real estate agents in the Albuquerque Metro area.
10. It’s Cheaper To Rent Than Buy A Home
This is one of the most controversial topics surrounding buying versus selling, and it really does come down to a personal decision. There are benefits to buying a home and there are benefits to renting a home. You probably should not buy a home if you do not plan to stay in the home for at least 3 or 4 years. It will cost you about 9% to 10% of the sales price to sell your home. If homes are increasing in value by 3% per year, it will take you 3 years to cover costs to sell your home.