9 Tips for Home Buyers in 2010
1. Cash is the new king
If you can spare the cash, it has a heck of a lot more buying clout now. In the past, we've tried to persuade people to seek out more liquid investments for their cash on hand and grab an easy-to-get low-interest mortgage. Now, with the equity markets depressed at the same time that mortgage loans are hard to find, the tables have turned. Those wielding ready cash in a recession are always ahead of the game.
2. Negotiate extras ... and more extras
This is a no-brainer in the current market. But while sellers continue to offer throw-ins such as built-in appliances, flat-screen TVs and even cars, the best throw-ins are always the ones that take monetary form. Think paid closing costs, a year's worth of property taxes, repair credits and paid homeowners association dues, to name only a few.
3. Start a down payment fund
The goal should be to amass 20 percent. Set monthly saving goals. Shore up the family budget. Work an extra job if you must. The pain will precede a gain: lower house payments and higher equity in the future.
4. Determine your own home buying budget
Do this before you start talking with lenders. They will tell you what you qualify for, but only you can determine what you can really afford. Be realistic and work in a buffer for contingencies and negative life events. And instead of facing possible piecemeal rejection locally lender by lender, shop for a mortgage online and see what several competing lenders have to offer. But don't expect appreciably less-stringent terms online.
5. Clean up your credit score
You've heard this one before. But now it's more important than ever if you hope to get home financing in '09. Correct reporting-agency errors that may be dragging down your score. Pay your bills on time. Pay down active credit cards, but don't close out paid-off accounts.
6. Research equals savings
Agents will almost always tell you that the time to buy is now. But do your own research. Go online and scour newspapers and other local sources looking for housing inventory backlogs, the average for-sale time that homes are on the market and average selling prices. Also, be wary of the number of area foreclosures and major-employer layoffs.
You'll get a better sense of how much negotiating clout you'll really have and which way the market is moving. Information is power -- in your case, purchasing power.
7. Don't overlook neighborhood issues
If and when you do qualify for a mortgage, don't overlook these important issues in your exuberance: quality of schools, traffic noise, upcoming zoning issues, neighborhood stability, home turnover, crime levels and the presence of any sex offenders. This is where a strong, veteran agent can assist.
8. Watch for foreclosed-property inventory to loosen
Banks soon will be under greater pressure to cut their losses on property they own through foreclosure and to increase revenues. With a smaller percentage of distressed homes selling at auction, banks are loaded up with more of these nonperforming assets.
In major markets, more agents are specializing in prying loose so-called REOs -- real estate owned by banks. Again, cash on hand talks loudest.
9. Look for other looming opportunities
Can't get a loan? The financial markets should begin to untangle at least a little bit in 2009. The newly Fed-fortified banks will, or at least should, start moving that money. They are banks, after all. But don't expect a return to zero down payments.