10 Secrets of Off-Season Home Buying

As the housing market heads into its sluggish months, savvy buyers can squeeze out some nice deals.

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Slide Show: 10 Secrets of Off-Season Home Buying

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With real estate values still sliding and mortgage rates approaching record lows, a favorable climate for home buying is accompanying this year's fall foliage. And as the days grow colder, housing experts say home buyers will have another reason to jump into the market in the coming months. "Let's face it," says Guy Cecala, publisher of Inside Mortgage Finance. "Anybody who is trying to sell a house going into the winter months has to be flexible, and you should be able to get good deals." That's because the residential real estate market is highly seasonal, with many home buyers planning their transactions around the academic calendar. Buyers with children typically start their search in the early spring in hopes of having a contract signed by summer so they can move into their new house by late August. Once the school year begins, however, the housing market heads into a period of hibernation, with sales activity declining until January or February, when it bottoms out.

[Slide Show: 10 Secrets of Off-Season Home Buying.]

With fewer buyers competing, anyone looking to purchase property in the off-peak season may find themselves in a better position to land the deal they've been looking for. "I tell people to buy off season," says Ron Phipps, a broker with Phipps Realty in Warwick, R.I. "You may be able to do better than you otherwise might." Here are 10 tips for anyone looking to buy real estate in the off-peak season:

1. Make sure you are secure in your job: Although the house-hunting climate may be favorable, buyers need to be confident in their income stream before jumping into the real estate market. And with the unemployment rate heading toward 10 percent, a growing number of Americans may find themselves out of work in the coming months. "If you are unsure about your [employment] outlook, there is nothing wrong with renting," says Mike Larson of Weiss Research. "Renting is a bargain these days, too." The real estate research firm Reis says that the national apartment vacancy rate hit its highest level since 1986 in the third quarter. Landlords dropped asking prices by nearly 2 percent to attract tenants, the firm says.

2. Spit-shine your credit: With home loan defaults on the rise, banks have jacked up lending standards for borrowers of all sorts. For example, today's borrowers will need a FICO score of roughly 720 or higher to get the most attractive mortgage rates. At the same time, most borrowers will have to produce several months of bank statements and tax returns for the previous two years to obtain a loan, Cecala says. Such requirements, while not earth-shattering, stand in stark contrast to the breezy credit standards that many could get in the first half of the decade. "It is a brave new world out there when it comes to getting a mortgage," Cecala says. To ensure that they can get the home loan they need, he recommends that house hunters get preapproved by a lender before starting their search. "The idea is to try to work your way through the financing issues before you actually are ready to put an offer down," he says. It's also helpful for borrowers to review their FICO score and credit reports. If any errors appear on the credit report, take care of them.

[See 8 Simple Steps to a Higher Credit Score.]

3. Gear up to get down: The financial turbulence of the past two years has driven the once-popular "no money down" home loan into extinction. As a result, would-be home buyers will need cash on hand for a down payment. Although requirements will vary, depending on the borrower and the market, buyers will need a down payment of at least 3.5 percent. "If you haven't got your assets in order, or your liquid reserves are pretty low, you are going to want to go make changes to your holdings so that you have got the cash available to make the transaction happen," says Keith Gumbinger of HSH.com, which tracks mortagages and consumer loans. Borrowers who can't come up with a down payment should consider setting aside a portion of each paycheck until they have saved enough cash.