In The Market to Buy?

Here are five steps that will get you off on the right foot:

Get Your Finances In Order

Your credit reports are an ongoing look at how you manage your finances. It’s best to know what your credit reports say about your financial history before you apply for a mortgage. Your reports play an important role in the mortgage approval process and in determining theĀ  interest rate and other loan terms that a lender offers you.

Get Familiar With The Mortgage Industry

Finding the right loan and lender is crucial. It’s up to you to determine which lender is best for your needs, and it’s always a good idea to have some background about the loan process before you talk to a lender. HOW SHOULD THIS BE ACCOMPLISHED?

Get Pre-Approved For A Mortgage

Consider this scenario: A home seller gets two similar offers. One is accompanied by a letter from the buyer’s bank that states she is pre-approved for a mortgage in the amount of the offer. The other has no supporting documents. Which offer do you think the seller will consider first?

Determine Your Wants And Needs

Buying a home isn’t as difficult as you might think. You can make it even easier if you get familiar with your local real estate market ahead of time, and make a list of your wants and needs before you start looking at houses.

Learn To Work With Your Real Estate Agent

Real estate agents represent buyers, sellers, or both -and in some cases they an work as neutral facilitators for either party. Know what you want from a real estate agent and be clear about his or her duties and loyalties.

Understanding CMAs

Don’t want to pay too much for a home? Want to be sure that you aren’t paying more than market value for your home purchase? A CMA – Comparative (or Comparable) Market Analysis – is the strongest tool in your home-buying arsenal to help assure you’re paying a fair price.

A CMA recaps housing activity in the area in which you are interested, focusing generally on three properties that are similar in size and amenities located in the same neighborhood or nearby. The CMA will list specific details (number of bedrooms, number of baths, total room count, square footage, age, etc.) for similar properties that are currently on the market (active listings); are under contract but not yet closed (pending listings); have closed and transferred ownership (sold listings); along with those listings that have either expired without selling or have been withdrawn by the seller (taken off the market).

Because a CMA compares similar properties, it can give you a pretty clear snapshot of current housing values in a specific housing market. Although the CMA is very important, it cannot be used as an absolute determination of value, since it generally does not put a lot of weight on condition, an obviously important factor.

While the CMA will list homes that are currently on the market as well as those that are pending or have expired, it is those properties that have sold and closed that give the most information.This information is important because it details specifically what buyers are willing to pay (and lenders are willing to lend for specific properties.

Don’t make the mistake of putting too much weight on the prices of properties currently on the market. These homes could be wildly overpriced compared to the price for which they eventually sell. Likewise, one of the biggest reasons that a property listing will expire without selling is because it is overpriced. So take the prices of these expired listings with a grain of salt.

A CMA can be your most important tool in negotiation, since it will detail exactly where, price-wise, the house in which you are interested is positioned. Is it underpriced (a bargain), priced “on the money” (a fair price for both buyer and seller) or overpriced (time to either negotiate hard or walk away).

Remember, if you overpay for a home in a strongly appreciating market, the market will eventually cover your mistake. If, however, you overpay in a flat or declining market, you will end up holding the financial bag.