Home truths: Know before you buy BUYER BEWARE Even in a favorable market, house hunters should be cautious.You can’t get more direct than this e-mail we received from Maria Rosenfeld of Miami: “I’m a first-time home buyer and need help on getting started. I don’t know how to buy a home. What are the steps I need to follow?
”Even if you’ve been in the real-estate game before, today’s market is confounding. An estimated 1.1 million homes are in foreclosure, the most since 1979. And it’s not just subprime mortgages that are a problem; the default rate for borrowers who qualified for prime loans is climbing as well.
“Buying, selling, remodeling” offers advice for consumers who face a variety of scenarios in today’s fragile housing market. Sellers are obviously in a tough position. And we’ve been hearing how great it is to be a buyer right now and how it may be a good idea for investors to pick up a house or two while prices are low. I turned to our finance editors at Consumer Reports, our finance advocates at Consumers Union, and experts at other consumer groups for their advice. They had strong words of caution.A home is to live in. For most people, seeing real estate as an investment that will surely appreciate is risky business.
For one thing, while prices are already down in many parts of the country, they might go lower. So the cheap house you buy now could still sink in value. And while we’ve become accustomed to 6 or 7 percent returns on real estate, historically prices have just kept pace with or barely exceeded inflation. It’s probably wise to buy a home you want to live in rather than an investment with four walls.Choose your mortgage (and your broker) carefully.
The mortgage broker may be more focused on selling you a mortgage than on getting you the best deal—that’s your job. Find out what you can afford and the best terms for you; up to half of borrowers who took a subprime loan would have qualified for a conventional mortgage with better terms. Start by going to www.bankrate.com or www.hsh.com for worksheets.
Don’t count on refinancing out of a bad loan; falling home values could prevent that.Search on your own terms. Once you have a clear idea of your budget, your hunt should be easier. Consider an exclusive buyer-broker who will represent only you, not the sellers. Nonexclusive real-estate agents tend to show you their own listings first, since they won’t have to share the commission if they represent both the buyer and the seller.
Then they’ll probably show you their firm’s listings, since they stand to gain from those sales as well. It can help to search online first and target some homes that might be right for you, no matter who has the listing.