Ten things you can do to take the trauma out of home buying
Find a real estate agent that's simpatico. Homebuying is not only a big financial commitment, but also an emotional one. It's critical that the agent you choose is both skilled and a good fit with your personality.
Remember, there's no "right" time to buy, any more than there's a right time to sell. If you find a home now, don't try to second-guess the interest rates or the housing market by waiting. Changes don't usually occur fast enough to make that much difference in price, and a good home won't stay on the market long.
Don't ask for too many opinions. It's natural to want reassurance for such a big decision, but too many ideas will make it much harder to make a decision.
Accept that no house is ever perfect. Focus in on the things that are most important to you and let the minor ones go.
Don't try to be a killer negotiator. Negotiation is definitely a part of the real estate process, but trying to "win" by getting an extra-low price may lose you the home you love.
Remember your home doesn't exist in a vacuum. Don't get so caught up in the physical aspects of the house itself (room size, kitchen), that you forget such issues as amenities, noise level, etc., that have a big impact on what it's like to live in your new home.
Don't wait until you've found a home and made an offer to get approved for a mortgage, investigate insurance availability, and consider a schedule for moving. Presenting an offer contingent on a lot of unresolved issues will make your bid much less attractive to sellers.
Factor in maintenance and repair costs in your post-home buying budget. Even if you buy a new home, there will be some costs. Don't leave yourself short and let your home deteriorate.
Accept that a little buyer's remorse is inevitable and will probably pass. Buying a home, especially for the first time, is a big commitment, but it also yields big benefits.
Choose a home first because you love it, then think about appreciation. While U.S. homes have appreciated an average of 5.4 percent annually over from 1998 to 2002, a homes most important role is as a comfortable, safe place to live.
Ten Questions to Ask a Home Inspector
What are your qualifications? Are you a member of the American Society of Home Inspectors or National Associaton of Home Inspectors?
Do you have a current license? Inspectors are not required to be licensed in every state.
How many inspections of properties such as this do you do each year?
Do you have a list of past clients I can contact?
Do you carry professional Errors and Omission Insurance? May I have a copy of the policy?
Do you provide any guarantees of your work?
What specifically will the inspection cover?
What type of report will I receive after the inspection?
How long will the inspection take and how long will it take to receive the report?
How much will the inspection cost?
What Your Home Inspection Should Cover
Siding: Look for dents or buckling
Foundations: Look for cracks or water seepage
Exterior Brick: Look for cracked bricks or mortar pulling away from bricks
Insulation: Look for condition, adequate rating for climate (the higher the R value, the more effective the insulation is)
Doors and Windows: Look for loose or tight fits, condition of locks, condition of weatherstripping
Roof: Look for age, conditions of flashing, pooling water, buckled shingles, or loose gutters and downspouts
Ceilings, walls, and moldings: Look for loose pieces, dry wall that is pulling away.
Porch/Deck: Loose railings or step, rot
Electrical: Look for condition of fuse box/circuit breakers, number of outlets in each room
Plumbing: Look for poor water pressure, banging pipes, rust spots or corrosion that indicate leaks, sufficient insulation
Water Heater: Look for age, size adequate for house, speed of recovery, energy rating.
Furnace/Air Conditioning: Look for age, energy rating. Furnaces are rated by annual fuel utilization efficiency; the higher the rating, the lower your fuel costs. However, other factors such as payback period and other operating costs, such as electricity to operate motors.
Garage: Look for exterior in good repair; condition of floor-cracks, stains, etc.; condition of door mechanism.
Basement: Look for water leakage, musty smell.
Attic: Look for adequate ventilation, water leaks from roof.
Septic Tanks (if applicable): Adequate absorption field capacity for the percolation rate in your area and the size of your family.
Driveways/Sidewalks: Look for cracks, heaving pavement, crumbling near edges, stains.
Ten Questions to Ask Your Lender
Be sure you find a loan that fits your needs with these comprehensive questions:
What are the most popular mortgage loans you make? Why?
Which type of mortgage plan do you think would best for us? Why?
Are your rates, terms, fees, and closing costs negotiable?
Will I have to buy private mortgage insurance? If so how much will it cost and how long will it be required? NOTE: Private mortgage insurance is usually required if you make less than a 20-percent downpayment, but most lenders will let you discontinue the policy when you've acquired a certain amount of equity by paying down the loan.
Who will service the loan? Your bank or another company?
What escrow requirements do you have?
How long is your loan lock-in period (the time that the quoted interest rate will be honored)? Will I be able to obtain a lower rate if they drop during this period?
How long will the loan approval process take?
How long will it take to close the loan?
Are there any charges or penalties for prepaying the loan?
Common Closing Costs for Buyers
The lender must disclose a good faith estimate of all settlement costs. A check to cover your closing costs will probably have to be a cashier's check. The title company or other entity conducting the closing will tell you the required amount for:
Downpayment
Loan origination fees
Points, or loan discount fees you pay to receive a lower interest rate.
Appraisal fee
Credit report
Private mortgage insurance premium
Insurance escrow for homeowners insurance, if being paid as part of the mortgage.
Property tax escrow, if being paid as part of the mortgage. Lenders keep funds for taxes and insurance in escrow accounts as they are paid with the mortgage, then pay the insurance or taxes for you.
Deed recording fees
Title insurance policy premiums
Survey
Inspection fees, building inspection, termites, etc.
Notary fees
Prorations for your share of costs such as utility bills and property taxes.
A Note About Prorations. Because such costs are usually paid on either a monthly or yearly basis, you might have to pay a bill for services used by the sellers before they moved. Proration is a way for the sellers to pay you back or for you to pay them for bills they may have paid in advance. For example, the gas company usually sends a bill each month for the gas used during the previous month. But assume you buy the home on the 6th of the month. You would owe the gas company for only the days from the 6th to the end for the month. The seller would owe for the first 5 days. The bill would be prorated for the number of days in the month, and then each person would be responsible for the days of his or her ownership.
What to Keep From Your Closing
The Real Estate Settlement Procedures Act (RESPA) statement. This form, sometimes called a HUD 1 statement, itemizes all the costs associated with the closing. You'll need for income tax purposes and when you sell the home.
The Truth in Lending Statement summarizes the terms of your mortgage loan.
The mortgage and the note (two pieces of paper) spell out the legal terms of your mortgage obligation and the agreed-upon repayment terms.
The deed transfers ownership of the property to you.
Affidavits swearing to various statements by either party. For example, the sellers will often sign an affidavit stating that they have not incurred any liens on the property.
Riders are amendments to the sales contract that affect your rights. For example, if you buy a condominium, you may have a rider outline the condo association's rules and restrictions.
Insurance policies provide a record and proof of your coverage.
Tips for Finding the Perfect Neighborhood
The neighborhood you choose can have a big impact on your lifestyle, safety, available amenities, and convenience ... all play their part.
Make a list of the activities; movies, health club, church you engage in regularly, and stores you visit frequently. See how far you would have to travel from each neighborhood you're considering to engage in your most common activities.
Check out the school district. The Department of Education in your town can probably provide information on test scores, class size, percentage of students who attend college, and special enrichment programs. If you have school-age children, also considering paying a visit to schools in the neighborhoods you're considering. Even if you don't have children, a house in a good school district will be easier to sell in the future. Another source is SchoolMatch
Find out if the neighborhood is safe. Ask the police department for neighborhood crime statistics. Consider not only the number of crimes but also the type; burglaries, armed robberies, and the trend of increasing or decreasing crime. Also, is crime centered in only one part of the neighborhood, such as near a retail area? Another source is http://www.homestore.com/
Determine if the neighborhood is economically stable. Check with your local city economic development office to see if income and property values in the neighborhood are stable or rising. What is the percentage of homes to apartments? Apartments don't necessarily diminish value, but do mean a more transient population. Do you see vacant businesses or homes that have been for sale for months?
See if you'll make money. Ask a local REALTOR® or call the local REALTOR® Association to get information about price appreciation trends in the neighborhood. Although past performance is no guarantee of future results, this information may give you a sense of how good an investment your home will be. A REALTOR® or the government planning agency may also be able to tell you about planned developments or other changes in the neighborhood, like a new school or highway, that might affect value.
See for yourself. Once you've narrowed your focus to two or three neighborhoods, go there and walk around. Are homes tidy and well maintained? Are streets quiet? Pick a warm day if you can and chat with people working or playing outside.
Ten Steps to Prepare for Home Ownership
Decide how much home you can afford. Generally, you can afford a home equal in value to between 2 and 3 times your gross income.
Develop a wish list of what you'd like your home to have. Then prioritize the features on your list.
Select three or four neighborhoods you'd like to live in. Consider items such as schools, recreational facilities, area expansion plans, and safety.
Determine if you have enough saved to cover your downpayment and closing costs. Closing costs, including taxes, attorney's fee, and transfer fees average between 2 and 7 percent of the home price.
Get your credit in order. Obtain a copy of your credit report.
Determine how large a mortgage you can qualify for. Also explore different loans options and decide what's best for you.
Organize all the documentation a lender will need to preapprove you for a loan.
Do research to determine if you qualify for any special mortgage or downpayment assistance programs.
Calculate the costs of homeownership, including property taxes, insurance, maintenance, and association fees, if applicable.
Find an experienced REALTOR® who can help you through the process.
