| A home is a financial asset and more: it's a place to | | | | 27. HOW DO I DETERMINE THE INITIAL OFFER? |
| live and raise children; it's a plan for the future; it's an | | | | Unless you have a buyer's agent, remember that the |
| investment in your community. That's why all | | | | agent works for the seller. Make a point of asking him |
| Americans should have an opportunity to enjoy the | | | | or her to keep your discussions and information |
| benefits of owning a home. And here are some tips | | | | confidential. Listen to your real estate agent's advice, |
| for first-time home buyers. | | | | but follow your own instincts on deciding a fair price. |
| Knowledge is said to open doors. This is literally true | | | | Calculating your offer should involve several factors: |
| when it comes to buying a home. To become a | | | | what homes sell for in the area, the home's condition, |
| first-time home buyer, you need to know where and | | | | how long it's been on the market, financing terms, and |
| how to begin the home buying process. The following | | | | the seller's situation. By the time you're ready to make |
| questions and answers have been carefully selected | | | | an offer, you should have a good idea of what the |
| to give you a foundation of basic knowledge of home | | | | home is worth and what you can afford. And, be |
| purchasing. In addition to helping you begin, these steps | | | | prepared for give-and-take negotiation, which is very |
| will give you the tools necessary to navigate the entire | | | | common when buying a home. The buyer and seller |
| home buying process - from deciding whether you're | | | | may often go back and forth until they can agree on a |
| ready to buy house, all the way to that final proud step | | | | price. Check Home price in that area on websites. |
| of owning a home, getting the keys to your new home. | | | | 28. WHAT IS EARNEST MONEY? HOW MUCH |
| 1. HOW DO I KNOW IF I'M READY TO BUY A | | | | SHOULD I SET ASIDE? |
| HOME? | | | | Earnest money is money put down to demonstrate |
| You can find out by asking yourself some questions: | | | | your seriousness about buying a home. It must be |
| Do I have a steady source of income (usually a job)? | | | | substantial enough to demonstrate good faith and is |
| Have I been employed on a regular basis for the last | | | | usually between 1-5% of the purchase price (though |
| 2-3 years? Is my current income reliable? | | | | the amount can vary with local customs and |
| Do I have a good record of paying my bills? | | | | conditions). If your offer is accepted, the earnest |
| Do I have few outstanding long-term debts, like car | | | | money becomes part of your down payment or |
| payments? | | | | closing costs. If the offer is rejected, your money is |
| Do I have money saved for a down payment? | | | | returned to you. If you back out of a deal, you may |
| Do I have the ability to pay a mortgage every month, | | | | forfeit the entire amount. |
| plus additional costs? | | | | 29. WHAT ARE "HOME WARRANTIES", AND |
| If you can answer "yes" to these questions, you are | | | | SHOULD I CONSIDER THEM? |
| probably ready to buy your own home. | | | | Home warranties offer you protection for a specific |
| 2. HOW DO I BEGIN THE PROCESS OF BUYING A | | | | period of time (e.g., one year) against potentially costly |
| HOME? | | | | problems, like unexpected repairs on appliances or |
| Start by thinking about your situation. Are you ready to | | | | home systems, which are not covered by home |
| buy a home? How much can you afford in a monthly | | | | owner's insurance. Warranties are becoming more |
| mortgage payment? How much space do you need? | | | | popular because they offer protection during the time |
| What areas of town do you like? After you answer | | | | immediately following the purchase of a home, a time |
| these questions, make a "To Do" list and start doing | | | | when many people find themselves cash-strapped. |
| casual research about property. Talk to friends and | | | | GENERAL FINANCING QUESTIONS:THE BASICS |
| family, drive through neighborhoods, and look in the | | | | 30. WHAT IS A MORTGAGE? |
| "Homes" section of the newspaper, Foreclosure | | | | Generally speaking, a mortgage is a loan obtained to |
| Listings, and internet search. | | | | purchase real estate. The "mortgage" itself is a lien (a |
| 3. HOW DOES PURCHASING A HOME COMPARE | | | | legal claim) on the home or property that secures the |
| WITH RENTING? | | | | promise to pay the debt. All mortgages have two |
| The two don't really compare at all. The one | | | | features in common: principal and interest. |
| advantage of renting is being generally free of most | | | | 31. WHAT IS A LOAN TO VALUE (LTV) HOW |
| maintenance responsibilities. But by renting, you lose the | | | | DOES IT DETERMINE THE SIZE OF MY LOAN? |
| chance to build equity, take advantage of tax benefits, | | | | The loan to value ratio is the amount of money you |
| and protect yourself against rent increases. Also, you | | | | borrow compared with the price or appraised value of |
| may not be free to decorate without permission and | | | | the home you are purchasing. Each loan has a specific |
| may be at the mercy of the landlord for housing. | | | | LTV limit. For example: With a 95% LTV loan on a |
| Owning a home has many benefits. When you make | | | | home priced at $50,000, you could borrow up to |
| a mortgage payment, you are building equity. And | | | | $47,500 (95% of $50,000), and would have to |
| that's an investment. Owning a home also qualifies you | | | | pay,$2,500 as a down payment. |
| for tax breaks that assist you in dealing with your new | | | | The LTV ratio reflects the amount of equity |
| financial responsibilities- like insurance, real estate taxes, | | | | borrowers have in their homes. The higher the LTV |
| and upkeep- which can be substantial. But given the | | | | the less cash home buyers are required to pay out of |
| freedom, stability, and security of owning your own | | | | their own funds. So, to protect lenders against potential |
| home, they are worth it. | | | | loss in case of default, higher LTV loans (80% or |
| 4. HOW DOES THE LENDER DECIDE THE | | | | more) usually require mortgage insurance policy. |
| MAXIMUM LOAN AMOUNT THAT CAN AFFORD? | | | | 32. WHAT TYPES OF LOANS ARE AVAILABLE |
| The lender considers your debt-to-income ratio, which | | | | AND WHAT ARE THE ADVANTAGES OF EACH? |
| is a comparison of your gross (pre-tax) income to | | | | Fixed Rate Mortgages: Payments remain the same |
| housing and non-housing expenses. Non-housing | | | | for the the life of the loan |
| expenses include such long-term debts as car or | | | | Types |
| student loan payments, alimony, or child support. | | | | 15-year |
| Monthly mortgage payments should be no more than | | | | 30-year |
| 29% of gross income, while the mortgage payment, | | | | Advantages |
| combined with non-housing expenses, 4 should total no | | | | Predictable |
| more than 41% of income. The lender also considers | | | | Housing cost remains unaffected by interest rate |
| cash available for down payment and closing costs, | | | | changes and inflation. |
| credit history, etc. when determining your maximum | | | | Adjustable Rate Mortgages (ARMS): Payments |
| loan amount. | | | | increase or decrease on a regular schedule with |
| 5. HOW DO I SELECT THE RIGHT REAL ESTATE | | | | changes in interest rates; increases subject to limits |
| AGENT? | | | | Types |
| Start by asking family and friends if they can | | | | Balloon Mortgage- Offers very low rates for an Initial |
| recommend an agent. Compile a list of several agents | | | | period of time (usually 5, 7, or 10 years); when time has |
| and talk to each before choosing one. Look for an | | | | elapsed, the balance is clue or refinanced (though not |
| agent who listens well and understands your needs, | | | | automatically) |
| and whose judgment you trust. The ideal agent knows | | | | Two-Step Mortgage- Interest rate adjusts only once |
| the local area well and has resources and contacts to | | | | and remains the same for the life of the loan |
| help you in your search. Overall, you want to choose | | | | ARMS linked to a specific index or margin |
| an agent that makes you feel comfortable and can | | | | Advantages |
| provide all the knowledge and real estate services you | | | | Generally offer lower initial interest rates |
| need. | | | | Monthly payments can be lower |
| But make sure you check the prices for homes in the | | | | May allow borrower to qualify for a larger loan amount |
| area on internet before you visit any real estate agent. | | | | 33. WHEN DO ARMS MAKE SENSE? |
| 6. HOW CAN I DETERMINE MY HOUSING NEEDS | | | | An ARM may make sense If you are confident that |
| BEFORE I BEGIN THE SEARCH? | | | | your income will increase steadily over the years or if |
| Your home should fit way you live, with spaces and | | | | you anticipate a move in the near future and aren't |
| features that appeal to the whole family. Before you | | | | concerned about potential increases in interest rates. |
| begin looking at homes, make a list of your priorities - | | | | 34. WHAT ARE THE ADVANTAGES OF 15- AND |
| things like location and size. Should the house be close | | | | 30-YEAR LOAN TERMS? |
| to certain schools? your job? to public transportation? | | | | 30-Year: |
| How large should the house be? What type of lot do | | | | In the first 23 years of the loan, more interest is paid |
| you prefer? What kinds of amenities are you looking | | | | off than principal, meaning larger tax deductions. |
| for? Establish a set of minimum requirements and a | | | | As inflation and costs of living increase, mortgage |
| 'wish list." Minimum requirements are things that a | | | | payments become a smaller part of overall expenses. |
| house must have for you to consider it, while a "wish | | | | 15-year: |
| list" covers things that you'd like to have but aren't | | | | Loan is usually made at a lower interest rate. |
| essential. | | | | Equity is built faster because early payments pay |
| 7. WHAT SHOULD I LOOK FOR WHEN DECIDING | | | | more principal. |
| ON A COMMUNITY? | | | | 35. CAN I PAY OFF MY LOAN AHEAD OF |
| Select a community that will allow you to best live your | | | | SCHEDULE? |
| daily life. Many people choose communities based on | | | | Yes. By sending in extra money each month or |
| schools. Do you want access to shopping and public | | | | making an extra payment at the end of the year, you |
| transportation? Is access to local facilities like libraries | | | | can accelerate the process of paying off the loan. |
| and museums important to you? Or do you prefer the | | | | When you send extra money, be sure to indicate that |
| peace and quiet of a rural community? When you find | | | | the excess payment is to be applied to the principal. |
| places that you like, talk to people that live there. They | | | | Most lenders allow loan prepayment, though you may |
| know the most about the area and will be your future | | | | have to pay a prepayment penalty to do so. Ask your |
| neighbors. More than anything, you want a | | | | lender for details. |
| neighborhood where you feel comfortable in. | | | | 36. ARE THERE SPECIAL MORTGAGES FOR |
| 8. HOW CAN I FIND OUT ABOUT LOCAL | | | | FIRST-TIME HOME BUYERS? |
| SCHOOLS? | | | | Yes. Lenders now offer several affordable mortgage |
| You can get information about school systems by | | | | options which can help first-time home buyers |
| contacting the city or county school board or the local | | | | overcome obstacles that made purchasing a home |
| schools. Your real estate agent may also be | | | | difficult in the past. Lenders may now be able to help |
| knowledgeable about schools in the area. | | | | borrowers who don't have a lot of money saved for |
| 9. HOW CAN I FIND OUT HOW MUCH HOMES ARE | | | | the down payment and closing costs, have no or a |
| SELLING FOR IN CERTAIN COMMUNITIES AND | | | | poor credit history, have quite a bit of long-term debt, |
| NEIGHBORHOODS? | | | | or have experienced income irregularities. |
| Your real estate agent can give you a ballpark figure | | | | 37. HOW LARGE OF A DOWN PAYMENT DO I |
| by showing you comparable listings. If you are working | | | | NEED? |
| with a real estate professional, they may have access | | | | There are mortgage options now available that only |
| to comparable sales. | | | | require a down payment of 5% or less of the |
| 10. HOW CAN I FIND INFORMATION ON THE | | | | purchase price. But the larger the down payment, the |
| PROPERTY TAX LIABILITY? | | | | less you have to borrow, and the more equity you'll |
| The total amount of the previous year's property | | | | have. Mortgages with less than a 20% down payment |
| taxes is usually included in the listing information. If it's | | | | generally require a mortgage insurance policy to |
| not, ask the seller for a tax receipt or contact the local | | | | secure the loan. When considering the size of your |
| assessor's off ice. Tax rates can change from year to | | | | down payment, consider that you'll also need money |
| year, so these figures may be approximate. | | | | for closing costs, moving expenses, and - possibly |
| 11. WHAT OTHER TAX ISSUES SHOULD I TAKE | | | | -repairs and decorating. |
| INTO CONSIDERATION? | | | | 38. WHAT IS INCLUDED IN A MONTHLY |
| Keep in mind that your mortgage interest and real | | | | MORTGAGE PAYMENT? |
| estate taxes will be deductible. A qualified real estate | | | | The monthly mortgage payment mainly pays off |
| professional can give you more details on other tax | | | | principal and interest. But most lenders also include local |
| benefits and liabilities, | | | | real estate taxes, home owner's insurance, and |
| 12. IS AN OLDER HOME A BETTER VALUE THAN | | | | mortgage insurance (if applicable). |
| A NEW ONE? | | | | 39. WHAT FACTORS AFFECT MORTGAGE |
| There isn't a definitive answer to this question. You | | | | PAYMENTS? |
| should look at each home for its individual | | | | The amount of the down payment, the size of the |
| characteristics. Generally, older homes may be in more | | | | mortgage loan, the interest rate, the length of the |
| established neighborhoods, offer more ambiance, and | | | | repayment term and payment schedule will all affect |
| have lower property tax rates. People who buy older | | | | the size of your mortgage payment. |
| homes, however, shouldn't mind maintaining their home | | | | 40. HOW DOES THE INTEREST RATE FACTOR IN |
| and making some repairs. Newer homes tend to use | | | | SECURING A MORTGAGE LOAN? |
| more modern architecture and systems, are usually | | | | A lower interest rate allows you to borrow more |
| easier to maintain, and may be more energy-efficient. | | | | money than a high rate with the some monthly |
| People who buy new homes often don't want to | | | | payment. Interest rates can fluctuate as you shop for |
| worry initially about upkeep and repairs. | | | | a loan, so ask-lenders if they offer a rate "lock-in"which |
| 13. WHAT SHOULD I LOOK FOR WHEN WALKING | | | | guarantees a specific interest rate for a certain period |
| THROUGH A HOME? | | | | of time. Remember that a lender must disclose the |
| In addition to comparing the home to your minimum | | | | Annual Percentage Rate (APR) of a loan to you. The |
| requirement and wish lists, use the Home Scorecard | | | | APR shows the cost of a mortgage loan by |
| and consider the following: | | | | expressing it in terms of a yearly interest rate. It is |
| Is there enough room for both the present and the | | | | generally higher than the interest rate because it also |
| future? | | | | includes the cost of points, mortgage insurance, and |
| Are there enough bedrooms and bathrooms? | | | | other fees included in the loan. |
| Is the house structurally sound? | | | | 41. WHAT HAPPENS IF INTEREST RATES |
| Do the mechanical systems and appliances work? | | | | DECREASE AND I HAVE A FIXED RATE LOAN? |
| Is the yard big enough? | | | | If interest rates drop significantly, you may want to |
| Do you like the floor plan? | | | | investigate refinancing. Most experts agree that if you |
| Will your furniture fit in the space? Is there enough | | | | plan to be in your house for at least 18 months and |
| storage space? (Bring a tape measure to better | | | | you can get a rate 2% less than your current one, |
| answer these questions.) | | | | refinancing is smart. Refinancing may, however, involve |
| Does anything need to repaired or replaced? Will the | | | | paying many of the same fees paid at the original |
| seller repair or replace the items? | | | | closing, plus origination and application fees. |
| Imagine the house in good weather and bad, and in | | | | 42. WHAT ARE DISCOUNT POINTS? |
| each season. Will you be happy with it year-round? | | | | Discount points allow you to lower your interest rate. |
| Take your time and think carefully about each house | | | | They are essentially prepaid interest, With each point |
| you see. Ask your real estate agent to point out the | | | | equaling 1% of the total loan amount. Generally, for |
| pros and cons of each home from a professional | | | | each point paid on a 30-year mortgage, the interest |
| standpoint. | | | | rate is reduced by 1/8 (or.125) of a percentage point. |
| 14. WHAT QUESTIONS SHOULD I ASK WHEN | | | | When shopping for loans, ask lenders for an interest |
| LOOKING AT HOMES? | | | | rate with 0 points and then see how much the rate |
| Many of your questions should focus on potential | | | | decreases With each point paid. Discount points are |
| problems and maintenance issues. Does anything need | | | | smart if you plan to stay in a home for some time |
| to be replaced? What things require ongoing | | | | since they can lower the monthly loan payment. Points |
| maintenance (e.g., paint, roof, HVAC, appliances, | | | | are tax deductible when you purchase a home and |
| carpet)? Also ask about the house and neighborhood, | | | | you may be able to negotiate for the seller to pay for |
| focusing on quality of life issues. Be sure the seller's or | | | | some of them. |
| real estate agent's answers are clear and complete. | | | | 43. WHAT IS AN ESCROW ACCOUNT? DO I NEED |
| Ask questions until you understand all of the | | | | ONE? |
| information they've given. Making a list of questions | | | | Established by your lender, an escrow account is a |
| ahead of time will help you organize your thoughts and | | | | place to set aside a portion of your monthly mortgage |
| arrange all of the information you receive. Prepare | | | | payment to cover annual charges for home owner's |
| your own Home question list before you visit property. | | | | insurance, mortgage insurance (if applicable), and |
| Find out about monthly utility bills for entire home. | | | | property taxes. Escrow accounts are a good idea |
| 15. HOW CAN I KEEP TRACK OF ALL THE HOMES | | | | because they assure money will always be available |
| I SEE? | | | | for these payments. If you use an escrow account to |
| If possible, take photographs of each house: the | | | | pay property tax or home owner's insurance, make |
| outside, the major rooms, the yard, and extra features | | | | sure you are not penalized for late payments since it is |
| that you like or ones you see as potential problems. | | | | the lender's responsibility to make those payments. |
| And don't hesitate to return for a second look. | | | | 44. WHAT STEPS NEED TO BE TAKEN TO |
| Organize your photos and notes for each house. | | | | SECURE A LOAN? |
| 16. HOW MANY HOMES SHOULD I CONSIDER | | | | The first step in securing a loan is to complete a loan |
| BEFORE CHOOSING ONE? | | | | application. To do so, you'll need the following |
| There isn't a set number of houses you should see | | | | information. |
| before you decide. Visit as many as it takes to find the | | | | Pay stubs for the past 2-3 months |
| one you want. On average, home buyers see 15 | | | | W-2 forms for the past 2 years |
| houses before choosing one. Just be sure to | | | | Information on long-term debts |
| communicate often with your real estate agent about | | | | Recent bank statementstax returns for the past 2 |
| everything you're looking for. It will help avoid wasting | | | | years |
| your time. | | | | Proof of any other income |
| YOU'VE FOUND THE DREAM HOME | | | | Address and description of the property you wish to |
| 17. WHAT DOES A HOME INSPECTOR DO, AND | | | | buy |
| HOW DOES AN INSPECTION FIGURE IN THE | | | | Sales contract |
| PURCHASE OF A HOME? | | | | During the application process, the lender will order a |
| An inspector checks the safety of your potential new | | | | report on your credit history and a professional |
| home. Home Inspectors focus especially on the | | | | appraisal of the property you want to purchase. The |
| structure, construction, and mechanical systems of the | | | | application process typically takes between 1-6 weeks. |
| house and will make you aware of only repairs,that | | | | 45. HOW DO I CHOOSE THE RIGHT LENDER FOR |
| are needed. | | | | ME? |
| The Inspector does not evaluate whether or not you're | | | | Choose your lender carefully. Look for financial stability |
| getting good value for your money. Generally, an | | | | and a reputation for customer satisfaction. Be sure to |
| inspector checks (and gives prices for repairs on): the | | | | choose a company that gives helpful advice and that |
| electrical system, plumbing and waste disposal, the | | | | makes you feel comfortable. A lender that has the |
| water heater, insulation and Ventilation, the HVAC | | | | authority to approve and process your loan locally is |
| system, water source and quality, the potential | | | | preferable, since it will be easier for you to monitor the |
| presence of pests, the foundation, doors, windows, | | | | status of your application and ask questions. Plus, it's |
| ceilings, walls, floors, and roof. Be sure to hire a home | | | | beneficial when the lender knows home values and |
| inspector that is qualified and experienced. | | | | conditions in the local area. Do research and ask |
| It's a good idea to have an inspection before you sign | | | | family, friends, and your real estate agent for |
| a written offer since, once the deal is closed, you've | | | | recommendations. Once again internet research can |
| bought the house as is." Or, you may want to include | | | | help you in home financing too. |
| an inspection clause in the offer when negotiating for a | | | | 46. HOW ARE PRE-QUALIFYING AND |
| home. An inspection t clause gives you an 'out" on | | | | PRE-APPROVAL DIFFERENT? |
| buying the house if serious problems are found,or gives | | | | Pre-qualification is an informal way to see how much |
| you the ability to renegotiate the purchase price if | | | | you maybe able to borrow. You can be 'pre-qualified' |
| repairs are needed. An inspection clause can also | | | | over the phone with no paperwork by telling a lender |
| specify that the seller must fix the problem(s) before | | | | your income, your long-term debts, and how large a |
| you purchase the house. | | | | down payment you can afford. Without any obligation, |
| 18. DO I NEED TO BE THERE FOR THE | | | | this helps you arrive at a ballpark figure of the amount |
| INSPECTION? | | | | you may have available to spend on a house. |
| It's not required, but it's a good idea. Following the | | | | Pre-approval is a lender's actual commitment to lend to |
| inspection, the home inspector will be able to answer | | | | you. It involves assembling the financial records |
| questions about the report and any problem areas. | | | | mentioned in Question 47 (Without the property |
| This is also an opportunity to hear an objective opinion | | | | description and sales contract) and going through a |
| on the home you'd I like to purchase and it is a good | | | | preliminary approval process. Pre-approval gives you a |
| time to ask general, maintenance questions. | | | | definite idea of what you can afford and shows sellers |
| 19. ARE OTHER TYPES OF INSPECTIONS | | | | that you are serious about buying. |
| REQUIRED? | | | | 47. WHAT IS A CREDIT BUREAU SCORE AND |
| If your home inspector discovers a serious problem a | | | | HOW DO LENDERS USE THEM? |
| more specific Inspection may be recommended. It's a | | | | A credit bureau score is a number, based upon your |
| good idea to consider having your home inspected for | | | | credit history, that represents the possibility that you will |
| the presence of a variety of health-related risks like | | | | be unable to repay a loan. Lenders use it to determine |
| radon gas asbestos, or possible problems with the | | | | your ability to qualify for a mortgage loan. The better |
| water or waste disposal system. | | | | the score, the better your chances are of getting a |
| 20. HOW CAN I PROTECT MY FAMILY FROM | | | | loan. Ask your lender for details. |
| LEAD IN THE HOME? | | | | CLOSING |
| If the house you're considering was built before 1978 | | | | 48. WHAT HAPPENS AFTER I'VE APPLIED FOR |
| and you have children under the age of seven, you will | | | | MY LOAN? |
| want to have an inspection for lead-based point. It's | | | | It usually takes a lender between 1-6 weeks to |
| important to know that lead flakes from paint can be | | | | complete the evaluation of your application. Its not |
| present in both the home and in the soil surrounding the | | | | unusual for the lender to ask for more information |
| house. The problem can be fixed by repairing | | | | once the application has been submitted. The sooner |
| damaged paint surfaces or planting grass over | | | | you can provide the information, the faster your |
| effected soil. Hiring a lead abatement contractor to | | | | application will be processed. Once all the information |
| remove paint chips. | | | | has been verified the lender will call you to let you |
| 21. DO I NEED A LAWYER TO BUY A HOME? | | | | know the outcome of your application. If the loan is |
| Laws vary by state. Some states require a lawyer to | | | | approved, a closing date is set up and the lender will |
| assist in several aspects of the home buying process | | | | review the closing with you. And after closing, you'll be |
| while other states do not, as long as a qualified real | | | | able to move into your new home. |
| estate professional is involved. Even if your state | | | | 49. WHAT SHOULD I LOOK OUT FOR DURING THE |
| doesn't require one, you may want to hire a lawyer to | | | | FINAL WALK-THROUGH? |
| help with the complex paperwork and legal contracts. | | | | This will likely be the first opportunity to examine the |
| A lawyer can review contracts, make you aware of | | | | house without furniture, giving you a clear view of |
| special considerations, and assist you with the closing | | | | everything. Check the walls and ceilings carefully, as |
| process. Your real estate agent may be able to | | | | well as any work the seller agreed to do in response |
| recommend a lawyer. If not, shop around. Find out | | | | to the inspection. Any problems discovered previously |
| what services are provided for what fee, and whether | | | | that you find uncorrected should be brought up prior to |
| the attorney is experienced at representing home | | | | closing. It is the seller's responsibility to fix them. |
| buyers. | | | | 50. WHAT MAKES UP CLOSING COST OF HOME? |
| 22. DO I REALLY NEED HOME OWNER'S | | | | There may be closing cost customary or unique to a |
| INSURANCE? | | | | certain locality, but closing cost are usually made up of |
| Yes. A paid home owner's insurance policy (or a paid | | | | the following: |
| receipt for one) is required at closing, so arrangements | | | | Attorney's or escrow fees (Yours and your lender's if |
| will have to be made prior to that day. Plus, involving | | | | applicable) |
| the insurance agent early in the home buying process | | | | Property taxes (to cover tax period to date) |
| can save you money. Insurance agents are a great | | | | Interest (paid from date of closing to 30 days before |
| resource for information on home safety and they can | | | | first monthly payment) |
| give tips on how to keep insurance premiums low. | | | | Loan Origination fee (covers lenders administrative |
| 23. WHAT STEPS COULD I TAKE TO LOWER MY | | | | cost) |
| HOME OWNER'S INSURANCE COSTS? | | | | Recording fees |
| Be sure to shop around among several insurance | | | | Survey fee |
| companies. Also, consider the cost of insurance when | | | | First premium of mortgage Insurance (if applicable) |
| you look at homes. Newer homes and homes | | | | Title Insurance (yours and lender's) |
| constructed with materials like brick tend to have lower | | | | Loan discount points |
| premiums. Think about avoiding areas prone to natural | | | | First payment to escrow account for future real |
| disasters, like flooding. Choose a home with a fire | | | | estate taxes and insurance |
| hydrant or a fire department nearby. | | | | Paid receipt for home owner's insurance policy (and |
| 24. IS THE HOME LOCATED IN A FLOOD PLAIN? | | | | fire and flood insurance if applicable). |
| Your real estate agent or lender can help you answer | | | | Any documentation preparation fees |
| this question. If you live in a flood plain, the lender will | | | | 51. WHAT CAN I EXPECT TO HAPPEN ON |
| require that you have flood insurance before lending | | | | CLOSING DAY? |
| any money to you. But if you live near a flood plain, | | | | You'll present your paid home owner's insurance policy |
| you may choose whether or not to get flood | | | | or a binder and receipt showing that the premium has |
| insurance coverage for your home. Work with an | | | | been paid. The closing agent will then list the money |
| insurance agent to construct a policy that fits your | | | | you owe the seller (remainder of down payment, |
| needs. | | | | prepaid taxes, etc.) and then the money the seller |
| 25. WHAT OTHER ISSUES SHOULD I CONSIDER | | | | owes you (unpaid taxes and prepaid rent, if applicable). |
| BEFORE I BUY MY HOME? | | | | The seller will provide proofs of any inspection, |
| Always check to see if the house is in a low-lying | | | | warranties, etc. |
| area, in a high-risk area for natural disasters (like | | | | Once you're sure you understand all the |
| earthquakes, hurricanes, tornadoes, etc.), or in a | | | | documentation, you'll sign the mortgage, agreeing that if |
| hazardous materials area. Be sure the house meets | | | | you don't make payments the lender is entitled to sell |
| building codes. Also consider local zoning laws, which | | | | your property and apply the sale price against the |
| could affect remodeling or making an addition in the | | | | amount you owe plus expenses. You'll also sign a |
| future. Your real estate agent should be able to help | | | | mortgage note, promising to repay the loan. The seller |
| you with these questions. | | | | will give you the title to the house in the form of a |
| 26. HOW DO I MAKE AN OFFER? | | | | signed deed. |
| Your real estate agent will assist you in making an | | | | You'll pay the lender's agent all closing costs and, in |
| offer, which will include the following information: | | | | turn,he or she will provide you with a settlement |
| Complete legal description of the property | | | | statement of all the items for which you have paid. |
| Amount of earnest moneyown payment and financing | | | | The deed and mortgage will then be recorded in the |
| details | | | | state Registry of Deeds, and you will be a |
| Proposed move-in date | | | | homeowner. |
| Price you are offering | | | | 52. WHAT DO I GET AT CLOSING? |
| Proposed closing date | | | | Settlement Statement (itemizes services provided and |
| Length of time the offer is valid | | | | the fees charged; it is filled out by the closing agent |
| Details of the deal | | | | and must be given to you at or before closing) |
| Remember that a sale commitment depends on | | | | Truth-in-Lending Statement |
| negotiating a satisfactory contract with the seller, not | | | | Mortgage Note |
| just Making an offer. | | | | Mortgage or Deed of Trust |
| Other ways to lower ins-insurance costs include | | | | Binding Sales Contract (prepared by the seller; your |
| insuring your home and car(s) with the same company, | | | | lawyer should review it) |
| increasing home security, and seeking group coverage | | | | Keys to your new home |
| through alumni or business associations. Insurance | | | | WHERE CAN I FIND CHEAP HOMES FOR SALE? |
| costs are always lowered by raising your deductibles, | | | | Visit the link below and Find Cheap Homes for Sale |
| but this exposes you to a higher out-of-pocket cost if | | | | near you. |
| you have to file a claim. | | | | |