Wow! What a year for the real estate and mortgage industries. When people look back on 2007 from a business and financial perspective, they will likely recall the subprime mortgage "meltdown" that has yet to play out.
The whirlwind of media coverage that has surrounded the subprime crisis leaves many home buyers scratching their heads. "What does all the mean to me," many buyers want to know. "What lessons should I take away from all this?"
With an eye on current events, I offer you the following tips for home buying in 2008.
1. Boost Your Credit Score
Credit is everything when it comes to home buying. Many of the people who became foreclosure statistics in 2007 got there because of subprime ARM loans -- the only type of loan they could afford given their bad credit. So focus on maintaining or improving your credit score in 2008.
2. Understand the Different Mortgages
Don't rely on a mortgage lender to tell you what you need to know about the various types of mortgage loans. Mortgage lenders make money by selling mortgages, so that is their primary focus -- selling you a home loan. It's up to you to understand the pros and cons of different mortgage types, and how they will affect you in the long run.
3. Know Your Real Estate Market
At the time of this writing, many real estate markets across the U.S. are experiencing a major slow down. This might mean that buyers can get a good deal on a home, and then profit from the appreciation / equity when the market swings back up again. The key to making a wise home-buying decision comes, in part, from understanding your local real estate scene. The "Homes" section of your local newspaper is a great place to start.
4. Reduce Your Debt
If you decrease your debt while keeping your income steady, you will have a more favorable debt-to-income ratio, which is one of the things mortgage lenders consider when approving people for home loans. That's one of the many reasons to pay down debt. Start with those credit card balances, since they probably have the highest interest rate of all your debt items.
5. Increase Your Savings
It's always a good idea to increase the amount of money you put away each month, but it's an even smarter idea if you plan to buy a home in the near future. Mortgage lenders will check to see how much cash you have readily available, because they know you'll have to cover closings costs when buying a home. Start putting money away as early as possible.
All of these tips can be summed up in one simple statement -- be a smart consumer. Many of the people who suffered under the mortgage "crisis" of 2007 were not smart consumers. They overspent and made shortsighted financial moves. Hence, they became statistics in a negative way. Follow the tips above, and you can avoid joining their ranks!
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About the Author
Brandon Cornett writes on behalf of Foust Asset Development, real estate professionals who ethically work with buyers and sellers in the Orange County real estate market of California. Learn more about the Foust team at http://www.foustonline.com
5 Tips for Home Buyers in 2008
