Home Buying: The Basics

Probably the single most important investment you will ever make is the purchase of a home. Finding the right home for you can be a lengthy and arduous process, using up most of your free time until it's finished.

As the consumer, it's up to you to ask questions, pay attention to details, and keep records about what you've seen -- including photos -- for comparison.

Know Your Wants And Needs

Before embarking on the long journey of house hunting, you must know what your wants and needs are.

Sit down with pen and paper and list all the features you care most about:

• Looking for a house in a particular city, school district or neighborhood?
• Exactly how many bedrooms and bathrooms do you need (or want)?
• How about off-street parking? Do you need a 1-car garage or 2?
• Are you self-employed? If you have a home-based business, check for restrictions in the area.
• Are you looking for a finished attic or basement?
• Would you prefer a 2-story house or ranch style home?
• Type of heating?
• Will you need central heating and/or air conditioning?

Equally important, on a new sheet of paper list all the features you absolutely do not want in a house. For example:

• A house in a high-traffic area.
• An airport, train station or highway in close proximity.
• A home in need of a lot of major repairs.

As you look at houses, keep these items in mind. You may find that your lists change from time to time as you do more looking. You'll want to add or remove certain features you can't live with, or perhaps you'll become willing to make compromises on certain items.

Realize that you most likely will not find the "perfect" home. As experienced homebuyers will tell you, perfect homes are not found, they are made perfect through patience and hard work.

Get Your Credit Report In Order

Prior to looking at properties, you must get your finances in order. Now is the time to review your credit report and clean it up, if need be, to maximize your credit score. Many people do not realize that it is important to check your credit report periodically to make sure it is accurate. You should pay in full any past due amounts, or negotiate a settlement price to close the debt.

Perhaps you have a past due credit card debt, for example, that has been entered into collections in the amount of $1,100. The company may be willing to accept a payment of $600 to settle the debt and strike it from your records. Get this agreement in writing, though, before paying any settlement. Keep all receipts for any settled items from your credit report because it may take weeks or even months to get the debt actually removed.

Research Your Home-Buying Options

Decide what kind of property you are interested in. Do you want a HUD property, a foreclosure, real estate, or property for sale by owner?

You can go online for more information about HUD and foreclosures.

A number of web sites list homes according to city, state, or price range. Visit these sites to see pictures of homes, many with virtual tours, and review the listing features.

Get Pre-Approved For A Loan

You're ready now to find a lender and get yourself pre-approved for the loan. Being pre-approved offers a number of advantages. It will clarify what price range you can afford. Also, once you find the home you want, you can place an immediate offer. If you have to wait for a pre-approval, someone else might buy the house right out from under you.

Several special programs are often available from lenders, such as the FHA or Ameri-Dream, that can save you extra money in the closing process. Ask the lender about any special programs and what would work best before you decide on a loan.

Find A Good Real Estate Agent

It is wise for the first time homebuyer to work closely with a real estate agent, no matter what type of property you're looking for. The many helpful tips and suggestions that a knowledgeable real estate agent can give you will make your house-hunting easier. A good real estate agent is usually a good negotiator, and will be able to help you with the complicated paperwork involved in placing an offer on a house or in closing a deal.

It's essential that you have a real estate agent working for you as the buyer, rather than relying on the seller's agent for the house you want to buy. The latter can involve a conflict of interest, and it usually works to the disadvantage of the buyer.

Selecting a real estate agent requires a little more effort than picking a number out of the phone book. You should check with your friends and neighbors for any recommendations they may have. Find an agent you feel comfortable with who is knowledgeable about the area you hope to buy in.

Now You're Ready To Roll

These are just the basics of home buying. You will find many details you need to master as you move forward through the buying process, but having the basics under your belt will give you a head start.

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Pitfalls To Avoid

When Buying A Home

Whether you're looking for a first home, which often establishes the foundation for your future home purchases, or your last home where you'll spend your senior years, following are some mistakes to avoid and suggestions to assist you in making the best choice.

Get Pre-Qualified

Not getting pre-approved or pre-qualified by a bank or lending institution is one of the first mistakes many people make. Sellers are likely to be skeptical of your ability to obtain a mortgage loan if you have not been pre-qualified. When they're choosing between 2 comparable offers, or when considering countering a buyer's offer, a seller will always look more favorably upon a pre-qualified buyer.

Have Your Own Realtor

The services of a realtor are indispensable to help you navigate through the process of buying a home; a process both complicated and fraught with financial hazards. As the buyer, you'll need to have your own realtor who will be committed to representing your best interests. The seller's realtor will often favor the interests of the seller, with an eye to the commission involved.

One of the things your agent should do is a comparative market analysis to establish property values and selling prices of homes in your targeted area.

Take Your Time

Don't be in a hurry! All too frequently people rush into signing a contract to purchase a particular home and then, for any of a number of reasons, regret it. If you enter into a contract to buy a home, your chances of later getting that contract rescinded are very slim. Even though you may find another home you prefer, when you're under contract to make a purchase, you're expected to follow through and buy it.

You can prevent this kind of situation by taking plenty of time to consider any house that interests you.

Don't Over-Spend

Another reason people sometimes try to withdraw from a contract is they realize too late that they've over-purchased. The mere fact that you can qualify to purchase a particular property doesn't mean you can afford it.

It is no fun being "house poor." Putting too large a portion of your earnings into your mortgage payment detracts from your quality of life. Things you used to enjoy, such as vacation trips, dinners out or splurging on an expensive piece of clothing will have to be curtailed, very likely for a long time.

Don't Wait For Utopia

It often happens that people have specific, detailed requirements for their dream home, and they search endlessly for the right house to fulfill them. Unfortunately, they sometimes wait too long.

While pursuing utopia, people can pass up excellent homes that are good bargains and would fulfill a majority of their needs. Meanwhile, market prices and mortgage rates continue to escalate, putting good deals beyond their reach.

Explore Your Financing Options

As a potential buyer, you should be aware that there are many types of mortgages being offered by lenders. Thoroughly explore all of your options before getting yourself "locked in." An interest-only loan will allow the buyer to pay only the interest on their mortgage for a period of up to 5 years. For young buyers who want to establish themselves in a home of their own, but haven't yet reached their full earning potential, this is an attractive option. To benefit from this type of financing, the buyers should be better able to meet full mortgage payments at the end of the prescribed 1- to 5-year period.

A number of other options should also be explored.

Get A Professional Inspection

It is absolutely essential to have a comprehensive home inspection conducted by a professional. Relying on the knowledge of a friend is a penny-wise/pound-foolish thing to do. The comparatively minor expense of a full inspection is well worth the price. A review of the electrical system, the condition of the roof, plumbing, heating and air conditioning, septic system, and water quality, at a minimum, should be included in the inspection. This is a critical process that can save you a lot of anguish down the road.

As a real world example, on my current home I spent $500 for a home inspection. The inspector found several short-comings that neither the seller nor I was aware of. As a result of that objective written appraisal, $14,000 was knocked off of our already agreed upon (but "subject to satisfactory inspection") purchase price.

How's The Neighborhood?

Don't forget when selecting a home that your quality of life will also be affected by the surrounding community. No matter how beautiful your new home is, if it's in a rundown neighborhood and populated with neighbors you don't want to know, you aren't going to be happy.

Check out the school system and be sure that it meets with your approval. Inquire about the crime rate and consider the quality of the stores and services available in the vicinity.

Consider Resale Value

When you're focused on now, it can be hard to consider the future. However, resale value is one of the primary considerations in the decision to buy a home. Of course, this isn't the final consideration, but when touring your prospective new home keep an eye out for things that would be a deterrent to another buyer. If the problems you see are all minor and/or repairable, then your worries will be few.

Research Community Restrictions

Last but not least, before you sign the contract, become aware of any restrictions imposed by your new community association. Restrictions might include: certain landscaping requirements, parking restrictions, no RVs or boats in the yard, certain occupancy restrictions, and fencing guidelines, as well. Investing in a heavily restricted community without first doing your research is a mistake, and a very common one.

Do Your Homework

This is by no means an exhaustive list of the common home buying hazards to beware. Purchasing a home is a big undertaking, which should be done carefully and systematically.

Reputable realtors offer checklists that can be very useful throughout the searching and home buying process. Avoiding the pitfalls enumerated here should make your search for a new home both easier and more rewarding

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Things The First Time

Home Buyer Must Know

Purchasing a new home is exciting and a little daunting. There are many hurdles that could happen along the way unless you insure that they do not. When you finally own your own home, nothing compares to the feeling. .

Here are some things you should take do to make things go smoother.

Talk To Your Agent

The most important first step is finding a real estate agent that you trust to help you through the system. Only when you find someone that you trust should you sign any paper work.

When finding an agent, use those referred to you by friends, not necessarily the most prolific lister out there. You want someone who is going to serve your needs, not just someone who does what they have to and nothing more.

Money: Where’s Yours?

Next, take the time to get your finances in order. Get a copy of your credit report and insure that it is correct. Make sure to dispute any problems that you find. Also, make sure that you have as few bad marks as possible. You may want to wait a few months and pay some bills to help increase a bad score.

The Mortgage Industry

Learn as much as you can about mortgages. For example, do you know what a debt to income ratio is? Do you know if you should go with an adjustable rate mortgage or a fixed rate? All the information that you need is available to you throughout the web.

Once you know what you are looking for, take the time to find the right loan. See how much you are pre qualified to own. Get your paperwork in so that you can become pre-approved. Only after you are pre-approved should you move to the next phase of looking for the home you want.

Remember to shop around for who has the very best mortgage rates available too. Not all mortgage companies are the same.

The Home Buying Process

You should take the time to determine the things that you want and those that you need in a home. Do you need 2 bedrooms, but 3 would be nice? Think about size, area, amenities as well as how much you can afford. Nearly 80% of people expect to own more out of a home than they can afford.

Make sure that you have a good understanding of how the home buying process works. here are many types of homes on the market. Realize that if you purchase homes for sale by owner, your agent may not be able to help you and then you are on your own for insuring that the process goes well. Also, if you look into foreclosed homes, you may have to pay liens on the home as well as pay for the necessary repairs if needed.

Once you have a home that you would like to purchase, you should have the home inspected. This will help you to know the condition of the main features such as the roof, windows, air conditioning, and furnace. They will help you notice problems such as a wet basement of problems with the foundation. Don’t sign any papers until you have a good idea of what is happening with the home.

Use the tools that you have to get your answers solved. If you do not understand what you should be doing, ask your real estate agent for help. If you are wondering what is happening with your loan, talk to your mortgage loan officer. All of these things can go well when you plan for them. You can be living in a comfortable home within a matter of months if you start right from the beginning.

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Know The Resale Value Before You Even Buy A Home

Not only is your house a home, it is also an investment. No matter how long you live there, at some point you may decide to leave. Suddenly resale value becomes uppermost in your mind. But you actually should have considered what the resale value of the home potentially is before you even bought it.

The resale value of your house depends on many things. What is most important to consider is your own plans for that home. Do you plan to be there for 5 years or 50? Do you plan to purchase and then resell it right away to make a profit? No matter what, there are several things that will affect your home's resale value.

Location

What is a good location now is not necessarily what will be good years later. However, several things are likely to stay the same. For example, the amount of land the home is on is important because land rarely decreases in value. Things like sidewalks, mature trees and proximity to schools all figure into the value no matter what the trend is. Also, consider the population and economic growth of the area. These can help you predict what could happen to the home down the road.

Who’s Living There?

One of the things that affects resale value are the demographics. For example, if there are many baby boomers in the area, their homes may be more accessible to older individuals. While this is true now, in 10 years, these homes may not be as marketable with the same qualities -- if there are fewer buyers looking for them. Is the city young and growing? This type of planning can help you to see what the area will be like in the future.

What Features Does It Have?

You can learn what characteristics are important to current home buyers by looking at selling prices with various features. For example, how much difference does an extra bathroom make? What about new, energy efficient windows? Homes that are older may not keep increasing in value, especially if their features are becoming old or out of style.

But, realize too that there may be many individuals looking for the purchase of a home for these very qualities, as well as buyers who intend to renovate.

Get A Home Inspection

A home inspection can help you know what work needs to be done to a home within the next few years. This will help you determine the life span of the important factors of the home. What if you plan to sell in 3 years and the roof, furnace and the windows will need to be replaced during that time period? This will lower the resale value unless you update these features.

Sure, you are looking for a home to purchase for your needs today. But, think of your home purchase as not just a place to live, but that it is the most costly investment you are likely to undertake in your life. Each aspect, including the resale value is important to take note of before you make that purchase.

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Should You Buy A Fixer Upper?

Many individuals set out to purchase a fixer upper. The idea behind it is that the bad qualities of the home will lower the price of it. The buyer can then invest the savings in transforming the house into their dream home. But there are different levels of fixer uppers. Its important to know when you should consider a house and when you should run from it.

You should take your time when looking into all of the repairs that are needed. Otherwise a great bargain may instead become a money pit.

House Hunting

If you are after a fixer upper, you can find them, in most cases, the same way that you would other homes. Just ask your real estate agent to help you, since they have access to all homes on the market. Remember, what the property looks like on paper is not necessarily what it will be like in reality.

Reality Strikes

Don't make the mistake of thinking that a low end price is one that necessarily means a great deal. You need to factor in what is wrong with the house. You should have a home inspector help you go through the home to find out what the real problems are, as well as how much it will cost to repair them. Get a professional appraisal of the home as well.

Don't rely on what the seller is telling you. Or let the seller pressure you. Don't agree to purchase until you are sure of the full scope of repairs needed. A pushy seller can be a sign of trouble! You need to allow time to consider how much work, time and money it will take before committing to a house. Take the time to really crunch the numbers and see how much you will actually be investing.

The Area

Like any home that you purchase, you should take into consideration the area in which the home is located. This is important especially when it comes to other homes in the area that have been renovated. In some areas, home values can be depreciating.

Only after you have considered everything that this fixer upper will need from you can you make a decision about whether it is a good buy or not.

Finally, if you plan to use a mortgage to pay for it, you may need to have the bank sign off on the fact that it is a fixer upper.

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How To Get The Most

Out Of House Hunting

There are many things that you can do to make your house hunting trip better and less stressful. Let's examine a few.

Determine Locations

The very first step in house hunting is to chose one or more areas to focus on. Here are some location factors to consider:

* Schools and their quality

* Shopping centers, medical facilities, recreational public transportation and other nearby businesses.

* The neighborhood itself and its curb appeal.

* How far from your employment is the home?

* What's the crime rate?

* What are the people like?

All of these things contribute to finding the best location for your home.

The Home You Want

Now that you know where in general you want to live, you can begin to work on what the house should be like.

* First and foremost make sure to know how much of a house you can afford. There is no sense in looking at homes that you can not get a loan for. Become pre-qualified with your mortgage lender and then provide this information to your real estate agent, so that they can help you find homes within your price range.

* Now look at your needs: bedrooms, baths, home size, garage.

* Then look at the things that you would like to have, but are not essential: large backyard, fireplace, and jacuzzi are examples.

Planning Is Key

It is important to work with your real estate agent to schedule examining the many houses that are available. But do not schedule more than a few homes for the same day because they will begin to blend together. Also make sure you take effective notes on each home while you are in it. Use a camera to help you to remember important features about each home.

Make sure that you dress comfortably and that you plan to be out for a long while.

Chosen an effective real estate agent, not the agent listed on the sign in the front yard of the home. Find someone that you know and trust to have your best interests at heart.

Taking the time to be prepared for your days of house hunting will help you get the most out of it. If you take the time to look at many homes in an effective manner, you may have several good options to choose from.

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Negotiate Your Home

Buying Contract Professionally

You are ready to make the big decision and buy a home. There are several things that you need to do in order to get the contract -- and the house -- the way that you want it.

Negotiation Goals

Negotiations take place between the buyer and the seller. If you are a good negotiator, you can expect to get what is rightfully yours, but also have to work with the seller to get the contract signed. Working together to solve problems is a crucial mindset.

Your goal is to get the best total price on the home, as well as getting into it in the right time period. The seller's goals are to get the most money OUT of the house and to move on HIS schedule.

While you may think that a home is worth less than the asking price, the seller usually thinks his home is worth more than it actually is. The fun thing is finding the right middle ground.

Negotiation Tips

1. If you feel that the home is not worth the price, and you have reasons to justify it, let your real estate agent know. Your agent will talk with the other agent about these blemishes. You should bid on the home at a lower price because of the imperfections, but do not insult the seller with an outrageously low rate. That's the perfect way to get them not accepting your offers at all.

2. Be prepared to solve any repair, title, survey or loan problems fairly and quickly to prevent future problems at closing. Determine who will make repairs and what the price of the home will be as a result.

3. Don't get emotional. In the offering and counter offering steps, the seller can walk out at any time if you make negative comments or become angry with them. Instead, work together to come to an agreement.

4. Don't respond too quickly. Carefully consider the sellers' arguments or statements -- first understand them, then delve deeper to examine motives, finally express your well considered response.

5. Listen and understand what the seller says -- he will often give you the clue that brings everything together. I once saved several thousand dollars because the seller was stuck on getting a certain price for his house -- I simply got him to agree to pay all closing costs instead of the customary half. He was happy because he "got his price," and I was happy because I saved money.

6. Find out the seller's needs. The buyer must be able to appeal to the seller's concerns.

7. Make sure to have any unclear portions of the proposals clarified completely.

8. Never discuss your personal issues that indicate a vulnerability, such as an urgency to move in or a financial problem.

9. Try to find a common ground with the seller. This can be a very powerful tool used to the buyers' advantage in the event of multiple offers. Often a seller may select a buyers' contract for sentimental reasons, for example if the buyers remind the sellers of themselves when they were a young couple.

10. Convey an appreciation for some aspect of the house that reflects the seller's taste. For example the decorating.

11. Respond to counter offers within a reasonable time frame.

12. Look for leverage points. One example is if the house has been on the market for over 300 days, the buyer will have a lot more leverage than they would have with a brand new listing.

13. Work with your agent to find the right terms for the negotiation.

14. Get help when it comes to making that first offer. Make sure that you ask your agent what the value of the home seems to be, based on appraisals and the home inspection. Most buyers will offer less than the asking price in the hopes of getting the home to come down in price some. Don't go too low though, as you could offend the homeowner and cause them to refuse to deal with you altogether.

By working with the seller throughout this process and offering the right amount, you will soon have the home of your dreams, without going through a nightmare to get it.

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