1. Before initiating the actual process of buying a new home, you must keep all your documents organized and check your credit score. Although the credit score of a home buyer is not the only factor required for obtaining home loan, it is definitely among the most important factors. Go through your credit report carefully, and understand the credit-standing you are possessing currently. Even if you find that you have an impressive credit report, you must analyze it properly before going to buy a home. Besides checking the activities and credit score, the lenders also check the ratio between the home buyer’s income and debt taken by him. For obtaining the desired amount as loan, it is extremely important that this ratio depicts that you have the financial strength required to pay for all expenditures related to the home (this include interest, principal and taxes).  Majority of the lenders offer loan only to people having income: debt ratio within 28-30% of their overall income. A person having a ratio higher than that or anyone who needs to improve their credit history must do the necessary adjustments before beginning the home buying procedure.
2. The next most important step while preparing for buying a home is completing all the necessary paperwork flawlessly. Arrange the annual tax returns, the bank statements, the pay stubs and the W-2s. Lenders might also ask for some additional information when you submit your loan application. Keeping the basic documents ready will ensure that you are on right track.
3. Based on the type of loan you are applying for, the rate of mortgage interest will vary. Other than that, these interest rates keep on changing at regular intervals. Thus, while making the purchase, a home buyer must consider these variables. If you find that the interest rate is currently going higher than the average rate, you can decide to delay the purchase by some time or can also opt for another lender. Choosing the right lender is important to ensure that you are getting a profitable deal. You can also seek guidance from your real estate agent while searching for a lender.
4. The process of purchasing a home should always be time taking and gradual. Never try to rush the purchase. Ask yourself about the kind of home that fits your requirements the best. Inform your real estate agent about your preferences. Based on that, the agent will shortlist homes for you, from which you can choose the one for buying.

The first thing that comes to our mind when we talk about real estate is the residential part which is the space for living. There are many residential sources which include homes, duplexes, apartments, condominiums and others. The main advantage of investing in residential real estate is that it can be rented easily. All of us needs place to live and thus residential real estate will be always in demand and is a good choice of investment. The financing procedure of a residential property is much easier as compared to the commercial property and does not involve too many hassles. Thus the ease and convenience of getting finance also attracts people to invest in residential property. The best part of the residential property is that it can be used by you in time of need. Thus your residential property will come to your rescue in your adverse times. And last but not the least if you have limited budget then residential properties are the best option as they can fall within your budget and have comparatively less price.

Commercial properties serve as the home for business and are available in the form of office space, space for retail and other industrial space. The most beneficial thing about investing in a commercial property is the long term lease agreement which generally last for about five and more years. Thus unlike residential property you need not to worry about renewing your lease every year with commercial ones. Commercial investment also relieves you from the hassles of management as the tenant looks after all the issues. And finally the return in commercial properties in undoubtedly more as compared with the residential ones.

The year was 2005, and I had just graduated. In a fit of youthful exuberance and positivity, I bought my first home in the summer of that year. My plan was simple; to keep costs as low as I could and so I bought a two room home that I could comfortably live in upstairs while renting out the basement of the home to someone else. I waded into my savings and made the down payment. Paying off the mortgage was obviously a different story and so I made the dive and pledged to be mortgage free in 3 years. It was an ambitious target, but I didn’t want to be made a slave to my mortgage like other people I had. I wanted my home to work for me and not me for my home.

Home prices were more reasonable at that time, it hadn’t yet taken off and since the rental income was reasonable, I was making major inroads into the mortgage. Some years on, I found a great deal on another property and thus made a 10% down payment on that and thus owned a second home. Half of the interest was tax deductible on the first home, so I admittedly slowed down and slowed down my efforts at paying off the mortgage, delighted that the home is working for me. I did make monthly payments, but made nothing by way of extra contributions in a lump sum annually (which I would have normally). A few years on, I sold the home for $55k after fees and everything was done with. The location of the home was just not that great for a family and space was a constraint.

And so, we moved into a zone with better schools and fit for kids. The sales for the first home went straight into the mortgage and so with that massive down payment I kicked off a 3-year open discounted variable mortgage with an outstanding balance of just $150k.  Our earnings were growing rapidly and we were making lump sum payments where possible and also extra payments monthly. Our frugality and graft paid off and we paid off that mortgage in about 3 years, give or take. It’s vital to set goals and saving habits and stick to it. No point in making a plan and then veering from it, right? It worked for us, and with some luck and planning it can work for you too.

Mortgage escrow accounts are not the same as a real estate escrow since a homeowner and a mortgage lender are the parties in question. As part of his end of the bargain, a homeowner must pay property tax and insurance on time. Failing to do so affects the mortgage lender since such actions can destroy the value of the collateral that the homeowner has placed the lender. In order to have a better valuation of the collateral in the case of a default, the mortgage lender will look to get guarantees about full and timely payment for property taxes and home insurance, which is where mortgage escrow accounts come into play.

The mechanisms of mortgage escrow accounts are very simple. In order to pay property taxes and home insurance, it is the homeowners responsibility to deposit the funds with the escrow account as part of the mortgage deal. When the payments become due, the escrow releases the funds and pays it off in time, thus leaving the value of the home intact. The benefits of this to the homeowner and to the mortgage lender is quite clear. The mortgage lender gets a sense of security and assurance about the value of the collateral while for the homeowner, this is a way to automate the payments he has to make for one part of the mortgage by paying smaller sums of money instead of a lump sum payment. It’s a win win situation for all. The lender knows that there will be no shortage of funds that hurts him and the homeowner doesn’t have to remember any due dates for payments. The one thing that homeowners must keep in mind with mortgage escrow accounts however are how it will affect their monthly budget. That is the one critical aspect many homeowners overlook almost totally.

Dirt cheap rates

Have you checked out those mortgage rates of late? They’re lower than the lowest of low-lying fruit! Fixed mortgages are now getting locked in at a more affordable 4.5%, which is much more affordable compared to what went on earlier. This obviously translates into much more affordable mortgages for all and it is perhaps the difference between that house that was once unaffordable and what it means to you now.

Forced Savings

If you set up the money to get directly paid towards your principal regularly, you don’t get the money in hand to spend and it couldn’t have gone to waste. Of course, you can do a hell of a lot better by investing that money elsewhere but money towards a home is equity. Buying a home is no longer the “buy now, sell for a profit later” proposition that it once was and those that are buying a home now are not optimistic sellers; they’re home-makers that want a home of their own.

Renting isn’t a great idea

Not all landlords are made equal and sometimes renting a home isn’t that savory or inexpensive an experience. If you’re lucky, your landlord won’t be an absolute sour puss, but more often than not, that’s exactly what he turns out to be. If you’re a tenant, you are not in your own home and subject to the wishes of a landlord, and that is never a great situation to be in.

The market crash has opened up opportunities that might previously have never been on the table as an option but fear can be such a debilitating thing that it hampers your long-term vision entirely. But this means you must have the discipline to save and have your finances in order, and is that really a large price to pay for the house of your dreams?

1.    Don’t Select Your Apartment based on a Sample Suite

Don’t make your decision based on the sample suite your renter shows. Ask them to take you to the actual apartment where you will eventually stay. If they deny, check for other options.

2.    Check With Police

There are places where robbery is common. You might not know it, if you are new to the locality. Hence, it’s advisable to check with the police department if the area is safe to live in. Besides, try to select an area that has proper security. I am sure you don’t want your car to be stolen from apartment’s parking area every few months.

3.    Talk to Local Residents

After you have inspected the area with your agent, go back to the locality in the evening, and talk to the local residents. Ask them if there’s something wrong with the area? Have they spotted drug dealers wandering on the roads at night? Is racism common here? Tell them you are planning to move in, and are sincerely bothered about the atmosphere here.

4.    Google Your Apartment

Google your apartment and address to know more about the area. I am sure you will discover something interesting about the place. You will at least find few reviews, which may help you decide whether or not it’s safe to live in.

5.    Pest Control

You may look at the spacious bedroom and remarkable living room, and wonder why the rent is so low. Within few days, however, you will know why. The place might be full of insects.

You don’t want to spend next 5 years of your life spraying and fighting with cockroaches. And trust me it’s very difficult to knock them all down. You kill fifty today, another hundred will be back tomorrow. Hence, make sure the apartment you select has some facility to fight pests.

6.    Check Google News

If something had happened in you building in the past, it must be recorded in Google news archives. If nothing shows up, there hasn’t any significant incident taken place in your locality.

If you don’t find anything related to your locality, you can consider performing an advanced search, and checking out the archives section. Don’t be surprised if you find something had happened in the past. Things always keep happening at a place where many people live together. Yu can chuck the area, if there is a ton of horrible news pertaining to your area.

7.    Staff of the Building

When you visit the place with the agent or the renter, check how the building staff is. You can take a pass if you get any signs of being inconsiderate, snarky, or rude. If they look uncooperative or mean, don’t even bother looking further. If this is the treatment you get before even renting the place, imagine what it would be like when your tap tarts leaking or you have problem with pests. Don’t believe if the agent gives any excuses. No one really like dealing with rude people. Period.

8.    Research About the Property Management Company

You can search on Google: ‘X Property Management Company review’, and check the results. Large companies would have websites and other links. So it would cover the initial few pages of your search results. You will have to filter it out, and explore more about the company. This will also help you know customer service details.

This list may seem to be a bit long and tedious. But if you really want to make sure you live in a nice locality, spending time on these things would be worthy. You may have to compromise on few things if you are on a budget. There would certainly be a difference between amenities provided by $1200 rent house and $600 one.

Most Americans are depended on mortgage to buy a house. Availing this loan, however, becomes quite difficult if the credit score is low. The only option they are left with is approaching bad credit mortgage lenders. These lenders, due to the increased risk they bear, offer loans at higher rates.

Within a day, however, you can find a log list of lenders offering bad credit mortgage. Most financial institutions offer these loans along with other conventional loans. There are also companies that offer loan only to people with bad credit. Most of these lenders have an online presence. You can create a comprehensive list and call-up each of them to know the particulars of the loan.

Another way to avail a sub-prime loan is to hire a mortgage broker. These brokers share good relationship with most lenders, which can help you to avail mortgage quickly. They would, however, provide this service at a cost.

If your credit score is below 650, you will have to avail such loan. In order to reduce high interest rate charged by bad credit mortgage lenders, you can either opt to have reduced amount or pay bigger amount as down payment initially.

Since your credibility would still be a concern for lenders, they might as you to open an escrow account, and ask you to deposit insurance and related taxes each month into the account.

However, before you shortlist any mortgage lender, make sure you have explored enough information about the lender. There would be many financial institutions waiting to exploit your current financial situation. Hence, it’s quite imperative to conduct a comprehensive research before you deal with any of them. Make sure the interest rates and charges are at par with other lenders.

Having a home means having a secured place with money invested in to buy it. For this investment we search for the best deal, a place with best views and comforts at a reasonable price. Even if the price is high, we have banks that provide mortgage at a very low down payment. And we can easily avail one. His recession seems to be a blessing in disguise for all of us homebuyers.

However, before you sprint and clutch your favorite corner of the house that you are about to purchase, are you sure you are not wasting your funds? Maybe you are not. Then, at least you can ensure that you are not finalizing the deal based on some futile myths.

Here are the common ones that we keep reciting:

1. It’s a long-term investment

   If that’s what you think, then probably you haven’t glimpsed through the statistics of benefits of people who similarly misinterpreted their house as a long term investment. People who bought homes from the year of 1975 to 2008 have definitely seen a rise in the housing prices, but at a rate quite slower than most of the stocks or bonds. To be precise, the housing rates increased just around 1% per year whereas the benefit on funds invested on Treasury bills was over 2% per year.

   If you are among those people who are interested in ‘high risk, high return’ investment, you would not like to hear that Moody’s corporate bond provided profit of over 6% per year and S&P 500 stock increased by 8% each year from 1975 to 2008. The pleasure of living in one’s own home is unmatched. However, it cannot be named as ‘long tern investment.’ It’s a myth.

   If you are really searching for an investment, the stocks and bonds are still at a lower price than their worth. Buy them instead of a house.

2. The newly introduced First Time Homebuyer Tax Credit is helpful

   $8000 tax credit that you are eligible for as a new homebuyer may not necessarily help you to save $8000 or even $1. The federal government had released some pressure off new homebuyers by easing the regulations. So there was a steep hike in demand for new houses. Then Mr. President introduced our favorite ‘First time Home Buyer Tax Credit’ due to which people who never thought of buying a home started looking for one. This compelled the prices to rise in the areas where demand exceeded supply like the metro of Washington. So, this new tax credit has caused prices to reach at such a high level that wouldn’t have been so high if the program wouldn’t have been introduced. See what Mr. President have done to you.

   In order to save $8000, you pay $20,000 more than the real cost of the house. In short, this program seems to be helping ‘home sellers’ instead of ‘home buyers.’

3. You become a better and responsible citizen after you buy your own house

   Now that’s what I call a real myth. People believe that owing a home involves investing scores of funds which automatically makes you a responsible citizen. Expect financially, you also involve in taking proper care of you house and neighbors. Does it still sound logical? There is no awe-inspiring proof that confirms this kind of bogus fact. Instead I have better arguments and proofs that confirm the contradiction. The rate of house ownership in the countries of Denmark and Germany is lower than 40%. This means it is 68% lower than us. But I haven’t found many German citizens with psychological disorder or socially-mad behavior in today’s news paper.

   Ok. On the other end the ownership rate is 80% in Spain, yet there no TV or radio shows mentioning than Spaniards are better than Americans.

   People also argue that they become independent after owing a house. However, it happens even when you move in a rented house. The sense of independence depends on your lifestyle and decisions and not house ownership.

4. It’s quite affordable to purchase a house when down-payments are low

   It doesn’t mean you have to buy a house if the Federal Housing Administration is offering mortgages with just 3.5% down payment without considering the consequences you may face later. Huh? Consequences? Yes. Let me explain this to you with the help of an example. Say the house is worth $100. You pay $3.5 as down payment and owe the remaining mortgage debt of $96.5. The more debt you carry home, the more are chances that even a small price fall will make you owe more than the house is actually worth. This situation of a consumer is called as ‘underwater’, also ‘upside down.’ In the above instance, a fall of just 4% in the price can lead to ‘underwater.’

   A similar mindset by Bear Sterns and Lehman Brothers that made use of debt to equity ratio helped them to achieve nothing but collapse effortlessly.

   You feel it’s better not to repay the mortgage rather than owing an overpriced house with lesser current market value. So, along with down payment, you also lose all the money spent on renovation of this new house. Not to mention the credit score that will be reduced by 25-30%.

   However, if you decide not to pay the loan, have you given a thought to your next residing location? I asked this question because until you pay off the existing mortgage, you won’t get a new one. A recent research says that people with good credit score relocate more than people with bad one. That’s because the non-payers of mortgage are helplessly stuck at one place and cannot avail other loan. The recent sub-prime crises will generate many such stuck-homebuyers.

5. It’s better to own a home rather than pay expensive rent

   Maybe you are saved from paying rent to your landlord, after you own a home. But you still have to pay an amount which can be higher than the rent. You have to pay the maintenance cost along with monthly mortgage payment.

   You also know that most of the point I mentioned above are just myths, still you want to own a home because it give you a sense of security and pleasure. However, do not expect anything more than the illusionary security and pleasure because it wouldn’t give you the profit that you are searching for.

   You need to face the fact that the only reason you want a home is because you want to fulfill your emotional desires and not make money, because it can’t make any.

Here are six signs that will let you know if the value of your house will increase.

The Employment Percentage

You might wonder what the percentage of employment in a particular state has got to do with worth of property in that area. As you are aware, recession has rendered many people jobless. Without proper income, these people can take loan to buy houses. Therefore with the decrease in employment percentage, the demand for properties decreases as they become unaffordable. If the necessity for employment rises, companies will want to establish offices in different areas and there is a consequent increase in the demand for properties. You can always take the employment trends and growth patterns reports from the local labor statistics offices and see for yourself if the trends are taking an upward or a downward route. An upward trend will show that the value of your property will increase in the near future.

Income Status

You can expect your property to rise in value if it is in an area where the residents are financially sound.  An area where people are struggling with finances it is improbable that you’ll get any buyers. You can find out the income status of your area from websites like Bureau of Economic Analysis and the online employment status as given by the state employment offices.

Foreclosure Rates

Properties that are in an area where foreclosures have been very frequent this economically weak period will not see any rise in their values in the near future. Foreclosures in fact, lower the values of properties.

Availability of Resources

If your house is in an area where more than 2 % homes are on sale, forget to get a good price for it. If there are so many homes on sale, how can you expect your house to fetch a special price for you.  Isn’t there too much competition for that? Websites, such as Trulia, will give you an idea of the number of properties that are on sale in an area of interest so that you can assess from it, the value of your property in the future.

Smaller gaps in the listed and actual selling prices indicate better value for your property. If the selling prices are very low, then you cannot expect your property to acquire great value later.

Follow these indicators to assess the worth of your property in the present and future.

• Getting Turned On By Flashy Features: There was this bungalow in my neighborhood that was once occupied by a celebrity. The present owner put up the sale price as $14 million just because it had some personal furniture of the famous figure. A fan of that celeb would generally fall for the house, but I wouldn’t. Is it worth spending such a huge amount of money just for some vicarious celebrity feelings?  All my celebrity euphoria will melt down once I start paying up the loan that I take for purchasing the property.
• Don’t Fall For Facilities That Are No Use To You: Are you impressed by that huge swimming pool in the bungalow lawn that you’ve recently seen for buying ? Do you really need that swimming pool? Don’t opt for that house if you really are not used to swimming frequently. Ultimately you’ll only end up paying huge amounts of money for a feature that you don’t use at all. Similarly any garden inclusions like play features for children don’t make sense to buy if you don’t use them. They only add to the cost of the property you buy.
• Keep Money For Repair Work: If you analyze the reason for the large number of foreclosures that have happened recently, you’ll find that people have taken mortgage loans to their maximum capacity and were finding paying them back very difficult. Also their loans did not allow them to keep aside any money for repair work. Now, repair work is inevitable as you might encounter a problem with your house any time. If you don’t save up money for that you’ll be in deep trouble. Also you can get your house renovated later on and that will increase the value of your asset.
• Don’t Overestimate Tax Savings: You might think that paying interest on mortgage loans is going to give you tax benefits. That is true, but it is not all the beneficial. You can avail tax benefits in other ways too. Suppose you have a big family and your income is less than $100,000 annually, even then you get huge tax benefits. There’s no necessity for you to buy a property because of that.
• Find Out About The Neighbors: Before you finalize the deal with the landlord you should find out as much as you can about the house and its surrounds. You should check different parts of the house for any defects. Find out if it is well connected with the rest of the city and if it is located in a self sufficient area so that you don’t have to run to the city center for even the smallest household necessities. Something that might be difficult for you to assess might be the nature of the neighborhood. You should put efforts in knowing the kind of neighbors you have and the kind of activities they do. Even though we might not interact much with neighbors we simply cannot live in isolation.