• Affordability: 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.
• Wish List: Develop a wish list of what you’d like your home to have. Then prioritize the features on your list.
• Selection:: Select three or four neighborhoods you’d like to live in. Consider items such as schools, recreational facilities, area expansion plans, and safety.
• Down Payment: Determine if you have enough saved to cover your down payment and closing costs. Closing costs, including taxes, attorney’s fee, and transfer fees average between 2 and 7 percent of the home price.
• Credit Score: Get your credit in order. Obtain a copy of your credit report.
• Qualify For Mortgage: Determine how large a mortgage you can qualify for. Also explore different loans options and decide what’s best for you.
• Documentation: Organize all the documentation a lender will need to pre approve you for a loan.
• Research: Do research to determine if you qualify for any special mortgage or down payment assistance programs.
• Assess Costs: Calculate the costs of home ownership, including property taxes, insurance, maintenance, and association fees, if applicable.
• Realtor: Find an experienced REALTOR? who can help you through the process.
How Much Can I Afford?
This calculation assumes a 28-percent income tax bracket. If your bracket is higher, your savings will be too.
Rent: _________________________
Multiplier: X 1.32
Mortgage payment:__________________
Because of tax deductions, you can make a mortgage payment—including taxes and insurance— that is approximately one-third larger than your current rent payment and end up with the same amount of income.
Reasons to Own Your Own Home
• Tax Breaks: The U.S. Tax Code lets you deduct the interest you pay on your mortgage, property taxes you, pay, as well as some of the costs involved in buying your home.
• Equity: Money paid for rent is money that you’ll never see again, but mortgage payments let you build equity ownership interest in your home.
• Savings: Building equity in your home is a ready-made savings plan. And when you sell, you can generally take up to $250,000 ($500,000 for a married couple) as gain without owing any federal income tax.
• Predictability: Mortgage payments don’t go up over the years so your housing costs may actually decline as you own the home longer but keep in mind that property taxes and insurance costs will rise.
• Freedom: The home is yours to decorate any way you want and benefit from your investment for as long as you own the home.
• Stability: Remaining in one neighborhood for several years gives you a chance to participate in community activities, lets you and your family establish lasting friendships, and offers your children the benefit of educational continuity.
Common First-Time Home buyer Mistakes
1. Don’t ask enough questions of their lender and miss out on the best deal.
2. Don’t act quickly enough to make a decision and someone else buys the house.
3. Don’t find the right agent whose willing to help them through the home buying process.
4. Don’t do enough to make their offer look good to a seller.
5. Don’t think about resale before they buy. The average first-time buyer only stays in a home for four years.
Tips for First-Time Home Buyers
1. There is no perfect home, Be picky, but don’t be unrealistic
2. Do your research and decide what features are most important to you.
3. Check your credit report and ensure you have enough money for your down payment and your closing costs.
4. Get pre qualified from a lender for a mortgage before you start looking.
5. Use your own judgment and ask one or two people for advice and not opinions, will drive you crazy.
6. Know ahead of time when you could move. When is your lease up? Are you allowed to sublet? How tight is the rental market in your area?
7. Decide if you stay in the home long term or short term this will help you decide to move into a starter home or something more permanent, and will help you choose the type of mortgage that is right for you.
8. Keep some money when you move in, If you max yourself out to buy the biggest home you can afford, you’ll have no money left for maintenance or decoration or to save money for other financial goals.
9. Protect yourself and insist on a home inspection and if possible get a warranty from the seller to cover defects within one year.
10. Need help looking, hire a Realtor, whose will be working for you best interest, unlike the listing agent whose responsibility is to the seller.
Things to Take the Trauma Out of Home Buying
1. Find a real estate agent that’s both skilled and a good fit with you personality. Home buying is not only a big financial commitment, but also an emotional one.
2. 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. A good home will not stay on the market long.
3. Don’t ask people for too many opinions, it nice to have their approval for such a big decision, but too many ideas will make it much harder to make that decision.
4. There are no perfect house, try and focus on what features are most important to you and let the minor ones go.
5. Don’t try to be a killer negotiator, by trying to “win” by getting an extra-low price may lose you the home you love.
6. 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.
7. Don’t wait until you’ve found a home 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.
8. Consider maintenance and repair costs in your post-home buying budget, a new home will still have some costs. Don’t leave yourself short and let your home deteriorate.
9. Accept that a little buyer’s remorse is inevitable and will probably pass. Buying your first home, is a big commitment, but it also yields big benefits.
10. Choose a home first because you love it; then think about appreciation, a home’s most important role is as a comfortable, safe place to live.
How High Tech is Your Home?
For the tech savvy buyers who want the latest technology or entertainment options then you need to check the home for these options
1. Are there cable TV and high-speed Internet hookups jacks in every room?
2. Are there telephone extensions or jacks in every room?
3. Is the home pre wired for home theater or multi-room audio and video?
4. Does the home have a local area network for linking computers?
5. Is the home already wired for DSL or other high-speed Internet connection?
6. Does the home have multi zoning heating and cooling controls with programmable thermostats?
7. Is the homes equipped for multi room lighting controls and window-covering controls?
8. Is the home wired with multipurpose in-wall wiring that allows to update services as technology changes?
Home Defects to Watch For
• Water Leaks: Look for stains on ceilings and near the baseboards, especially in the attics.
• Shifting Foundations: Check for large cracks along the home’s foundation.
• Drainage: Look for standing water, either around the foundation of the home of in the yard.
• Termites: Check for weakened or grooved wood, especially near ground level.
• Roofs: Look for broken or missing couplings and buckled shingles as well as water spots on ceilings.
• Inadequate wiring: Check for antiquated fuse boxes, extension cords (indicating insufficient outlets), and outlets without a place to plug in the grounding prong.
• Plumbing: Look for very low water pressure, banging in pipes
Questions to Ask A Home Inspector
1. Are you a member of the American Association of Home Inspectors and what are your qualifications?
2. Are currently licensed? Inspectors are not required to be licensed in every state.
3. On average, how many inspections of properties such as this do you do each year?
4. Can I contact past clients whom you did inspections fort?
5. Do you have professional errors and omission insurance? May I have a copy of the policy?
6. Is your work guaranteed, and for how long?
7. What will the inspection cover?
8. Will I get a copy of the report after the inspection?
9. How long will the it inspection take?
10. How much will the home inspection cost?
What Should Your Home Inspection 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, 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 weather stripping
• 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
• 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.
• Garage: Look for exterior in good repair; condition of floor—cracks, stains, etc.; condition of door mechanism.
• 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
How Comprehensive is My Home Warranty?
Review your home warranty policy to see which of the following items are covered, and if the policy covers the full replacement cost of an item.
• Plumbing
• Electrical Systems
• Water Heater
• Furnace
• Heating Ducts
• Water Pump
• Dishwasher
• Stove/Cook top/Ovens
• Microwave
• Refrigerator
• Washer/Dryer
• Swimming Pool (may be optional)
Property Tax Questions To Ask
• The assessed value of the property is generally less than market value. Request a recent copy of the seller’s tax bill to help you determine this information.
• How frequently are properties reassessed and when was the last assessment done? Taxes jump most significantly when a property is reassessed.
• Will the sale of the homey trigger a tax increase? Often the assessed value of the property may increase based on the amount you pay for the property.
• How comparable are the taxes to other properties in the area? If not, it might be possible to appeal the tax assessment and lower the rate?
• Check the current tax bill to see if it reflects any special exemptions that you might not qualify for? For example, many tax districts offer reductions to those 65 or over.
What I Need To Know From The Condo Board
1. What percentage of units is owner-occupied versus tenant-occupied? The higher the percentage of owner-occupied units, the more marketable the units will be at resale.
2. What covenants, bylaws, and restrictions govern the property and what grandfather clauses are in place? Ask for a copy of the bylaws to determine if you can live within them.
3. How much does the association keep in reserve and how much of that money is being invested?
4. Are association assessments keeping pace with the annual rate of inflation? To determine if the assessment is reasonable, compare the rate to others in the area.
5. What does and doesn’t the assessment cover—common area maintenance, recreational facilities, trash collection, snow removal?
6. In the past five years what special assessments have been mandated? How much was each owner responsible for, is some special assessments are unavoidable.
7. How much turnover occurs in the building?
8. Is the project in litigation or the builders or homeowners are involved in a lawsuit, reserves can be depleted quickly.
9. How reputable is the developer? Find other projects the developer has built and visit one if you can. Ask residents about their perceptions. If the roof, windows, and bricks aren’t in good repair, they become your
problem once you buy.
10. How many associations are involved in the property? In very large developments, umbrella associations, as well as the smaller association into which you’re buying, may require separate assessments.
Understanding Homeowners Insurance
1. Look for exclusions to coverage,most insurance policies do not cover flood or earthquake damage as a standard item. These coverage's must be bought separately.
2. Look for dollar limitations on claims. Even if you are covered for a risk, there may a limit on how much the insurer will pay. many policies limit the amount paid for stolen jewelry unless items are insured separately.
3. Understand replacement cost. If your home is destroyed you’ll receive money to replace it only to the maximum of your coverage, so be sure your insurance is sufficient. This means that if your home is insured for $150,000 and it costs $180,000 to replace it, you’ll only receive $150,000.
4. Understand actual cash value. If you chose not to replace your home when it’s destroyed, you’ll receive replacement cost, less depreciation. This is called actual cash value.
5. Understand liability. Generally your homeowners insurance covers you for accidents that happen to other people on your property, including medical care, court costs, and awards by the court. However, there is usually an upper limit to the amount of coverage provided. Be sure that it’s sufficient if you have significant assets.
Lowering Your Home Owners Insurance
1. Raise your deductible, If you can afford to pay more toward a loss that occurs, your premiums will be lower.
2. Buy your homeowners from the same company you have your auto insurance and you’ll usually qualify for a discount.
3. Make your home less susceptible to damage. Keep roofs and drains in good repair. Retrofit your house to protect against natural disasters common to your area.
4. Keep your home safe by installing smoke detectors, burglar alarms, and dead-bolt locks which will usually qualify for a discount.
5. Insure your house for the correct amount, remember, you’re covering replacement cost, not market value.
6. Ask about other discounts, individuals who are home more than working people may qualify for a discount on theft insurance.
7. Keep the same insurer, your current vendor is more likely to give you a good price.
8. Network with groups—associations, alumni groups—that offer lower insurance rates.
9. Assess your policy limits and the value of your home and possessions annually, items may depreciate and may not need as much coverage.
10. Is there’s a government-backed insurance plan, whether in high-risk areas, such as coasts, federal or state government may back plans to lower rates.
What I Need To Understand About Title Insurance
1. Title Insurance protects your ownership right to your home both from fraudulent claims against your ownership and from mistakes made in earlier sales, such a mistake in the spelling of a person’s name or an inaccurate description of the property.
2. This is a one-time cost usually based on the price of the property.
3. Title Insurance is usually paid for by the sellers.
4. There are two types of policies a lender title policies, which protect the lender, and owner title policies, which protect you. The lender will probably require a lender policy.
5. Depending on the age of the property, discounts on premiums are sometimes available , newer properties may not required as much work to check the title.
What To Look For On A Final Walk-through
This occurs a day or two prior to the close to ensures all requests by the buyer are completed.
• The repairs requested by the buyer have been made, request copies of paid bills and any related warranties
• Check that all items that were included in the sale price—draperies, lighting fixtures—are still there.
• Ensure the screens and storm windows are in place or stored.
• Check that all appliances are operating.
• The intercom, doorbell, and alarm are operational
• Check the hot water heater is working
• The HVAC is working
• Check that no plants or shrubs have been removed from the yard
• The garage door opener and other remotes are handed over to new buyers at closing
• All instruction books and warranties on appliances and fixtures are there
• All personal items of the sellers and all debris have been removed.
Closing Costs for Buyers
All lenders must disclose a good faith estimate of all settlement costs. Check with the title company conducting the closing for the amount of the check and the type of check which should be a cashier's check.
• Private mortgage insurance premium
• Loan origination fees
• Down payment
• Points, or loan discount fees you pay to receive a lower interest rate
• Appraisal fee
• Credit report
• 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
• Pro rations for your share of costs such as utility bills and property taxes
What Do I Keep From Your Closing
• The 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.
• Riders are amendments to the sales contract that affect your rights.
• Insurance policies provide a record and proof of your coverage.
Tips for Packing Like a Pro
• Create a master “to do” list so you won’t forget something critical.
• Get rid of things you no longer want or need. Hold a garage sale or donate to a charity, or recycle.
• Don’t throw out everything. ask yourself how frequently you use an item.
• Pack like items together, put toys with toys, kitchen utensils with kitchen utensils.
• Do you plan to move yourself. Items such as family photos, valuable breakables, should probably stay with you.
• Use the right box for the item, loose items could break if not packed properly.
• Use small boxes to put heavy items so they’re easier to lift. Keep weight under 50 lbs.
• Wrap all fragile items separately and pad bottom and sides of boxes.
• Label all box on all sides, this will make it easier to find something no matter how they are stacked
• Color-coded the labels to indicate which room each item should go in, color-code a floor plan for your new house to help movers.
• Put all your moving documents together, including address book, phone numbers, driver’s name and van number.
• Keep a back up your computer files before moving your computer.
• Inspect each box and all the furniture for damage as soon as it arrives to your new home.
• Remember, most movers won’t take plants.
