Know Your Budget

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Before making major changes to your home, be sure to take into account what houses are selling for in your immediate neighborhood as well as surrounding neighborhoods. Are houses selling quickly once listed or even before they are listed? This should also help you establish a budget for your project and not over-improve for the neighborhood.


The most costly mistake you can make is not setting a realistic budget in the beginning and cutting corners well into the project. This can result in your not being satisfied and in issues arising during an inspection when you sell the home.

When considering buying a house, talk to a lender to find out what you can afford. Any offer you make on a house is stronger if it is accompanied with a pre-approval letter or commitment letter from the lender. At the very least, have a pre-qualification letter, which tells a seller that you have spoken to a lender and know what you can afford.

Find a mortgage broker before you start looking for a new home or selling your existing home. A mortgage broker will help you determine how much of a home you can afford to buy and guide you into the right loan program and an interest rate that best suits your financial situation.

Know your mortgage options before you decide whether you should lock into a fixed-rate option or go with an adjustable-rate. An adjustable-rate mortgage (ARM) will offer you a lower rate, thus allowing for lower payments. At some time during the life of the loan, the rate will start adjusting, but you can lock in a rate and payment for periods from six months to 10 years. The shorter the term, the lower the rate. The most popular ARM product is the 5-year ARM. This means your rate is fixed for five years.

If you are going to stay in your home for more than two years, it is typically better to have your mortgage consultant quote you the lowest interest rate with 0 discount points. Pay the full closing costs, even the 1 percent origination fee, so you can get the lowest rate available.

In most cases you will need money for your closing coststypically about 3 percent of the sales price although you can negotiate in your contract for the seller to pay your closing costs.

Mortgage brokers who fund renovations need to have a background in this area. Additionally, a broker should have several different programs available from several different lenders, whether they are for renovation loans, lines of credit or cash-out refinances.

A renovation loan is based on the cost to purchase and the cost to renovate. If you have owned the property for one year, the loan is based on the appraised value as renovated. Rates during construction obviously vary, however, the rate after construction is far more important.

Take pictures or save articles from magazines to better visualize and communicate what types of looks you like. Seeing a home or a picture with the improvement you want to make gives you a better idea of how they fit with your house. Look around at homes on the market, and check with agents and appraisers also.

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