There is not much to say about buying a new house, but let me offer some tips about the purchase process and caution you about pitfalls.
The nice thing about buying a house is that you are excited! You place a contract on the house and typically close on the property within 30 days. But the upside is also the downside: you have a limited timeframe in which to get financing as determined in the contract; therefore, you are forced to take the interest rates that are available at that time. If you are paying closing costs, you could be investing thousands of dollars in a mortgage that you might not want if rates improve down the road.
My advice is this -- if you are buying a house, let us do it with no closing costs whatsoever, and then we’ll sit back and watch the market. If rates get better down the road, we’ll refinance it, once again with no closing costs. If rates get better after that, we will do it again with no closing costs. With this approach you have the freedom to manipulate the market and catch it on a good day. Of course, you could invest thousands of dollars in discount points to “buy down” the rate, hoping that you got it on a good day. I do not recommend this approach at all, because if you come to me and say that you want to invest $15,000 dollars to buy down a rate, what happens if rates drop three months later? You just paid a pile of money for something that is basically obsolete and which you could have gotten you for free had you taken the approach I am recommending.
If you are buying a house, plan your mortgage with no closing costs and make sure that you have a very low earnest money requirement. Agents always try to make it seem as if you have to put down a large earnest money deposit, but if you are a stickler about it, you can get this done with a much smaller sum. Make sure that the contract is always subject to financing. That way if you don’t qualify for a mortgage, you won’t lose your earnest money. And most important of all, make sure the value of the property is realistic.
I know we are not helping the economy by saying this, but existing home sales are taking longer and longer to get off the market. The reason is people are trying to sell homes with inflated values. In many cases, they owe more than what the houses are worth. So they are trying to get as much as they can. That is fine — more power to them — but as a consumer, make sure that you can’t go down the street and get essentially the same house for less money, especially if it’s brand new.
And here is what we consider to be the most important thing: don’t get your mortgage at the first place your real estate agent suggests.
You wouldn’t secure your mortgage at the first place a taxi driver told you, just because he drove you around for a week. So don’t go and blow $7,000 in closing costs because you can’t say ‘no’ to someone you have known for a week. You have options. If your agent is pushing you hard to a certain mortgage guy, who knows what is going on between them? Just stand on your own two feet and say: ‘If you want me to pay $7,000 in closing costs, then you go ahead and pay it; otherwise, I am going to Lenox Financial.’