First Steps

  1. Check your credit rating. Sit down with a reliable loan officer and choose a loan program that meets your needs and get pre-qualified.
  1. Determine a comfortable monthly budget for your new purchase.
  1. Determine what neighborhood or area of town best matched your needs.
  1. Identify important features you want/need in a home.
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Your Property Wish List

What does your future home look like?  Where is it located?  As you hunt down your dream home, consult this list to evaluate properties and keep your priorities top of mind.

Neighborhoods
What neighborhoods do you prefer?

Schools
What school systems do you want to be near?

Transportation
How close must the home be to these amenities?

Public transportation

Airport

Expressway

Neighborhood shopping

Schools

Other

Home Style

What architectural style(s) or homes do you prefer?

Do you want to buy a home, condominium, or townhome?

Would you like a one-story or two-story home?

How many bedrooms must your new home have?

How many bathrooms must your new home have?

Home Condition

Do you prefer a new home or an existing home?

If you’re looking for an existing home, how old of a home would you consider?

How much repair or renovation would you be willing to do?

Do you have special needs that your home must meet?

Your Property Wish List

(Circle one of the choices: Must Have, Would Like, Willing to Compromise, Not Important)

Front yard

Back Yard

Garage   (__cars)

Patio/Deck

Pool

Family Room

Formal Living Room

Formal Dining Room

Eat-in-Kitchen

Laundry room

Finished Basement

Attic

Fireplace

Spa in bath

Air conditioning

Wall-to-wall-carpet

Wood floors

Great View

Must Have

Must Have

Must Have

Must Have

Must Have

Must Have

Must Have

Must Have

Must Have

Must Have

Must Have

Must Have

Must Have

Must Have

Must Have

Must Have

Must Have

Must Have

Would Like

Would Like

Would Like

Would Like

Would Like

Would Like

Would Like

Would Like

Would Like

Would Like

Would Like

Would Like

Would Like

Would Like

Would Like

Would Like

Would Like

Would Like

Compromise

Compromise

Compromise

Compromise

Compromise

Compromise

Compromise

Compromise

Compromise

Compromise

Compromise

Compromise

Compromise

Compromise

Compromise

Compromise

Compromise

Compromise

Not Important

Not Important

Not Important

Not Important

Not Important

Not Important

Not Important

Not Important

Not Important

Not Important

Not Important

Not Important

Not Important

Not Important

Not Important

Not Important

Not Important

Not Important

Loan Types to Consider

Brush up on these mortgage basics to help you determine the loan that will best suit your needs.

Mortgage terms: Mortgages are generally available at 15-, 20-, or 30- year terms.  In general, the longer the term, the lower the monthly payment.  However, you pay more interest overall if you borrow for a longer term.

Fixed or adjustable interest rates: A fixed rate allows you to lock in a low rate as long as you hold the mortgage and, in general, is usually a good choice if interest rates are low.  An adjustable-rate mortgage is designed so that your loan’s interest rate will rise as market interest rates increase.  ARMs usually offer a lower rate in the first years of the mortgage.  ARMs also usually have a limit as to how much the interest rate can be increased and how frequently they can be raised.  These types of mortgages are a good choice when fixed interest rates are high or when you expect your income to grow significantly in the coming years.

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Government-backed loans: These loans are sponsored by agencies such as the Federal Housing Administration (www.fha.gov) or the Department of Veteran Affairs (www.va.gov) and offer special terms, including lower down payments or reduced interest rates to qualified buyers.

Slight variations in interest rates, loan amounts, and terms can significantly affect your monthly payment.  For help in determining how much your monthly payment will be for various loan amounts, use the online mortgage calculator on www.righthouseleftclick.com

Balloon mortgages: These mortgages offer very low interest rates for a short period of time, often three to seven years.  Payments usually cover on the interest so the principal owed is not reduced.  However, this type of loan may be a good choice if you think you will sell your home in a few years.

10 Questions to Ask Your Lender

  1. What are the most popular mortgages you offer? Why are they so popular?
  1. Which type of mortgage plan do you think would be best for me? Why?
  1. Are your rates, terms, fees and closing costs negotiable?
  1. 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 your down payment is less than 20%.  However, most lenders will let you discontinue the PMI when you’ve acquired a certain amount of equity by paying down the loan)
  1. Who will service the loan; your bank or another company?
  1. What escrow requirements do you have?
  1. How long will this loan be in a lock-in-period (in other words, the time that the quoted interest rate will be honored)? Will I be able to obtain a lower rate if it drops during this period?
  1. How long will the loan approval process take?
  1. How long will it take to close the loan?
  1. Are there any charges or penalties for prepaying the loan?

 

Used with permission from Real Estate Checklist & Systems,

www.realestatechecklists.com

7 Reasons to Own Your Own Home

  1. Tax breaks – The U.S. Tax Code lets you deduct the interest you pay on your mortgage, your property taxes, as well as some of the costs involved in buying your home.
  1. Appreciation – Real estate has long-term, stable growth in value. While year-to-year fluctuations are normal, median existing-home sale prices have increased on average 6.5 percent each year from 1972 through 2005, and increased 88.5 percent over the last 10 years according to the National Association of Realtors ®.  In addition, the number of U.S. households is expected to rise 15 percent over the next decade, creating continued high demand for housing.
  1. 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.
  1. 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.
  1. Predictability – unlike rent, your fixed-mortgage payments don’t rise over the years so your housing costs may actually decline as you own the home longer. However, keep in mind that property taxes and insurance costs will increase.
  1. Freedom- The home is yours. You can decorate any way you want and benefit from your investment for as long as you own the home.
  1. 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

 

Tax Benefits of Home Ownership

The tax deductions you are eligible to take for mortgage interest and property taxes greatly increase the financial benefits of home ownership.

Here’s how it works:

Assume: $9877 = Mortgage interest paid (a loan of $150,000 for 30 years at 7%, using year five interest)

$2,700 =  Property taxes (at 1.5 % on $180,000 assessed value)

$12, 577 – Total deduction

Then, multiply your total deduction by your tax rate.

For example, at 28% tax rate: $12,577 x 0.28 = $3,521.56

$3,521.56 =   Amount you have lowered your federal income tax

                        (at 28% tax rate)

 

Note: Mortgage interest may not be deductible on loans over $1.1 million.  In addition, deductions are decreased when total income reaches a certain level.

Take the Stress Out of Home Buying

Buying a home should be fun, not stressful.   As you look for your dream home, keep in mind these tips for making the process as peaceful as possible.

  • Find a real estate agent who you connect with. Home buying is not only a big financial commitment, but also an emotional one.  It’s critical that the realtor you chose is both highly skilled and a good it with your personality.
  • Remember, there’s no “right” time to buy, just as there’s no perfect time to sell. If you find a home now, don’t try to second-guess interest rates or the housing market by waiting longer – you risk losing out on the home of your dreams.  The housing market usually doesn’t change 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 from too many people will make it much harder to make a decision.  Focus on the wants and needs of your immediate family; the people who will be living in the home.
  • Accept that no house is ever perfect. If it’s in the right location, the yard may be a bit smaller than you had hoped.  The kitchen may be perfect but the roof needs repair.  Make a list of your top priorities and focus in on things that are most important to you.  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 or by refusing to budge on your offer may cost you the home you love.  Negotiation is give and take.
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  • 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, etc., that you forget about important issues as noise level, location to amenities and other aspects that also have a big impact on your quality of life.
  • Plan ahead. Don’t wait until you’ve found a home and made an offer to get approved for a mortgage, investigate home insurance, 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 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 financial commitment.  But, it also yields big benefits.  Don’t lose sight of why you wanted to buy a home and what made you fall in love with the property you purchased.
  • 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 from 1998 to 2002, a home’s most important role is to serve as a comfortable, safe place to live.

10 Questions to Ask Home Inspectors

Before you make your final buying or selling decision, you should have the home inspected by a professional.  An inspection can alert you to potential problems with a property and allow you to make an informed decision.  Ask these questions to prospective home inspectors.

  1. Will your inspection meet recognized standards? Ask whether the inspection and the inspection report will meet all state requirements and comply with a well-recognized standard of practice and code of ethics such as the one adopted by the American Society of Home Inspectors or the National Association of Home Inspectors.  Customers can view each group’s standards of practice and code of ethics online at ashi.org or www.nahi.org.  ASHI’s Website also provides a database of state regulations.
  1. Do you belong to a professional home inspector association? There are many state and national associations for home inspectors, including the two groups mentioned above.  Unfortunately, some groups confer questionable credentials or certifications in return for nothing more than a fee.  Insist on members of reputable, nonprofit trade organizations; request to see a membership ID.
  1. How experienced are you? Ask how long inspectors have been in the profession and how many inspections they’ve completed.  They should provide customer referrals on request.  New inspectors also may be highly qualified, but they should describe their training and let you know whether they plan to work with a more experienced partner.
  1. How do you keep your expertise up to date? Inspectors’ commitment to continuing education is a good measure of their professionalism and service.  Advanced knowledge is especially important in cases in which a home is older or includes unique elements requiring additional or updated training.
  1. Do you focus on residential inspection? Make sure the inspector has training and experience in the unique discipline of home inspection which is very different from inspecting commercial buildings or a construction site.  If you are buying a unique property, such as a historic home, you may want to ask whether the inspector has experience with that type of property in particular.

 

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  1. Will you offer to do repairs or improvements? Some state laws and trade associations allow inspectors to provide repair work on problems uncovered during the inspection.  However, other states and associations forbid it as a conflict of interest.  Contact your local ASHI chapter to learn about the rules in your state.
  1. How long will the inspection take? One average, an inspector working alone inspects a typical single-family house in two to three hours; anything significantly less may not be thorough.  If you are purchasing an especially large property, you may want to ask whether additional inspectors will be brought in.
  1. What’s the cost? Costs can vary dramatically depending on the region, the size and age of the house, and the scope of the services.  The national average for single-family homes is about $320, but customers with large homes can expect to pay more.  Customers should be wary of deals that seem too good to be true.
  1. What type of inspection report do you provide? Ask to see samples to determine whether you will understand the inspector’s reporting style.  Also, most inspectors provide their full report within 24 hours of the inspection.
  1. Will I be able to attend the inspection? The answer should be yes.  A home inspection is a valuable educational opportunity for the buyer.  An inspector’s refusal to let the buyer attend should raise a red flag.

What a Home Inspector Should Cover

Home inspections will vary depending on the type of property you are purchasing.  A large history home, for example, will require a more specialized inspection than a small condominium.  However, the following are the basic elements that a home inspector will check.  You can also use this list to help you evaluate properties you might purchase.

For more information, try the virtual home inspection at www.ASHI.org , the website of the American Society of Home Inspectors.

Structure: A home’s skeleton impacts how the property stand up to weather, gravity, and the earth.  Structural components, including the foundation and the framing, should be inspected.

Exterior: The inspector should look at sidewalks, driveways, steps, windows, and doors.  A home’s siding, trim, and surface drainage are also part of an exterior inspection.

  • Door and Windows
  • Siding- brick, stone, stucco, vinyl, wood, etc.
  • Driveways/sidewalks
  • Attached porches, decks, and balconies

Roofing: A well-maintained roof protects you from rain, snow, and other forces of nature.  Take note of the roof’s age, conditions of flashing, roof draining systems (pooling water), buckled shingles, loose gutters and downspouts, skylight, and chimneys.

Plumbing: Thoroughly examine the water supply and drainage systems, water heating equipment, and fuel storage systems.  Drainage pumps and sump pumps also fall under this category.  Poor water pressure, banging pipes, rust spots, or corrosion can indicate problems.

Electrical: Safe electrical wiring is essential.  Look for the condition of service entrance wires, service panels, breakers and fuses, and disconnects.  Also take note of the number of outlets in each room.

Heating: The home’s heating system, vent system, flues, and chimneys should be inspected.  Look for age of water heater, whether the size is adequate for the house, speed of recovery, and energy rating.

Air conditioning: Your inspector should describe your home cooling system, its energy source, and inspect the central and through-wall cooling equipment. Consider the age and energy rating of the system.

Interiors: An inspection of the inside of the home can reveal plumbing leaks, insect damage, rot, construction defects, and other issues.  An inspector should take a close look at:

  • Walls, ceilings and floors
  • Steps, stairways, and railings
  • Countertops and cabinets
  • Garage doors and garage door systems

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Ventilation/Insulation: To prevent energy loss, check for adequate insulation and ventilation in the attic and in unfinished areas such as crawlspaces.  Also look for proper, secured insulation in walls.  Insulation should be appropriate for the climate.  Excess moisture in the home can lead to mold and water damage.

Fireplaces: They’re charming, but they could be dangerous if not properly installed.  Inspectors should examine the system, including the vent and flue, and describe solid fuel burning appliances.

Source: American Society of Home Inspectors (www.AHSI.org)