Last night, at a gathering party, I met a REMAX real estate agent who had a few tips and advice for the first time home buyers. I brought back some advice from the conversation;
>> Make sure your FICO score is in the good or excellent range.
>> Make sure that I am not spending over half the allowed limit on my credit cards. Have more than one credit card in order to prevent this.
>> Make sure you keep a good rental history of two years and that you can have a copy of all the rent checks from the bank to give proof of this to the lender. The lender wants to see both front and back of each check.
>> Have at least $6,600 to 10,000 (depends on the price of the property you're buying, though) in reserve money. This money is not part of my downpayment. I can show 70% of my 401/457 K money and Roth IRA money as reserve money.
>> It's better to buy a two to three bedroom home rather than a one bedroom apartment or condo. I had been aiming for a one bedroom condo/apartment with my budget limits. She said it's better to buy a two to three bedroom home and rent out the spare rooms to help pay for the mortage payments. Condos/apartment conversions will not do well in re-sale at all. They are becoming popular due to the housing price momentum of the single family homes. They are in more of danger for a bubble burst than other types of homes.
>> I should buy soon although I don't have the 20% downpayment since the home prices will probably cool down 5 - 10 % only, and the majority of the homes that will cool down in price will be at least $800,000 or more (the higher priced homes). With the interest rates going up, I will never win this race whether I wait or buy now. Do not wait more than a year.
>> Do not get interest-only loans. They tack the money/principal you owe during the interest-only years onto the back end of your loan, and once, you start paying the principal portion as well (once the interest-only period ends), you will realize that you have a mortgage bubble of a payment each month since you only have 25 years versus 30 years to pay off the whole bloated loan. Assuming you took out a 5 year interest only loan. At this point, she pointed to my sister and said they have done that and they will find it hard to cope in three years.
This is all that I can remember from that wine-filled evening. I'll keep her advice in mind but I still want to some more hard cash in my hands before taking the plunge. I also understand that, eventhough she might have good intentions in mind, she is still a real estate agent and might have her own interests in mind. Most of her advice was general and common sense, though.
