Monday 22nd September 2014

Owning Your Own Home

in Relocation Information

Owning an image

How do I know if I’m ready to buy a home?
You can find out by asking yourself some questions:

Do I have a steady source of income? Have I been employed on a regular basis for the last 2–3 years? Is my current income reliable?
Do I have a good record of paying my bills?
Do I have few outstanding long-term debts, like car payments?
Do I have money saved for a down payment?
Do I have the ability to pay a mortgage every month, plus additional costs?

If you can answer “yes” to these questions, you are probably ready to buy your own home.

How to I begin the process of buying a home?
Start by thinking about your situation. Are you ready to buy a home? How much can you afford in a monthly mortgage payment? How much space do you need? What areas of the community do you like? After you answer these questions, make a “To Do” list and start doing casual research. Talk to friends and family, drive through neighborhoods, and look in the “Homes” section of the newspaper.

Additionally, you may want to consider pre-applying for a loan. Doing so will allow you to know how much home you can afford before you begin searching; it can also give you negotiating power once you’ve selected a home, as the buyer will know that you’re already approved for a loan. However, pre-approval loans are usually only for a fixed period of time; if your home search exceeds this period, you will have to re-apply for the loan.

How does purchasing a home compare with renting?
The two don’t really compare at all. The one advantage of renting is being generally free of most maintenance responsibilities. But by renting, you lose the chance to build equity, take advantage of tax benefits and protect yourself against rent increases. Also, you may not be free to decorate without permission and may be at the mercy of the landlord for housing.
Owning a home has many benefits. When you make a mortgage payment, you are building equity. And that’s an investment. Owning a home also qualifies you for tax breaks that assist you in dealing with your new financial responsibilities — like insurance, real estate taxes and upkeep — which can be substantial. But given the freedom, stability and security of owning your own home, they are worth it.

How does the lender determine the maximum loan I can afford?
The lender considers your debt-to-income ratio, which is a comparison of your gross (pre-tax) income to housing and non-housing expenses. Non-housing expenses include such long-term debts as car or student loan payments, alimony, or child support. According to the FHA, monthly mortgage payments should be no more than 29 percent of gross income, while the mortgage payment, combined with non-housing expenses, should total no more than 41 percent of income. The lender also considers cash available for down payment and closing costs, credit history, and so on when determining your maximum loan amount.

How do I select the right real estate agent?
Your local chamber of commerce can provide a list of area agents. Talk to each before choosing one. Look for an agent who listens well and who understands your needs, and whose judgment you trust. The ideal agent knows the local area well and has resources and contacts to help you in your search. Overall, you want to choose an agent who makes you feel comfortable and can provide all the knowledge and services you need.

How can I determine my housing needs before I begin the search?
Your home should fit the way you live, with spaces and features that appeal to the whole family. Before you begin looking at homes, make a list of your priorities — things like location and size. Should the house be close to certain schools? to your job? to public transportation? How large should the house be? What type of lot do you prefer? What kinds of amenities are you looking for? Establish a set of minimum requirements and a “wish list.” Minimum requirements are things that a house must have for you to consider it, while a “wish list” covers things that you’d like to have, but that aren’t essential.

Source: The U.S. Department of Housing and Urban Development

Owning Your Own Home: Finding the Right House for You

What should I look for when deciding on a community?
Select a community that will allow you to best live your daily life. Many people choose communities based on schools. Do you want access to shopping and public transportation? Is access to local facilities like libraries and museums important to you? Or do you prefer the peace and quiet of a rural community? When you find places that you like, talk to people who live there. They know the most about the area and will be your future neighbors. More than anything, you want a neighborhood where you feel comfortable.

How can I find out about community resources?
Contact the local chamber of commerce for promotional literature, welcome kits, maps and other information. Your real estate agent and the local library are also good sources of information.

Is an older home a better value than a new one?
There isn’t a definitive answer to this question. You should look at each home for its individual characteristics. Generally, older homes may be in more established neighborhoods, offer more ambience and have lower property tax rates. People who buy older homes, however, shouldn’t mind maintaining their home and making some repairs. Newer homes tend to use more modern architecture and systems, are usually easier to maintain, and may be more energy-efficient. People who buy new homes often don’t want to worry initially about upkeep and repairs.

What should I look for when walking through a home?
In addition to comparing the home to your minimum requirement and wish lists, consider the following:

Is there enough room for both the present and the future?
Are there enough bedrooms and bathrooms?
Is the house structurally sound?
Do the mechanical systems and appliances work?
Is the yard big enough?
Do you like the floor plan?
Will your furniture fit in the space? Is there enough storage space? (Bring a tape measure to better answer these questions.)
Does anything need to repaired or replaced? Will the seller repair or replace the items?
Imagine the house in good weather and bad, and in each season. Will you be happy with it year-round?

Take your time and think carefully about each house you see. Ask your real estate agent to point out the pros and cons of each home from a professional standpoint.

What questions should I ask when looking at homes?
Many of your questions should focus on potential problems and maintenance issues. Does anything need to be replaced? What things require ongoing maintenance (e.g., paint, roof, HVAC, appliances, carpet)? Also ask about the house and neighborhood, focusing on quality of life issues. Ask questions until you understand all of the information they’ve given. Making a list of questions ahead of time will help you organize your thoughts and arrange all of the information you receive.

How can I keep track of all the homes I see?
On average, homebuyers see 15 houses before choosing one. If possible, take photographs and keep notes for each house: the outside, the major rooms, the yard and extra features that you like or ones that you see as potential problems. And don’t hesitate to return for a second look.

Source: The U.S. Department of Housing and Urban Development


Owning Your Own Home: You’ve Found It!

What does a home inspector do?
An inspector checks the safety of your potential new home. Home inspectors focus especially on the structure, construction and mechanical systems of the house and will make you aware of any repairs that are needed. The inspector does not evaluate whether or not you’re getting good value for your money. Generally, an inspector checks (and gives prices for repairs on): the electrical system, plumbing and waste disposal, the water heater, insulation and ventilation, the HVAC system, water source and quality, the potential presence of pests, the foundation, doors, windows, ceilings, walls, floors, and roof. Be sure to hire a home inspector who is qualified and experienced.

It’s a good idea to have an inspection before you sign a written offer since, once the deal is closed, you’ve bought the house “as is.” Or, you may want to include an inspection clause in the offer when negotiating for a home. An inspection clause gives you an “out” on buying the house if serious problems are found, or gives you the ability to renegotiate the purchase price if repairs are needed. An inspection clause can also specify that the seller must fix the problem(s) before you purchase the house.

It’s not required that you be there for the home inspection, but it’s a good idea. Following the inspection, the home inspector will be able to answer questions about the report and any problem areas. This is also an opportunity to hear an objective opinion on the home you’d like to purchase and is a good time to ask general, maintenance questions.

Do I really need homeowner’s insurance?
Yes. A paid homeowner’s insurance policy (or a paid receipt for one) is required at closing, so arrangements will have to be made prior to that day. Plus, involving the insurance agent early in the home-buying process can save you money. Insurance agents are a great resource for information on home safety, and they can give you tips on how to keep insurance premiums low.

If you live in a flood plain, the lender will require that you have flood insurance before lending any money to you. But if you live near a flood plain, you may choose whether or not to get flood insurance coverage for your home. Work with an insurance agent to construct a policy that fits your needs.

How do I make an offer?
Your real estate agent will assist you in making an offer, which will include the following information:

Complete legal description of the property
Amount of earnest money
Down payment and financing details
Proposed move-in date
Price you are offering
Proposed closing date
Length of time the offer is valid
Details of the deal

What happens after I’ve applied for my loan?
It usually takes a lender between one to six weeks to complete the evaluation of your application. It’s not unusual for the lender to ask for more information once the application has been submitted. The sooner you can provide the information, the faster your application will be processed. Once all the information has been verified, the lender will call you to let you know the outcome of your application. If the loan is approved, a closing date is set up, and the lender will review the closing with you. And after closing, you’ll be able to move into your new home.

What should I look for during the final walk-through?
This will likely be the first opportunity to examine the house without furniture, giving you a clear view of everything. Check the walls and ceilings carefully, as well as any work the seller agreed to do in response to the inspection. Any problems discovered previously that you find uncorrected should be brought up prior to closing. It is the seller’s responsibility to fix them.

What can I expect to happen on closing day?
You’ll present your paid homeowner’s insurance policy or a binder and receipt showing that the premium has been paid. The closing agent will then list the money you owe the seller (remainder of down payment, prepaid taxes, etc.) and then the money the seller owes you (unpaid taxes and prepaid rent, if applicable). The seller will provide proofs of any inspection, warranties, etc.

Once you’re sure you understand all the documentation, you’ll sign the mortgage, agreeing that if you don’t make payments the lender is entitled to sell your property and apply the sale price against the amount you owe, plus expenses. You’ll also sign a mortgage note, promising to repay the loan. The seller will give you the title to the house in the form of a signed deed.

You’ll pay the lender’s agent all closing costs and, in turn, he or she will provide you with a settlement statement of all the items for which you have paid. The deed and mortgage will then be recorded in the state Registry of Deeds, and you will be a homeowner!

Source: The U.S. Department of Housing and Urban Development

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