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HOME BUYER TIPS (download all tips here)

Common First-Time Home Buyer Mistakes

Lender Checklist: What You Need for a Mortgage

Specialty Mortgages: Risks and Rewards

5 Factors That Decide Your Credit Score

6 Creative Ways to Afford a Home

8 Tips to Guide for Your Home Search

10 Questions to Ask Your Lender

Budget Basics Worksheet

How Big of a Mortgage Can I Afford?

Loan Types to Consider

Get Your Finances in Order: To-Do List

Tax Benefits of Homeownership

Tips for Lowering Homeowner’s Insurance Costs

What You Can Do to Improve Your Credit

Your Property Wish List

5 Things to Know About Title Insurance

7 Reasons to Own Your Home

10 Questions to Ask Home Inspectors

10 Questions to Ask the Condo Board

17 Tips for Packing Like a Pro

Closing Documents You Should Keep

Common Closing Costs for Buyers

How High Tech Home is Your Home?

Pros and Cons of Going Condo

Questions to Ask When Choosing a REALTOR®

Take the Stress Out of Home Buying

Tips for Buying in a Tight Market

Tips for Finding the Perfect Neighborhood

What a Home Inspection Should Cover

What Not to Overlook on a Final Walk-through

What’s a Home Warranty?

Why You Should Work With a REALTOR®

Common First-Time Home Buyer Mistakes
1. They don’t ask enough questions of their lender and end up missing out on the best deal.

2. They don’t act quickly enough to make a decision and someone else buys the house.

3. They don’t find the right agent who’s willing to help them through the homebuying process.

4. They don’t do enough to make their offer look appealing to a seller.

5. They don’t think about resale before they buy. The average first-time buyer only stays in a home for four years.

Source: Real Estate Checklists and Systems, www.realestatechecklists.com.

Reprinted from REALTOR® magazine (REALTOR.org/realtormag) with permission of the NATIONAL ASSOCIATION OF REALTORS®.

Copyright 2008. All rights reserved.

 

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Lender Checklist: What You Need for a Mortgage

  • W-2 forms — or business tax return forms if you're self-employed — for the last two or three years for every person signing the loan.

  • Copies of at least one pay stub for each person signing the loan.    Account numbers of all your credit cards and the amounts for any outstanding  balances.

  • Copies of two to four months of bank or credit union statements for both checking and savings accounts.

  •  Lender, loan number, and amount owed on other installment loans, such as student loans and car loans.

  •  Addresses where you’ve lived for the last five to seven years, with names of landlords if  appropriate.

  • Copies of brokerage account statements for two to four months, as well as a list of any other major assets of value, such as a boat, RV, or stocks or bonds not held in a brokerage account.

  • Copies of your most recent 401(k) or other retirement account statement.

  •  Documentation to verify additional income, such as child support or a pension.

  • Copies of personal tax forms for the last two to three years.

Reprinted from REALTOR® magazine (REALTOR.org/realtormag) with permission of the NATIONAL ASSOCIATION OF REALTORS®.

Copyright 2008. All rights reserved.

 

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Specialty Mortgages: Risks and Rewards

 

In high-priced housing markets, it can be difficult to afford a home. That’s why a growing number of home buyers are forgoing traditional fixed-rate mortgages and standard adjustable-rate mortgages and instead opting for a specialty mortgage that lets them “stretch” their income so they can qualify for a larger loan.

 

But before you choose one of these mortgages, make sure you understand the risks and how they work.

 

Specialty mortgages often begin with a low introductory interest rate or payment plan — a “teaser”— but the monthly mortgage payments are likely to increase a lot in the future. Some are “low documentation” mortgages that come with easier standards for qualifying, but also higher interest rates or higher fees. Some lenders will loan you 100 percent or more of the home’s value, but these mortgages can present a big financial risk if the value of the house drops.

 

Specialty Mortgages Can:

 

·         Pose a greater risk that you won’t be able to afford the mortgage payment in the future, compared to fixed rate mortgages and traditional adjustable rate mortgages.

·         Have monthly payments that increase by as much as 50 percent or more when the introductory period ends.

·         Cause your loan balance (the amount you still owe) to get larger each month instead of smaller.

 

Common Types of Specialty Mortgages:

 

·         Interest-Only Mortgages: Your monthly mortgage payment only covers the interest you owe on the loan for the first 5 to 10 years of the loan, and you pay nothing to reduce the total amount you borrowed (this is called the “principal”). After the interest-only period, you start paying higher monthly payments that cover both the interest and principal that must be repaid over the remaining term of the loan.

 

·         Negative Amortization Mortgages: Your monthly payment is less than the amount of interest you owe on the loan. The unpaid interest gets added to the loan’s principal amount, causing the total amount you owe to increase each month instead of getting smaller.

 

·         Option Payment ARM Mortgages: You have the option to make different types of monthly payments with this mortgage. For example, you may make a minimum payment that is less than the amount needed to cover the interest and increases the total amount of your loan; an interest-only payment, or payments calculated to pay off the loan over either 30 years or 15 years.

 

·         40-Year Mortgages: You pay off your loan over 40 years, instead of the usual 30 years. While this reduces your monthly payment and helps you qualify to buy a home, you pay off the balance of your loan much more slowly and end up paying much more interest.

 

Questions to Consider Before Choosing a Specialty Mortgage:

 

·         How much can my monthly payments increase and how soon can these increases happen?

·         Do I expect my income to increase or do I expect to move before my payments go up?

·         Will I be able to afford the mortgage when the payments increase?

·         Am I paying down my loan balance each month, or is it staying the same or even increasing?

·         Will I have to pay a penalty if I refinance my mortgage or sell my house?

·         What is my goal in buying this property? Am I considering a riskier mortgage to buy a more expensive house than I can realistically afford?

 

Be sure you work with a REALTOR® and lender who can discuss different options and address your questions and concerns!

 

Learn about the NATIONAL ASSOCIATION OF REALTORS® Housing Opportunity Program at www.REALTOR.org/housingopportunity. For more information on predatory mortgage lending practices, visit the Center for Responsible Lending at www.responsiblelending.org.

 

 

Reprinted from REALTOR® magazine (REALTOR.org/realtormag) with permission of the NATIONAL ASSOCIATION OF REALTORS®.

Copyright 2008. All rights reserved.

 

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 5 Factors That Decide Your Credit Score

Credit scores range between 200 and 800, with scores above 620 considered desirable for obtaining a mortgage. The following factors affect your score:

1. Your payment history. Did you pay your credit card obligations on time? If they were late, then how late? Bankruptcy filing, liens, and collection activity also impact your history.


2. How much you owe.  If you owe a great deal of money on numerous accounts, it can indicate that you are overextended. However, it’s a good thing if you have a good proportion of balances to total credit limits.

3. The length of your credit history. In general, the longer you have had accounts opened, the better. The average consumer's oldest obligation is 14 years old, indicating that he or she has been managing credit for some time, according to Fair Isaac Corp., and only one in 20 consumers have credit histories shorter than 2 years.


4. How much new credit you have. New credit, either installment payments or new credit cards, are considered more risky, even if you pay them promptly.

5. The types of credit you use. Generally, it’s desirable to have more than one type of credit — installment loans, credit cards, and a mortgage, for example.

For more on evaluating and understanding your credit score, visit www.myfico.com.

 

 

Reprinted from REALTOR® magazine (REALTOR.org/realtormag) with permission of the NATIONAL ASSOCIATION OF REALTORS®.

Copyright 2008. All rights reserved.

 

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 6 Creative Ways to Afford a Home


1. Investigate local, state, and national down payment assistance programs. These programs give qualified applicants loans or grants to cover all or part of your required down payment. National programs include the Nehemiah program,
www.getdownpayment.com, and the American Dream Down Payment Fund from the Department of Housing and Urban Development, www.hud.gov.


2. Explore seller financing. In some cases, sellers may be willing to finance all or part of the purchase price of the home and let you repay them gradually, just as you would do with a mortgage.

3. Consider a shared-appreciation or shared-equity arrangement. Under this arrangement, your family, friends, or even a third-party may buy a portion of the home and share in any appreciation when the home is sold. The owner/occupant usually pays the mortgage, property taxes, and maintenance costs, but all the investors' names are usually on the mortgage. Companies are available that can help you find such an investor, if your family can’t participate.

4. Ask your family for help. Perhaps a family member will loan you money for the down payment or act as a co-signer for the mortgage. Lenders often like to have a co-signer if you have little credit history.

5. Lease with the option to buy. Renting the home for a year or more will give you the chance to save more toward your down payment. And in many cases, owners will apply some of the rental amount toward the purchase price. You usually have to pay a small, nonrefundable option fee to the owner.

6. Consider a short-term second mortgage. If you can qualify for a short-term second mortgage, this would give you money to make a larger down payment. This may be possible if you’re in good financial standing, with a strong income and little other debt.

 

 

Reprinted from REALTOR® magazine (REALTOR.org/realtormag) with permission of the NATIONAL ASSOCIATION OF REALTORS®.

Copyright 2008. All rights reserved.

 

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8 Tips to Guide for Your Home Search

 

1. Research before you look. Decide what features you most want to have in a home, what neighborhoods you prefer, and how much you’d be willing to spend each month for housing.

 

2. Be realistic. It’s OK to be picky, but don’t be unrealistic with your expectations. There’s no such thing as a perfect home. Use your list of priorities as a guide to evaluate each property.

3. Get your finances in order. Review your credit report and be sure you have enough money to cover your down payment and closing costs. Then, talk to a lender and get prequalified for a mortgage. This will save you the heartache later of falling in love with a house you can’t afford.

4. Don’t ask too many people for opinions. It will drive you crazy. Select one or two people to turn to if you feel you need a second opinion, but be ready to make the final decision on your own.

5. Decide your moving timeline. When is your lease up? Are you allowed to sublet? How tight is the rental market in your area? All of these factors will help you determine when you should move.

6. Think long term. Are you looking for a starter house with plans to move up in a few years, or do you hope to stay in this home for a longer period? This decision may dictate what type of home you’ll buy as well as the type of mortgage terms that will best suit you.

7. Insist on a home inspection. If possible, get a warranty from the seller to cover defects for one year.

8. Get help from a REALTOR®. Hire a real estate professional who specializes in buyer representation. Unlike a listing agent, whose first duty is to the seller, a buyer’s representative is working only for you. Buyer’s reps are usually paid out of the seller’s commission payment.

 

 

Reprinted from REALTOR® magazine (REALTOR.org/realtormag) with permission of the NATIONAL ASSOCIATION OF REALTORS®.

Copyright 2008. All rights reserved.

 

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10 Questions to Ask Your Lender

1. What are the most popular mortgages you offer? Why are they so popular?

2. Which type of mortgage plan do you think would be best for me? Why?

3. Are your rates, terms, fees, and closing costs negotiable?

4. 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 percent. However, most lenders will let you discontinue PMI when you’ve acquired a certain amount of equity by paying down the loan.)

5. Who will service the loan — your bank or another company?

6. What escrow requirements do you have?

7. 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?

8. How long will the loan approval process take?

9. How long will it take to close the loan?

10. Are there any charges or penalties for prepaying the loan?

Used with permission from Real Estate Checklists & Systems, www.realestatechecklists.com.

 

 

Reprinted from REALTOR® magazine (REALTOR.org/realtormag) with permission of the NATIONAL ASSOCIATION OF REALTORS®.

Copyright 2008. All rights reserved.

 

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Budget Basics Worksheet
 

The first step in getting yourself in financial shape to buy a home is to know exactly how much money comes in and how much goes out. Use this worksheet to list your income and expenses below.

 

INCOME

Take Home Pay (all family members)

Child Support/Alimony

Pension/Social Security

Disability/Other Insurance

Interest/Dividends

Other

Total Income

 

 

EXPENSES

Rent/Mortgage (include taxes, principal, and insurance)

Life Insurance

Health/Disability Insurance

Vehicle Insurance

Homeowner’s or Other Insurance

Car Payments

Other Loan Payments

Savings/Pension Contribution

Utilities (gas, water, electric, phone)

Credit Card Payments

Car Upkeep (gas, maintenance, etc.)

Clothing

Personal Care Products (shampoo, cologne, etc.)

Groceries

Food Outside the Home (restaurant meals and carryout)

Medical/Dental/Prescriptions

Household Goods (hardware, lawn, and garden)

Recreation/Entertainment

Child Care

Education (continuing education, classes, etc.)

Charitable Donations

Miscellaneous

Total Expenses

Remaining Income After Expenses

(Subtract Total Income from Total Expenses)

 

 

Reprinted from REALTOR® magazine (REALTOR.org/realtormag) with permission of the NATIONAL ASSOCIATION OF REALTORS®.

Copyright 2008. All rights reserved.

 

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How Big of a Mortgage Can I Afford?

Not only does owning a home give you a haven for yourself and your family, it also makes great financial sense because of the tax benefits — which you can’t take advantage of when paying rent.

The following calculation assumes a 28 percent income tax bracket. If your bracket is higher, your savings will be, too. Based on your current rent, use this calculation to figure out how much mortgage you can afford.

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.

For more help, use Fannie Mae’s
online mortgage calculators.

 

 

Reprinted from REALTOR® magazine (REALTOR.org/realtormag) with permission of the NATIONAL ASSOCIATION OF REALTORS®.

Copyright 2008. All rights reserved.

 

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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.

 

·         Balloon mortgages. These mortgages offer very low interest rates for a short period of time — often three to seven years. Payments usually cover only 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.

 

·         Government-backed loans. These loans are sponsored by agencies such as the Federal Housing Administration (www.fha.gov) or the Department of Veterans 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 Fannie Mae’s online mortgage calculators.

 

 

Reprinted from REALTOR® magazine (REALTOR.org/realtormag) with permission of the NATIONAL ASSOCIATION OF REALTORS®.

Copyright 2008. All rights reserved.

 

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Get Your Finances in Order: To-Do List


1. Develop a household budget. Instead of creating a budget of what you’d like to spend, use receipts to create a budget that reflects your actual spending habits over the last several months. This approach will factor in unexpected expenses, such as car repairs, as well as predictable costs such as rent, utility bills, and groceries.

2. Reduce your debt. Lenders generally look for a total debt load of no more than 36 percent of income. This figure includes your mortgage, which typically ranges between 25 and 28 percent of your net household income. So you need to get monthly payments on the rest of your installment debt — car loans, student loans, and revolving balances on credit cards — down to between 8 and 10 percent of your net monthly income.


3. Look for ways to save. You probably know how much you spend on rent and utilities, but little expenses add up, too. Try writing down everything you spend for one month. You’ll probably spot some great ways to save, whether it’s cutting out that morning trip to Starbucks or eating dinner at home more often.

4. Increase your income. Now’s the time to ask for a raise! If that’s not an option, you may want to consider taking on a second job to get your income at a level high enough to qualify for the home you want.

5. Save for a down payment. Designate a certain amount of money each month to put away in your savings account. Although it’s possible to get a mortgage with only 5 percent down, or even less, you can usually get a better rate if you put down a larger percentage of the total purchase. Aim for a 20 percent down payment.


6. Keep your job. While you don’t need to be in the same job forever to qualify for a home loan, having a job for less than two years may mean you have to pay a higher interest rate.

7. Establish a good credit history. Get a credit card and make payments by the due date. Do the same for all your other bills, too. Pay off the entire balance promptly.

 

 

Reprinted from REALTOR® magazine (REALTOR.org/realtormag) with permission of the NATIONAL ASSOCIATION OF REALTORS®.

Copyright 2008. All rights reserved.

 

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Tax Benefits of Homeownership

The tax deductions you’re eligible to take for mortgage interest and property taxes greatly increase the financial benefits of homeownership. Here’s how it works.

Assume:

$9,877 = Mortgage interest paid (a loan of $150,000 for 30 years, at 7 percent, using year-five interest)
$2,700 = Property taxes (at 1.5 percent on $180,000 assessed value)
______

$12,577 = Total deduction

 

Then, multiply your total deduction by your tax rate.

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

$3,521.56 = Amount you have lowered your federal income tax (at 28 percent 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.

 

 

Reprinted from REALTOR® magazine (REALTOR.org/realtormag) with permission of the NATIONAL ASSOCIATION OF REALTORS®.

Copyright 2008. All rights reserved.

 

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Tips for Lowering Homeowner’s Insurance Costs

1. Review the Comprehensive Loss Underwriting Exchange (CLUE) report on the property you’re interested in buying. CLUE reports detail the property’s claims history for the most recent five years, which insurers may use to deny coverage. Make the sale contingent on a home inspection to ensure that problems identified in the CLUE report have been repaired.

 

2. Seek insurance coverage as soon as your offer is approved. You must obtain insurance to buy. And you don’t want to be told at closing that the insurer has denied your coverage.

 

3. Maintain good credit. Insurers often use credit-based insurance scores to determine premiums.

 

4. Buy your home owners and auto policies from the same company and you’ll usually qualify for savings. But make sure the discount really yields the lowest price.

 

5. Raise your deductible. If you can afford to pay more toward a loss that occurs, your premiums will be lower. Avoid making claims under $1,000.

6. Ask about other discounts. For example, retirees who tend to be home more than full-time workers may qualify for a discount on theft insurance. You also may be able to obtain discounts for having smoke detectors, a burglar alarm, or dead-bolt locks.

 

7. Seek group discounts. If you belong to any groups, such as associations or alumni organizations, they may have deals on insurance coverage.

 

8. Review your policy limits and the value of your home and possessions annually. Some items depreciate and may not need as much coverage.

9. Investigate a government-backed insurance plan. In some high-risk areas, federal or state government may back plans to lower rates. Ask your agent.

 

10. Be sure you insure your house for the correct amount. Remember, you’re covering replacement cost, not market value.

 

 

Reprinted from REALTOR® magazine (REALTOR.org/realtormag) with permission of the NATIONAL ASSOCIATION OF REALTORS®.

Copyright 2008. All rights reserved.

 

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What You Can Do to Improve Your Credit


Credit scores, along with your overall income and debt, are big factors in determining whether you’ll qualify for a loan and what your loan terms will be. So, keep your credit score high by doing the following:

1. Check for and correct any errors in your credit report. Mistakes happen, and you could be paying for someone else’s poor financial management.

2. Pay down credit card bills. If possible, pay off the entire balance every month. Transferring credit card debt from one card to another could lower your score.

3. Don’t charge your credit cards to the maximum limit.

4. Wait 12 months after credit difficulties to apply for a mortgage. You’re penalized less for problems after a year.

5. Don’t order items for your new home on credit — such as appliances and furniture — until after the loan is approved. The amounts will add to your debt.

6. Don’t open new credit card accounts before applying for a mortgage. Too much available credit can lower your score.

7. Shop for mortgage rates all at once. Too many credit applications can lower your score, but multiple inquiries from the same type of lender are counted as one inquiry if submitted over a short period of time.

8. Avoid finance companies. Even if you pay the loan on time, the interest is high and it will probably be considered a sign of poor credit management.

This information is copyrighted by the Fannie Mae Foundation and is used with permission of the Fannie Mae Foundation. To obtain a complete copy of the publication, Knowing and Understanding Your Credit, visit www.homebuyingguide.org.

 

 

Reprinted from REALTOR® magazine (REALTOR.org/realtormag) with permission of the NATIONAL ASSOCIATION OF REALTORS®.

Copyright 2008. All rights reserved.

 

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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) of 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?

 

 Home Features 

 

Please circle one of the choices: Must Have, Would Like, Willing to Compromise, Not Important 

 

Front yard                             Must Have             Would Like            Willing to Compromise      Not Important                        

Back yard                             Must Have             Would Like            Willing to Compromise      Not Important 

Garage ( __ cars)               Must Have             Would Like            Willing to Compromise      Not Important 

Patio/Deck                           Must Have             Would Like            Willing to Compromise      Not Important 

Pool                                        Must Have             Would Like            Willing to Compromise      Not Importan

Family room                         Must Have             Would Like            Willing to Compromise      Not Important 

Formal living room             Must Have             Would Like            Willing to Compromise      Not Important 

Formal dining room           Must Have             Would Like            Willing to Compromise      Not Important 

Eat-in kitchen                      Must Have             Would Like            Willing to Compromise      Not Important 

Laundry room                      Must Have             Would Like            Willing to Compromise      Not Important    

Finished basement            Must Have             Would Like            Willing to Compromise      Not Important 

Attic                                       Must Have             Would Like            Willing to Compromise      Not Important 

Fireplace                              Must Have             Would Like            Willing to Compromise      Not Important 

Spa in bath