Mo re i n f o : h o u s e o p e d i a .

c o m

HOMEBUYER'S
HANDBOOK
Helpful reference guide to lead you through your home buying journey

PRESENT ED BY

C hris t ie Valeri
R EALT O R ®
CONTENT
Two Big Money Moments for
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Homebuyers
Qualifying for a Mortgage with
17
Student Loan Debt
STEP 1: PREPARING FOR Six Hidden Expenses that Surprise
18
HOMEOWNERSHIP New Homeowners

3
Buying Versus Renting: The Pros STEP 3: BUYING YOUR
& Cons HOME
10 Ways to Help Repair Your
4 Let’s Make a Deal: Buyer
Credit History 19
Strategies
Prequalified or Preapproved:
5
What’s the Difference? 20
How to Win a Bidding War on a
House
7 Reasons Why Using a Real Estate
6 Agent Makes Shopping Easier Demystifying Your Real Estate
21
Contract
7 Partner With Your Agent to Find
the Perfect Home Home Inspection: A Buyer’s
22
Perspective
Floor Plans: Choosing the Right
8 Don’t Delay When It Comes to
One for You 23
Home Inspections
Buying New or Used: What’s Your
9
Home Preference?
STEP 4: MOVING INTO
STEP 2: FINANCING YOUR YOUR HOME
HOME 24 A Quick Lesson on Insurance for
New Homeowners
How to Shop Around for the Best
10 Nearing the Home Buyer’s Finish
Mortgage 25
Line: The Walk Through
11 Choosing the Best Mortgage for
You 26 Do-It-Yourself Packing and Moving

12 Find Out If You Qualify for

Government Help with a Mortgage 27 7 Must-Dos on Move-in Day

13 Home Mortgage Process: Do This,

Not That
HOMEBUYER’S
Free Help for Consumers: ‘Know 28
14
Before You Owe’
CHECKLIST
Tap Into Little Known Sources for
15
Down Payment Help

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PREPARING FOR HOMEOWNERSHIP FINANCING YOUR HOME BUYING YOUR HOME MOVING INTO YOUR HOME

BUYING VERSUS RENTING:

THE PROS & CONS

When is the right time to buy a home? Are there times when you’re better off
renting? There’s more to consider than just the finances. Let’s take a look.

Roots versus freedom. Home ownership brings the intangible benefit

of feeling established and putting down roots. We’ve all seen those pencil
markings on the walls of homes where parents recorded their kids’ heights
year after year. It conjures up feelings of comfort. Homeowners also are more
likely to build lasting relationships with neighbors and community businesses.
Apartments and neighborhoods with rental houses, on the other hand,
experience frequent turnover of residents. That said, renting provides the
freedom to easily move for job advancement and changing family dynamics.

Crunch some numbers. Compare the demand for homes versus that for
renting a house or apartment of similar size. What are the going rental rates
compared to a mortgage payment? Don’t forget: With home ownership the
cost of upkeep is on you; with a
rental, it’s on the landlord.

Tax savings. Come tax season, “When is the right time

homeowners are able to deduct to buy a home? Are there
mortgage interest and property
taxes, a big tax savings you times when you’re better
won’t have when renting. off renting?”
Equity for you or the landlord.
Another thing to consider is the
equity you build up in a home over time when making mortgage payments.
Rental payments only build equity for the landlord.

Use a rent-versus-buy calculator. Several sites offer online calculators

to help you decide whether it’s more financially beneficial to rent or buy. The
New York times offers one example at: http://nyti.ms/1j9OVCw

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PREPARING FOR HOMEOWNERSHIP FINANCING YOUR HOME BUYING YOUR HOME MOVING INTO YOUR HOME

10 WAYS TO HELP REPAIR YOUR CREDIT HISTORY

Do you have bad credit? While legitimate credit repair services can help improve your credit scores, you can do the work yourself and
save money. Here’s how.

1. Pull Your Credit Report. Pull your credit report 6. Avoid “Erase” Scams. If a credit repair service
at www.annualcreditreport.com. It’s free. Each credit reporting promises to “erase” bad marks on your credit that are genuine
agency, Experian, Equifax and Transunion, will have its own problems you have had, it is a scam. Legitimate blemishes on
detailed report on your history. Study each and look for errors. your report can only be removed over time by reestablishing good
For example, if you had a debt go to collections that has been sold credit practices.
to other collection agencies, it should only show as one debt —
not multiple ones. Fix any errors by writing to each agency with 7. Do Your Research. If you still think you need help from
supporting documentation. If an ex-spouse is lowering your credit a credit repair service, do your research. Look at online reviews,
score, supply all three agencies with a copy of your divorce decree. and check with the Better Business Bureau, the website for
your state’s attorney general and the federal agency called the
2. Send Documentation. If you spot an error caused Consumer Financial Protection Bureau at www.consumerfinance.
by identity theft, send all three agencies documentation that gov.
you have disputed the fraudulent account along with affidavits
attesting that they were not opened by you, and police reports on 8. Consolidate Your Debt. If you are drowning with
multiple debts, especially high-interest credit card debt, go to a
the crimes committed against you. This is a slow, difficult process.
bank that offers debt consolidation loans. Not all do. Start a good
3. Use Credit Cards Wisely. To rebuild your score, use relationship with a banker who can help you.
your cards wisely and pay them on time. Your payment history
and utilization account for 65 percent of your credit score so it’s
9. Federal Student Loans. If you have multiple federal
student loans, contact www.studentloans.gov and investigate
beneficial to use your cards regularly and pay them on time each
consolidation loans.
month.
10. No Auto Title or Payday. Never resort to auto title
4. Pay Off Your Accounts. A history of paid-off accounts loans or payday loans. These lending vehicles charge outrageous
amounts to about 15 percent of your score so completely paying
interest rates and, in the case of title loans, could cause you to
off a loan will help boost your score.
lose your car.
5. Diversified Debt. The remaining 20 percent of your
credit score is attributable to diversified debt. In other words, it’s
best to have more than one type of loan on your credit report.
A mortgage and a credit card will give you a higher score than
having only a mortgage.

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PREPARING FOR HOMEOWNERSHIP FINANCING YOUR HOME BUYING YOUR HOME MOVING INTO YOUR HOME

PRE-QUALIFIED OR PRE-APPROVED:
WHAT’S THE DIFFERENCE?
One of the most important steps in the home-shopping process is for buyers to have an initial assessment of their ability to get a
mortgage. As a buyer, already having a letter from a lender in hand means you can move quickly when you find the home you want. As a
seller, having a buyer with that letter means they are serious, and not just a “tire kicker.”
Many are confused about the two most commonly used terms: pre-qualified and pre-approved. They are different and shouldn’t be used
interchangeably. Here’s what you need to know.

Pre-qualification. With both pre-qualification and pre-approval, the prospective home buyer contacts
a mortgage lender and has a conversation about how much home the buyer can afford. The difference
between the two terms lies in the depth to which the lender has taken the buyer in this initial step.
With pre-qualification, the conversation is an early assessment of creditworthiness. The lender asks
about income, job history, debt, credit condition and other questions. No reports or statements are
pulled. From this conversation the lender can tell buyers how much home they can afford. Nothing is
guaranteed until the full mortgage approval process is completed. What is the value of this cursory
conversation? It helps save time and hassle if the buyers have issues such as damaged credit. If the
buyers have been self-employed, they will be on notice that they need more robust documentation later
in the buying process.

Pre-approved. The more definitive status is when a buyer is pre-approved. Here, the lender drills
down, getting permission to pull credit reports, receiving income verification, and looking at recent
statements of bank accounts and other assets. Based on these documents, the lender can actually
issue a letter of preapproval for a mortgage, up to a certain dollar amount. Most real estate agents
consider this a firmer step toward buying a home.
Even with “preapproved” status, there is no final guarantee of a loan. Once a home is chosen
and property is under contract, the real work of full approval begins. The lender will analyze all
of the same reports with more scrutiny, send verification inquiries to employers, look at bank
statements for the last several months, and examine two years of tax returns, among other things.
The house will be appraised to determine the appropriate loan-to-value ratio, or the maximum
percent of the home value the lender will loan. Debt-to-income ratios are then used to determine
the monthly mortgage payment you qualify for based on your income, housing expenses and recurring
financial obligations. Full approval is a much more fine-tuned process.

Staying pre-approved. Staying pre-approved. Once pre-approved, do not change any elements of your financial profile without
consulting your lender. Any of the following changes could lead to the invalidation of the pre-approval letter during the home purchase
process:
• Change in employment • Purchasing a car or other large ticket items with a loan
• Opening or closing of credit card or bank accounts • A deposit or withdrawal of an unusually large amount of
• Late payment of monthly bills or debt payments money from bank accounts

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PREPARING FOR HOMEOWNERSHIP FINANCING YOUR HOME BUYING YOUR HOME MOVING INTO YOUR HOME

7 REASONS WHY USING A REAL ESTATE AGENT MAKES

SHOPPING EASIER
Whether buying a new house or an existing one, buyers typically feel more at ease having a real estate agent working on their behalf. It’s
their job to make things go smoothly. Here’s how.

1. Knowledge of builders. Real estate agents don’t just 5. Knowledge of the contract. This may be the most
work with resale homes. Agents know the builders in a market - intimidating part of the process for the average person who buys
past and present - and should be able to tell you the quality of a house only once in several years. Agents work with real estate
workmanship and the value for your money. Agents will also be contracts on a daily basis and can help you ask the right questions
familiar with any promotions or mortgage discounts available. and steer you to a lawyer, if necessary. Seasoned agents are also
adept at negotiating.
2. Knowledge of the market. Real estate professionals
know how home sales are pacing in your market, the average days 6. Knowing a network of professionals. If you
on market, what areas are selling well, and what price range is don’t have local professionals in mind, real estate agents can
selling well. This is valuable knowledge for buyers and sellers. recommend mortgage brokers, inspectors, appraisers and lawyers
to hire.
3. Knowledge of particular neighborhoods. Real
estate agents know the ins and outs on neighborhoods - which 7. Professional standards. Real estate agents are
areas are selling well and which ones aren’t; the age of the homes; licensed by state and are required by law to act with the client’s
the reputation of the schools; and even the availability of shopping interests placed ahead of their own. Besides licensing, if an agent
and accessibility to public transportation. is a member of the state’s Realtor™ association, they have pledged
to uphold the highest standards of conduct in the industry.
4. Pricing knowledge. An agent will be able to tell if a
house is fairly priced and how to best make an offer given market
conditions.

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PREPARING FOR HOMEOWNERSHIP FINANCING YOUR HOME BUYING YOUR HOME MOVING INTO YOUR HOME

PARTNER WITH YOUR AGENT TO FIND

THE PERFECT HOME
Your real estate professional is your best asset when searching for potential homes, but
your agent needs certain key information to find the right fit. Knowing what to tell your
agent can help you make the most out of this important partnership.

BUDGET. Figure out what you can afford. Think carefully about all the costs of owning
a home — not just the down payment and mortgage. Don’t forget about homeowners
association fees, maintenance costs, taxes and private mortgage insurance, if you need
it. Be honest with yourself and your agent about how much you are willing and able to
spend. While not necessary, it’s smart to be preapproved or at least but prequalified for
a certain mortgage amount.

TIME FRAME. If you’re in a hurry to find a new place, your agent needs to know. If
you have plenty of time to search, agents will handle that differently, perhaps sending
periodic listings that match your exact wish list.

LOCATION. Be prepared to tell your agent where you want to live, being as specific as
possible. It may be a larger search, such as a radius around a specific location, it may
be a particular town or city, or it may be as specific as a single neighborhood. Also let
your agent know if you need to be close to public transportation or in a specific school
district. He or she may know of an alternative location that you may not have considered.

TYPE AND SIZE. Do you want a single-family home, a condominium, or some other
type of property? Size is also an important factor. For example, how many bedrooms
and bathrooms do you need? Do you have a certain square footage in mind? Do you
want a small yard or acreage? Think about how much space you need and what is right
for your lifestyle. Are you planning a
large family? Do you want to maintain
a large home or piece of land?
“Be prepared to tell your WISH LIST. It’s a good idea to create
agent where you want to a wish list and rank items from most

live, being as specific as

to least important. You may have a
certain style of home that your prefer.
possible.” Many people want a home that is
move-in ready. There may be amenities
that are important to you. Some of the
most common wish list items include
updated kitchens and bathrooms, hardwood floors, open floor plans and big yards.
Depending on this list, you might be able to find a home that satisfies all your wants and
needs for the right price. But often, buyers need to make trade-offs.

DEAL BREAKERS. All homebuyers have certain things they just can’t live with — or
without — in a home. Maybe it’s being located next to a busy road or having a driveway
on a hill. Or perhaps you must have at least three bedrooms. Whatever your deal breakers
might be, tell your agent up front. You’ll save everyone a lot of time and effort.

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PREPARING FOR HOMEOWNERSHIP FINANCING YOUR HOME BUYING YOUR HOME MOVING INTO YOUR HOME

FLOOR PLANS:
CHOOSING THE RIGHT ONE FOR YOU
Touring model homes is one of the best ways helpful if an aging relative comes for an ex-
to get a feel for whether a floor plan will work tended visit.
for you. It’s time well spent before committing
to such a huge investment in your future. Take A builder may include a “bonus room,” particu-
your time and consider the following: larly in those regions where basements are un-
common. The additional space can be utilized
Think now and later. Begin as a playroom, home office, or used
by thinking about what you to convert a three-bedroom
currently need in a home floor plan to a four-bedroom
but also try to antici- house.
pate changes in your
family situation. If Assess the flow. The
your family grows, flow of the overall
will you run out of floor plan should also
space? Will an ag- be taken into consid-
ing family member eration. For example,
be moving in with the kitchen should be
you? Will an adult adjacent to the dining
child be forced to re- area. The laundry room
turn home? is best located within
easy access of the bed-
Bedrooms arrangements. rooms to make laundry chores
Once again, consider what you easier. A “mud room” for coats,
need now and what your later needs may backpacks and shoes is a nice feature com-
be. For example, while younger children may ing off the garage. And finally, “Jack and Jill”
easily share a bedroom, older children may bathrooms that connect two bedrooms are a
need a space of their own. great way to maximize space.
The arrangement of bedrooms is also a consid- Bring the family. After a preliminary visit to
eration. While a downstairs master bedroom a model, it might be time to schedule a second
is popular among older couples, many couples visit with the entire family. Compare room siz-
with young children prefer upstairs master es with your current space to help judge if the
suites that are closer to the children’s rooms. new house is the right size.
A guest bedroom on the main floor may be

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PREPARING FOR HOMEOWNERSHIP FINANCING YOUR HOME BUYING YOUR HOME MOVING INTO YOUR HOME

BUYING NEW OR USED: WHAT’S YOUR HOME

PREFERENCE?

The hunt for a new home most often begins with the FEATURES. New homes offer upgrades, which means buyers may
answer to one simple question. Do I want to purchase choose to buy more expensive cabinets, counters or tile. In an ex-
isting home, update will have to be done after closing, which means
an existing home or new construction? Retro and dealing with the construction hassle. Electronic features, such as
quirky versus a blank slate? Consider these eight wiring for home theater and smart home technology, can be easily
trade-offs before making your decision. built into new construction. However, retrofitting an existing home
is more difficult and expensive.
PURCHASE PRICE. Statistics show that buying a new house
may cost 20 percent more than buying an existing home, though LOT SIZE AND LANDSCAPING. Unless you are building a
circumstances in your market may be different. New construction custom home on your own, new subdivisions build houses very close
tends to be further from urban centers. Existing homes in the city to one another. Older homes have more spacious lots. Trees and
center will be higher than comparable houses in the outskirts. But landscaping on new construction lots are usually young and sparse,
not all cost increases are in the house itself. Commuting costs are whereas older homes have the beauty of large mature trees and
much higher in the suburbs. other established greenery.

FLOOR PLAN. New homes are built with current tastes in mind, TIMING. With a new construction home, unless construction is
which means new construction will offer open floor plans with few underway, buyers must wait up to six months for it to be finished.
walls in the main living areas. Also in new homes, windows are With an existing home, sales typically close in a month or two.
larger, allowing more natural lighting. Vaulted ceilings create an
expansive feel. Bathrooms are larger and walk-in closets are com- MAINTENANCE. With new construction, everything is fresh. It
monplace. will be years before you have to replace or repair even small items.
With an existing home, an inspection is vital so the buyer knows the
Existing homes, depending on age, may have smaller, more defined condition of the house and knows when items will need repair or
rooms, smaller windows and lower ceilings. Homes from a couple replacement. Any expensive items that will need work soon should
of generations ago did not have walk-in closets and spacious bath- be used in negotiations for price concessions from the seller.
rooms. To open things up will require remodeling, which should be
figured into the purchase price. ENERGY EFFICIENCY. Newer homes are far more advanced
than older homes when it comes to energy efficiency. This is true
ARCHITECTURAL STYLE. Part of the appeal of existing not only for the structure itself, but also for the systems. Unless
homes is the retro look of the architecture. Some older designs they’ve been upgraded over the years, the insulation, windows and
have a character that cannot be found in contemporary houses. In doors of older homes will be colder in the winter and warmer in the
neighborhoods from generations past, homes were customized. Or summer. Heating and air conditioning systems today operate far
enough time has passed that tract homes have been remodeled. more efficiently, using less gas and electricity than even just five
years ago. The same is true of appliances. An older home may need
Builders in new subdivisions may have only a handful of designs. to be upgraded to get energy bills to a manageable level.
While they will try their best to keep identical homes from being
built side by side, a house three doors down might be your home’s
identical twin.

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PREPARING FOR HOMEOWNERSHIP FINANCING YOUR HOME BUYING YOUR HOME MOVING INTO YOUR HOME

HOW TO SHOP AROUND FOR THE BEST MORTGAGE

It’s important to shop for the perfect place Ask for referrals. Ask friends and co- some point in the application process,
to call home, but don’t forget to shop workers who have gotten mortgages in the you may lock the interest rate so that it
around for the best financing, too. The last few years for referrals. doesn’t go higher before you can close.
quality of the terms of your mortgage can This may or may not incur a charge from
mean a difference of tens of thousands of Do comparisons. Get at least three the lender, so ask. Knowing the interest
dollars over the life of the loan. Here are a quotes to compare. Ask each one for the rate atmosphere is crucial. If rates are
few tips on finding the best mortgage. numbers on different terms of loans, such trending lower, you may not want to lock
as a 15-year fixed, a 30-year fixed and an in a rate.
Mortgage broker vs. lender. A mort- adjustable-rate mortgage. With ARMs, find
gage lender works for one financial com- out what the payment will be at the max- • How much of a down payment do I
pany, such as a bank, and sells only its imum rate. Can you afford that maximum need? The amount of the loan and sub-
mortgages. A mortgage broker works with rate? sequent down payment is determined
many lenders and can shop among them to by the maximum ratio of a loan’s size to
find the best rate, fee packages and other Questions to ask. Don’t be shy about the value of the property, which secures
terms. asking questions of lenders and brokers. the loan. The loan-to-value (LTV) ratio is
Here are several key questions that will a measure of risk used by lenders. For
The lending world at your fingertips. help you decide what mortgage to choose. example, a conventional 30-year fixed
The internet makes shopping for anything term mortgage may have an 80 percent
• How much is the origination fee? Are
much easier and mortgages are no excep-
there any other fees? Lenders are re- LTV, meaning the loan value would be
tion. Browsing mortgages can be done
quired by law to supply you with a Loan 80 percent of the sales price or the ap-
on your time in the comfort of your own
Estimate (LE) within 3 business days of praised value, whichever is lower. The
home. You can also read reviews by pre-
vious customers. Be advised: Only speak submitting the loan application. Typical- subsequent down payment would be 20
percent.
with brokers and lenders you have con- ly, the origination fee will be expressed
tacted directly. Be wary of cold calls from in “points,” meaning percentage points. • How long will it take to process the
others who have picked up your contact in- An origination fee of one point equals loan? Compare the answer to what
formation through your internet searches. one percent of the loan amount. This online consumer reviews say. A long,
Stick with well known online companies to also applies to “discount points,” which drawn-out loan process can create de-
which you have initiated contact. is a way to reduce your interest rate. lays that cost you money in terms of
• When can I “lock in” my interest rate? what you are paying to stay in a current
Interest rates are always changing. At house or apartment or other unforeseen
costs.

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PREPARING FOR HOMEOWNERSHIP FINANCING YOUR HOME BUYING YOUR HOME MOVING INTO YOUR HOME

CHOOSING THE might make sense if you think you will sell before the five-year
initial period is up. The obvious risk with an ARM comes after

BEST MORTGAGE
the initial period, if the rate increases and you can’t afford
your payment. ARM loan foreclosures played a major role in the
housing crash in 2008.

INTEREST-ONLY LOANS. An interest-only loan also offers

FOR YOU lower payments for an initial period followed by a substantial

increase. In this case, during the initial years no principal is being
paid, only interest. The monthly savings can be considerable, but
the spike at the end of the initial period can sting. Homeowners
Shopping for a home also means shopping for a mortgage. If with this type of loan also aren’t building equity so it’s not
this is all new to you, the multitude of mortgage types might be surprising that Interest-only loans were another contributor to
confusing. Here’s what you need to know. the 2008 housing crash.

FIXED-RATE MORTGAGE. The fixed-rate mortgage is the PIGGYBACK LOANS. For borrowers with limited money for a
most traditional way to finance a home. Typically available in down payment, a piggyback loan could help. In this arrangement,
fifteen- and thirty-year terms, the loan’s interest rate remains the lender loans an amount equal to 80 percent of the house
the same throughout the life of the loan. The rate will be higher value, then lends a smaller home equity loan equal to 10 percent
for a thirty-year note than a fifteen-year note, but because the of the home value. The two loans are “piggybacked” atop one
pay off on the fifteen-year loan is shorter, the monthly principal another. The borrower only has to come up with the remaining
and interest payment is higher. The benefit is that you save tens 10 percent for a down payment. This arrangement also helps the
of thousands of dollars in interest paid over the life of the shorter borrower avoid paying private mortgage insurance.
loan. If you can’t afford a fifteen-year loan, take out a thirty-year
loan and pay a little extra toward principal each month, shaving Piggyback loans have their own drawbacks. The smaller loan is
thousands of dollars off your loan. usually for a shorter term and the payment is typically high. In
addition, the smaller loan creates a second lien on the property,
ADJUSTABLE-RATE MORTGAGE (ARM). With an adjustable- so the borrower must be equally faithful to it or risk foreclosure.
rate mortgage, the interest rate in the initial five years is lower, Finally, with only a 10 percent down payment, the buyer has less
then “resets” at a higher or lower rate thereafter, depending on a equity from the start.
predetermined formula. There are other starter periods available,
but the most popular is the five-year. Generally, the starter rate
is lower than the current fixed-rate mortgages available.

As an example, say you take out a “5/1” adjustable-rate mortgage.

That ratio refers to the five years of the initial fixed rate, the one
means that the rate can adjust each year thereafter. The amount
of the adjustment will be linked to a market index, plus a two- or
three-point added margin. Let’s say the initial five-year rate is
3.5 percent. Then, assume that the index is tied to the yield on
U.S. Treasury bills, which at the reset is 2 percent. In this example
you would pay 3.5 percent interest for the first five years, but in
the sixth year you’d pay 5 percent: the 2 percent index rate plus
the 3 percent margin. The next year it would reset again, higher
or lower, by the same formula.

Don’t agree to the terms of the loan unless you clearly understand
them. ARM loans offer caps on how much the rate can go up per
year, or how much it can rise over the life of the loan. An ARM

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PREPARING FOR HOMEOWNERSHIP FINANCING YOUR HOME BUYING YOUR HOME MOVING INTO YOUR HOME

FIND OUT IF YOU QUALIFY FOR

GOVERNMENT HELP WITH A
MORTGAGE
extra 3.3 percent represents a financinging fee paid
by the veteran that can be financed into the loan.
When searching There is no Private Mortgage Insurance (PMI) re-
out home-financ- quired since the VA insures against the lender’s
ing opportunities, it’s loss if a borrower defaults. The property must be an
worthwhile to see if you owner-occupied, one-to-four-family residence. The
qualify for government programs that offer at- VA requires two certificates: one for eligibility and
tractive terms. The loans are usually administered another for reasonable value of the property. If a vet-
through a private mortgage lender, but are insured eran refinances an existing VA loan with another VA
by the federal government against loss due to bor- loan, he or she can finance up to 100.5 percent with
rower default. Here’s a quick primer on the possi- the extra .5 percent going to interest rate reduction.
bilities. Qualified buyers can assume an existing VA loan.
FEDERAL HOUSING ADMINISTRATION (FHA) U.S. DEPARTMENT OF AGRICULTURE (USDA)
LOANS. Approved FHA mortgage lenders provide LOANS. This federal government program is backed
money, set interest rates, and have attractive terms by the USDA and is designed to make homeowner-
for owner-occupied properties. The FHA generally ship accessible to people living in rural areas. The
allows for a minimum 3.5 percent down payment address must be in the USDA’s eligible database. Ap-
with a credit score as low as 500 to qualify, but plicants must have a reasonably good credit history
does require a mortgage insurance premium to be and can finance up to 100 percent of the purchase
paid by the borrower. Maximum loan amounts are with a fixed-rate loan. As with the FHA program, the
approved by regional offices of the U.S. Department USDA requires homeowners to pay mortgage insur-
of Housing and Urban Development. Properties must ance premiums. There are three programs: the Guar-
be appraised by FHA-approved professionals follow- anteed Loan program, the Direct Loan program and
ing minimum property requirements. No prepayment the Rural Repair and Restoration program for very
penalties are allowed, sales contracts must contain low-income families and individuals.
an escape clause if property does not appraise for
the sales price, and loans can be assumed by a qual- Maximum household income requirements, which
ified buyer. vary by county, are enforced. The incomes of all
household members are factored together. The home
DEPARTMENT OF VETERANS AFFAIRS (VA) must be occupied by the owner.
LOANS. For veterans of the armed services, active
members or surviving spouses, the VA loan program
has excellent incentives for pursuing the dream of
homeownership. Veterans or surviving spouses who
have not remarried can borrow up to 103.3 percent
of the purchase amount with no down payment. The

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PREPARING FOR HOMEOWNERSHIP FINANCING YOUR HOME BUYING YOUR HOME MOVING INTO YOUR HOME

HOME MORTGAGE PROCESS: DO THIS, NOT THAT

The mortgage approval process is rigorous. Since the housing bubble burst in 2008, federal regulators have ratcheted up their
standards. Here’s a list of the do’s and don’ts to be approved.

DO THIS DON’T DO THIS

Brace yourself to comply with the documentation process, which During your mortgage approval, it’s best not to do anything that
is extensive. can be perceived as having a negative influence on your income
• Always be truthful on your mortgage application. If a and assets.
mortgage lender asks you to lie, get another lender. It is a • Don’t apply for or take out any type of loan — period
serious crime. • Don’t change jobs. If you have no choice, be prepared to
• Provide all requested copies of income such as regular pay explain it in detail, Also, don’t take an unpaid leave of
stubs, and proof of bonuses and commissions. You’ll also absence.
need an employment verification letter from your company. • Don’t transfer money between accounts. If you must,
If you have had decreases in pay, be prepared to explain. If document it and tell the lender why it was done.
you work on commission, you may be required to provide
a letter from your employer about your income prospects. • Try not to sell assets and deposit the cash unless you need
it for closing. Be prepared to document it.
• Provide all requested income tax returns. If you are self-
employed, be prepared for extra scrutiny. • Don’t take a cash advance on a credit card.
• Provide bank and investment statements. If you have had
or you expect large deposits or withdrawals, you’ll need to
explain them.
• Be current on car loans, credit card balances, student loans
and any other contracted payments. Pay down as much debt
as possible before applying for a mortgage. If you have black
marks on your credit reports, be ready with an explanation.
• Pay your earnest money and down payment from your own
accounts or from gifts acceptable sources. Consult the
lender regarding the acceptability of those sources.
• Notify the lender of any job changes, income changes, or
anything else that might affect your income and ability to
pay.

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PREPARING FOR HOMEOWNERSHIP FINANCING YOUR HOME BUYING YOUR HOME MOVING INTO YOUR HOME

FREE HELP FOR CONSUMERS: ‘KNOW

BEFORE YOU OWE’
In the often-confusing world of finance, the Consumer Financial Protection
Bureau (CFPB) is a valuable source of free information for homebuyers and
others making a major purchase or investment.
Created by Congress following the 2008 financial meltdown, the bureau
provides helpful educational materials, tools for making financial decisions,
and conflict resolution with financial institutions. The bureau’s motto is
“We’re on your side.”
Here are some of the highlights of how the bureau helps consumers:

EDUCATIONAL MATERIALS.
The bureau’s website offers several helpful educational guides, including
materials aimed at adults, youth and educators teaching financial fitness.
One section is dedicated to managing the finances of people who are
unable to make decisions for themselves. Check the website for webinars
on specific topics of interest. Don’t forget to check archived webinars.

CALCULATORS.
“Know Before You Owe” tools are available on the bureau’s website for
different types of loans, including auto and college loans and mortgages.
Review tutorials on weighing the future impact of taking on certain debts
and use online calculators to crunch the numbers.

RESOLVING CONFLICTS.
The bureau is not just an information source. The agency has some teeth for
helping consumers resolve conflict with financial institutions. Consumers
may file an online complaint with the bureau, which will then contact the
financial company in question. The company has 15 days to respond. Most
complaints must be resolved within 60 days.

ONLINE COMMUNITY.
A “Tell Your Story” section on the website provides an opportunity for
consumers to tell their consumer experiences, positive and negative, in the
hope of helping others.
Find all these resources and more at www.consumerfinance.gov

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PREPARING FOR HOMEOWNERSHIP FINANCING YOUR HOME BUYING YOUR HOME MOVING INTO YOUR HOME

Down payment assistance programs are targeted at low-

to moderate-income homebuyers, but some middle income
buyers may qualify. In some states, qualified homebuyers
must earn at or below 80 percent of the median income
for the area. Some states allow an income at more than
100 percent. The cost of the home also figures into the
equation. Some states set the amount available to you at a
percentage of the cost of the home being purchased, while
other states set a specific dollar cap.

A LITTLE MORE HELP. Fannie Mae offers a first-time

homebuyer program called Home Path Ready Buyer with
help amounting to 3 percent of closing cost assistance in
TAP INTO LITTLE KNOWN exchange for taking a financial management education
course.
SOURCES FOR DOWN Another program not limited to new homebuyers is the
multi-state program from the National HomeBuyers Fund
PAYMENT HELP which offers grants for down payments or closing costs.

Accumulating down payment money for a house is im-

portant, but can be challenging, especially for millennials
bogged down in massive student loan debt. But don’t de-
spair. Help is available through down payment assistance
programs — in other words — free money.

THE FEDERAL HOUSING ADMINISTRATION, or FHA,

along with the Veterans Administration (VA) and some oth-
er government-backed loan programs already provide the
opportunity to qualify for a mortgage for much less than
20 percent down. These government-backed programs are
well known to lenders and real estate agents.

LESSER KNOWN ARE THE DOWN PAYMENT ASSIS-

TANCE PROGRAMS around the country. These programs
are designed to help you meet minimum down-payment
requirements or make homeownership more affordable by
adding to what you have already saved. They are often, but
not always, restricted to first-time homebuyers. Each state
administers its own program with its own requirements.

THE MONEY AVAILABLE COULD BE A GRANT OR A

LOAN. You will be required to live in the home a certain
period of time, often 36 months.

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PREPARING FOR HOMEOWNERSHIP FINANCING YOUR HOME BUYING YOUR HOME MOVING INTO YOUR HOME

TWO BIG MONEY MOMENTS

FOR HOMEBUYERS
Homebuyers must make two large payments when purchasing a house. One is the earnest
money paid upon execution of the sales contract. The second is the down payment to the
lender at closing. What are the differences between the two?

IT’S ALL ABOUT COMMITMENT. In both cases, these payments represent a

commitment to the purchase. Earnest money shows that the buyer is making a
serious offer to the seller. It can be refunded only under very specific and legitimate
circumstances.

Down payment money is paid as part of the lending process. It is paid by the buyer —
with the rest of the purchase price being paid by the mortgage company. The larger the
down payment, the higher the commitment level from the buyer toward the purchase.

HOW EARNEST MONEY WORKS. When a buyer and seller sign a sales contract, the
buyer writes a check to the seller’s broker, or an escrow or title company, depending
on what is customary in your area. The earnest money, typically between 1 percent and
3 percent of the sales price, varies by state and is negotiable. The money is held in
an escrow trust account until the deal closes. The earnest money is refundable only if
certain terms of the contract are not met, such as the buyer not being approved for a
mortgage. If all goes well and the deal proceeds to closing, the earnest money is credited
to the buyer.

HOW DOWN PAYMENTS WORK.

After the contract is signed and
“ In some cases, the
earnest money paid, the buyer has a Veterans Administration
time period specified in the contract guaranteed-loan program
to obtain a mortgage. The amount
required for down payment depends on offers loans with nothing
the type of loan. Several government-
backed loans, such as Federal Housing
down.”
Administration (FHA) program loans,
are available for as little as 3 percent
down. In some cases, the Veterans Administration guaranteed-loan program offers loans
with nothing down. Most conventional (non-government backed) loans will require a
larger down payment since a lender is bearing the risk. If buyers put down 20 percent or
more, the mortgage company considers the loan at a low risk for default. For buyers who
put down less than 20 percent, the lender will require private mortgage insurance (PMI),
which protects against buyer default. The monthly premiums are paid by buyers as part
of their mortgage payments.

Both earnest money and the down payment are separate from other closing costs that
buyers must pay as part of the purchase process. At closing the amount of earnest money
paid upon execution of the sales contract is credited as part of the down payment money
from the buyer.

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PREPARING FOR HOMEOWNERSHIP FINANCING YOUR HOME BUYING YOUR HOME MOVING INTO YOUR HOME

QUALIFYING FOR A
Your income and your debts. Debt-to- 40s percentage, if you have a great credit
income ratio is a fundamental measure- score. A Federal Housing Administration
(FHA) loan has more lenient qualification
MORTGAGE WITH
ment that lenders use to judge a custom-
er’s ability to pay back a proposed loan. requirements, for example.
There are two measures, one cursory, the
other more in-depth. If your student loan is in deferment or on
STUDENT LOAN an income-driven repayment plan, FHA
A front-end debt-to-income ratio looks at rules allow the lender to use 1 percent of
DEBT the percentage of your monthly gross in-
come that would be used to pay the total
the total loan balance as the number to
use in figuring the loan-to-income ratio.
housing payment. Say your annual income
is $60,000 or $5,000 gross per month. The Improving your chances. A great pay-
monthly housing payment is calculated by ment history, with no missed or late pay-
If you’re worried your student loans will ments, is a great way to boost your lending
prevent you from buying your first home, adding principal, interest, taxes and insur-
ance, known in the home-lending business profile. Second, if at all possible, pay off
don’t fret. Here’s what you need to know
to land that first house. as PITI. Let’s say that your PITI adds up some existing loans before you get to the
to $1,400 per month. When you divide by mortgage shopping stage. Pay off a small
What the mortgage company consid- $5,000 monthly income, that equates to loan first, then apply that money to anoth-
ers. Your potential lender will look at your 0.28 debt-to-income ratio. In other words, er loan. Third, work hard and excel at your
FICO score, which can range from 300 to your mortgage payment would use 28 per- job, seeking advancement and pay raises.
850. A score above 650 is considered good. cent of your monthly gross income. A solid income picture and career strength
A score below 620 means you will have dif- will improve the revenue side of the ratio.
ficulty getting a loan at the best interest A back-end ratio digs deeper. It takes the
monthly housing payment and adds to it Finally, save more cash for a down pay-
rates. The score is a compilation of your ment. If you can put 20 percent down and
your total monthly debt payments. Sup-
payment history, how much is owed, length
pose you have a $350 per month student still have good cash reserves, you will more
of credit history along with other factors. likely be approved. A down payment under
loan payment, and a $300 per month car
The lender will also look at your length payment. Add that to the proposed $1,400 20 percent forces you to pay a monthly
of employment and will want to see your housing payment and your total debt-to- mortgage insurance premium (PMI) to pro-
most recent pay statements. You’ll need to income ratio on a $5,000 per month in- tect the lender from default, which nega-
provide tax returns and statements from come rises to 0.41 or 41 percent of your tively impacts your debt-to-income ratio.
all your bank and investment accounts. gross income.

Your student loan debt and your payment What does the mortgage company
history will show up on your credit report. accept? The back-end ratio has more im-
The lender will figure it into your debt-to- portance with the lender because it takes
income ratio calculation. your whole debt picture into account.
Lenders like to see a ratio of 36 percent
or lower, but will sometimes accept a low-

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PREPARING FOR HOMEOWNERSHIP FINANCING YOUR HOME BUYING YOUR HOME MOVING INTO YOUR HOME

SIX HIDDEN EXPENSES THAT SURPRISE NEW

HOMEOWNERS
You’ve sacrificed, scrimped and saved for the down payment on and take the time to read the fine print so you know what’s covered
your first home. But have you saved for the whole new world of and what’s not.
expenses that comes with home ownership? If not, you could get
blindsided by: APPLIANCES. Do you have your own washer and dryer? Your
own refrigerator? Unless your seller is willing to include those
CLOSING COSTS. Do your homework before making an offer items in the purchase price of the home, be prepared to factor
because the down payment is just part of the cost of the purchase. those costs in.
There are assorted fees and assessments to be paid when your
transaction closes. Talk to your real estate agent so you know what FURNISHINGS. If you are coming from an apartment, you
to expect. And don’t forget to consider ongoing monthly costs such may be surprised how empty the house feels with only your
as property taxes, insurance and homeowner association dues. existing furniture and belongings. The house might need window
treatments, too. Resist the urge to go on a shopping spree. Take
UTILITY SET-UP AND MONTHLY COST. Local utility the time to make a budget, set aside the cash and make thoughtful
companies often require a deposit and sometimes a connection purchases.
fee to start your service. Usually this isn’t a budget buster, but
definitely something you might not have anticipated. If you’re LAWN AND LANDSCAPE CARE. New homeowners will likely
coming from an apartment, you also will likely use more electricity, need lawn tools, a mower, trimmer, fertilizers and insecticides.
gas and water in a place of your own. Water use, especially to Consider shopping at yard sales and thrift stores for these items.
maintain landscaping, is a big surprise to many. It helps to ask You may also be able to delay a few purchases by borrowing from
your seller for a summary of the home’s utility costs throughout family members and friends but eventually you’ll need to strike
the year to get a heads up on what to expect. out on your own. Also, don’t forget to add in the cost of new or
replacement trees, shrubs and bedding plants. All of this yard work
REPAIR COSTS. If you are buying an existing home, be sure to takes time after work and on weekends. If you’re not willing to
ask the seller to purchase a home warranty during negotiations. make the time investment, be prepared to pay someone to do it
A policy will cost the seller about $500 but can save you a lot of for you.
headaches. Make sure the policy comes from a reputable company

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PREPARING FOR HOMEOWNERSHIP FINANCING YOUR HOME BUYING YOUR HOME MOVING INTO YOUR HOME

LET’S MAKE A DEAL: BUYER STRATEGIES

You don’t need to be a steely eyed negotiator to offer will come and the house will be snapped up.
get a good deal on a house, but it helps if you do It’s a painful lesson to lose a house this way.
your homework and make a solid offer based on
market conditions. Here are a few tips to ease the If houses are taking more than a month to sell,
process. there’s room for negotiating. Having buyers
traipse through their homes for a long period
PREAPPROVAL. A seller is more inclined to deal becomes a grind to sellers, so they’ll be ready for
with a buyer who is preapproved for a mortgage, relief. Also, if the seller is in some sort of distress,
which lessens the risk of a deal falling through such as a job transfer or job loss, a buyer has
because the buyer couldn’t qualify for a more power in the negotiations. That said,
mortgage. Don’t confuse preap- it’s important to always be respect-
proved, which is a more in-depth ful when negotiating.
analysis of your financial
situation, with prequalified, Under normal circumstanc-
which is more cursory. If es, it’s customary to make
a seller has two offers of a solid offer below the
relatively equal worth, list price, with back-
with one buyer preap- and-forth negotiations
proved and the other from there. The counter
not, the preapproved offers will get tighter
buyer’s offer will likely and tighter as you move
prevail. forward in the negotia-
tion.
CRUNCH THE NUMBERS.
Know what the house you want AN OFFER DRASTICALLY
is worth. Ask your real estate BELOW THE LIST PRICE IS
agent to do a Comparative Market Anal- RISKY. It could even insult the seller.
ysis or CMA, which tells you what similar homes Remember you have other negotiating tools,
are selling for nearby. The analysis also provides such as closing dates, closing costs and credits on
crucial information such as how many days it took repairs. Also consider asking for all appliances to
the homes to sell and if sellers had to reduce their be included in the sale. In a hot market, consider
prices. The ratio of list price to actual selling price offering full asking price, but then ask for conces-
will be a good guide to figuring out current market sions that put money back in your pocket.
value. BE PATIENT. Make your offer or counter offer and
HOW STRONG IS THE MARKET? Bear in mind wait for a response. Don’t get anxious if an answer
the market conditions when it comes to negotiat- doesn’t come right away. Let them make the next
ing. If homes are selling in a month or less, make move or risk the strength of your position.
your first offer your best because you probably
won’t have the opportunity to negotiate. Another

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PREPARING FOR HOMEOWNERSHIP FINANCING YOUR HOME BUYING YOUR HOME MOVING INTO YOUR HOME

HOW TO WIN A BIDDING WAR

ON A HOUSE

If you live in an area where homes are selling for asking price or more, you could find yourself in
a bidding war. Here are five tips to reduce your stress and come out on top.
HAVE YOUR MONEY IN ORDER. Do a solid budget analysis and know precisely how much you
can afford to offer as a down payment and what your monthly mortgage payments would be. Be
sure to add property taxes and insurance to your monthly payment. Next, get pre-approved for a
mortgage, which will hold more weight with the seller than simply being pre-qualified.
DON’T BE EMOTIONAL. Doing the above-described homework should help you avoid getting
emotionally tied to a house that you can’t afford. Save your bidding strategies to use on a house
you can afford and win.

KNOW THE NEIGHBORHOOD. Your real estate agent can supply you with recent sales prices on
homes in and near your desired neighborhood. Research the area online. Visit nearby parks, pools
and even nearby businesses to ask questions about the area.
MAKE WISE OFFERS. If you are in a seller’s market, a low offer may insult the seller and make
further negotiations tough. Beware of offering too far below the asking price. You might also
consider offer the asking price or higher in exchange for something else in your favor, such as
leaving a refrigerator. While you ultimately may have to offer more money for the house, other
negotiating points include: offering to pay some of the seller closing costs, agreeing to a closing
date in the seller’s favor, offering more earnest money, or making your offer with no contingencies,
if possible.

PITCH YOURSELF AS THE NEW OWNERS. Let the sellers know that you really love their home — how you’d like to see your kids grow up there.
Some buyers will go so far as writing the sellers a personal letter. This can motivate the seller to work with you to close the deal. At the same
time, however, be clear that you will move on to a back-up home, if necessary.

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PREPARING FOR HOMEOWNERSHIP FINANCING YOUR HOME BUYING YOUR HOME MOVING INTO YOUR HOME

earnest money deposit will be 1 percent to list is a sure way to kill a deal. Be reason-
DEMYSTIFYING 2 percent of the purchase price but this
can be negotiable. Laws vary from state
able and figure out what needs to be ad-
dressed before you move in.

YOUR REAL to state regarding who holds the earnest

money, but is oftentimes held in an escrow If a buyer backs out after the due diligence
account by the listing firm or an attorney’s
ESTATE office. Never make the earnest money
check out to an agent. The check is a ma-
period expires, the seller is typically en-
titled to the earnest money. Again, rules
differ from state to state so make sure you
CONTRACT jor part of your contract. If all goes well
during the purchase, the earnest money
know where you stand beforehand. The
most important thing during due diligence
deposit will be put toward the down pay- is to be proactive. Quality inspectors and
ment and closing costs. If things don’t go appraisers are difficult to book at the last
Buying a home will likely be the biggest well, the earnest money check may be re- minute. It’s the buyer’s responsibility to
investment you ever make. So it makes turned, which brings us to our next point. get these scheduled quickly.
sense to take the time to understand the
fine print in those long and confusing real DUE DILIGENCE PERIOD. This is ab- FINAL WALKTHROUGH. Schedule a fi-
estate contracts. A good agent will help solutely the most important period in the nal walk through of the house a few days
guide you through the process, but save contract. The due diligence period pro- before closing to make sure the owners
yourself time, money and anxiety by know- vides the buyer an option to terminate have left the house as you remember it.
ing these key terms and phrases. the sales contract, and in some states an Note any repairs that haven’t been done as
option fee is paid directly to the seller. A promised. Make sure any items they prom-
MAKING AN OFFER. It should go with- set amount of time is negotiated between ised to leave behind are still there. Have
out saying but all offers should be in writ- the buyer and the seller, usually between the movers damaged any walls or floors?
ing. Oral agreements offer ZERO legal pro- two and four weeks. A bad inspection, an Do the appliances still work?
tection. Put the offer in a written contract unfavorable appraisal, or a bad feeling in
and make sure it’s signed by both parties. your stomach — it doesn’t matter what CLOSING. Barring last-minute prob-
Chances are the offer will be met with a the reason is, the buyer is free to walk lems with financing, closing day should
counteroffer. It might take one round of away during this time. The earnest deposit run smoothly. Bring proper identification,
counters or it may take several to finally will be refunded to the buyer. However, the along with a bank check for the down pay-
agree to a price and the other terms of the seller keeps the due diligence fee. ment. Be prepared to sign multiple copies
contract. of the closing documents and don’t be
During the due diligence period, it’s im- afraid to ask questions. Once the deed has
EARNEST MONEY DEPOSIT. An ear- portant to get the home inspected and been recorded, you’ll receive that coveted
nest money check is a promise from the appraised. Even a new construction home set of keys to your new home.
buyer to follow through with the terms of should have an inspection. The inspection
the contract. This tells the seller you’re a will reveal any repairs the house needs.
serious buyer and have the money to pur- Use the due diligence period to negotiate
chase the home. Usually the amount of the who pays for what in the inspection report.
Asking the seller to fix everything on the

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PREPARING FOR HOMEOWNERSHIP FINANCING YOUR HOME BUYING YOUR HOME MOVING INTO YOUR HOME

HOME INSPECTION: to be addressed as part of the deal, but be reasonable about it.
Understand that the inspector is going to find issues with any
home, even a relatively new one. Even extremely minor things
are noted on inspection reports.
A BUYER’S A list of minor repairs can probably be negotiated easily
between you and the seller. Buyers should insist that repairs
PERSPECTIVE addressing safety issues be repaired by the seller before
closing. Non-safety related, yet costly, repairs present more
difficult decisions.
After weeks of home shopping, you’ve found a house and signed Reaching an agreement on repairs can be handled a few
a contract to purchase. Then the inspector finds problems ways. One option is to ask the seller to fix certain items before
that need repair — expensive repairs. How should you handle closing and agree to handle the rest once you own the home.
them? You thought negotiating the selling price was all there Or, you can provide a contractor’s invoice for the repairs that
was to the haggling. Now you have to make decisions on who the seller agrees to cover at closing and have the work done
covers repair costs. to your specifications after closing. This option is particularly
helpful where the repair involves choices you would like to
Certainly you, the buyer, don’t want to move into a house saddled
make.
with a list of costly repairs. The seller, of course, doesn’t want
the financial burden either. That’s where compromise comes What if the repair issues are costly and you cannot reach
into play. You need to be reasonable with each other. an agreement? At what point do you walk away from the deal?
You must decide if the repair is crucial and if you can afford to
First, be sure to schedule the inspection immediately
pay for it after closing. If you decide the repairs will bust your
after you go under contract. Many states’ real estate
budget, you need to make sure you understand your right to
contracts give you a “due diligence period” for getting the
terminate the contract within the due diligence period so you
inspection done and making decisions on repairs. Most
don’t forfeit your escrow money.
contracts also have provisions for resolving inspection
discoveries, so read and navigate those provisions carefully.
The seller may insist that the house is to be bought “as
is.” There may well be a box to check on the sales contract to
that effect. Don’t agree to it unless you are willing to take the
house, warts and all. The seller may say that any known repair
needs are taken into account in the price, but don’t settle for
that answer. There may be unknown issues lurking.
If you are working with a buyer’s agent the two of you
should be present when the inspector does his work.
Don’t hover over him; he will go over his findings with you
afterward. Later, he will send you his official report. The seller
may be present also, with the listing agent. Be smart and
discrete in your conversation. No need to offend the seller
needlessly.
Don’t insist that the seller fix everything that the
inspector finds. Decide which items are significant enough

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PREPARING FOR HOMEOWNERSHIP FINANCING YOUR HOME BUYING YOUR HOME MOVING INTO YOUR HOME

DON’T DELAY WHEN IT COMES TO HOME

INSPECTIONS
You’ve found a house you love, made an offer and have a termites, but it will take a pest specialist to look more closely
signed contract in hand. Now the clock is ticking. Many states’ for evidence of active infestation and damage. The mortgage
sales contracts give a limited period of time to get the house company may require this inspection.
inspected. During this so-called “due diligence period,” is
when you want to inspect the house and request anything you LEAD AND ASBESTOS. If you are purchasing an older
want repaired — or ask for money toward necessary repairs. home, the paint may contain lead and the insulation, ceilings
Be prepared to start the inspections as quickly as possible. or wall board may contain asbestos. Lead plumbing is
another concern in older homes. If you have any concerns or
GET A CONDITION DISCLOSURE REPORT. In many suspicions, talk to the general home inspector and follow up
states, sellers are required to provide a comprehensive with experts in those fields.
residential property disclosure on a form approved by the
real estate commission. Provide the document to the certified RADON. Some areas of the country have above-average
inspector you hire and discuss any concerns you have with levels of the radioactive gas called radon. You can go to www.
the disclosure. The inspector will use this report as a starting radon.com/maps and see how your area stacks up. Discuss
point in the review of the property. with your agent the need to have a radon inspection.

TOP-TO-BOTTOM INSPECTION. The inspector will POOL, well and septic systems. General inspectors will look
do a comprehensive evaluation of the house, examining all at these systems and note if a problem exists. For a more
systems and structures. This means an inspection of the in-depth look, which is recommended, you’ll need to hire
roof, foundation, walls, mechanical functions, appliances specialists.
that are staying with the house, insulation, windows, doors FLOOD ZONE. The mortgage company will certainly be
and more. The inspector will not do a mechanical diagnostic aware if the house is in a flood zone. You can do some research
on the heating and air conditioning, but will note whether
yourself by going to https://msc.fema.gov/portal. If the house
it is functioning and will measure the temperature blowing is in a flood zone, special flood insurance is required by the
from vents. For a more in-depth inspection of this and other mortgage company.
systems, you will need to hire specialists.
SURVEY. Your mortgage company will want to see the
As the buyer, you and your real estate agent can negotiate for
current survey, then have a surveyor walk the property,
repairs that you wish to be completed before closing, or you
checking the boundaries and looking for any encroachments
can negotiate for a price concession to complete the work
by neighbors, or easements by utility companies.
afterward. There may be some items that your mortgage
lender may want fixed before they will approve the mortgage You may not need all these specialized inspections, but with
on the property. such a short window of time to get them scheduled, their
reports evaluated and any deficiencies decided upon, you
PEST INSPECTION. The general inspector will note if he must act decisively.
sees any evidence of “wood-destroying insects,” such as

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PREPARING FOR HOMEOWNERSHIP FINANCING YOUR HOME BUYING YOUR HOME MOVING INTO YOUR HOME

A QUICK LESSON ON INSURANCE FOR NEW

HOMEOWNERS
Up until you buy your first home, your experience with insurance may be limited to auto,
life and health coverage policies. When you buy your first home, you’ll encounter a slew of
new types of coverage, including title insurance, homeowner’s insurance, flood insurance
and maybe even something called an “umbrella policy.” To minimize the head-spinning,
here’s a brief overview.

TITLE INSURANCE. During the sale of a home, a title insurance policy must be acquired.
A title company will research official records to determine if any events “encumber” the
clear title to ownership of the home. For example: If a contractor wasn’t fully paid for
work done on the property, he or she may have filed a “mechanic’s lien” on the property,
meaning that upon sale of the property, the contractor must be paid from the proceeds
of the sale before title can transfer to the new owner. The records search also will reveal
if the owner has taken out a home equity loan. You and the mortgage company have a
financial stake in the home, so title insurance is an important protection against potential
financial liability.

HOMEOWNER’S INSURANCE. Before closing on a home, buyers need a homeowner’s

insurance policy. Your mortgage company will require it, but even if you pay cash for the
home you’ll want the protection. Homeowner’s insurance protects you in a number of
ways. First, it protects your home from financial loss after storm damage and fire. It will
pay for the cost of repairs and reconstruction and for your temporary housing. Second, it
protects you from liability should someone get injured on your property, such as tripping
and falling on your front steps, incurring medical bills. It protects your belongings from
fire and theft by burglary. Policies can be complicated so have the insurance agent explain
any unfamiliar terminology. Ask them for a concrete example of how the insurance works.
For instance: Roof damage from a storm may have a deductible amount of 1 percent of
the total insured value of the home. If the roof is a total loss and the home’s insured value
is $300,000, that means your deductible — the amount you must pay out of pocket — is
$3,000.

Also ask your agent about policies with built-in increases in the insured value to keep up
with home value increases. When home values rise, the price of repairs rise as well.

Most major insurance companies will provide “bundle” rates or discounts if you purchase
car and home insurance from the same company. You might also consider an “umbrella”
policy which is an extra layer of liability insurance above your regular policy limits, up to
$1 million or more, protecting you from large lawsuit awards if you were to be found at
fault after a serious accident.

FLOOD INSURANCE. If the home is in an area that is considered at risk for flooding,
the law requires that mortgage companies require flood insurance. Standard homeowner
policies do not cover floods. Flood insurance is available separately through agents via the
National Flood Insurance Program. If the home is not in a flood-prone area, you may not be
required to purchase it, but some insurers advise it on the grounds that up to 25 percent
of flood damage each year happens to homes not in designated flooding areas.

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PREPARING FOR HOMEOWNERSHIP FINANCING YOUR HOME BUYING YOUR HOME MOVING INTO YOUR HOME

NEARING THE HOME BUYER’S

FINISH LINE: THE WALK
THROUGH
As a home buyer, • Turn on and off every built in appliance making
you’ve come a long sure they work. Don’t forget the garage door
way. Your offer was ac- opener, garbage disposal and exhaust fans in
cepted, the home has been the kitchen and baths.
inspected, the financing is complete, and you are
about to close. There’s just one more crucial step: • Turn on and off the heating and air conditioning,
the final walk through. Here’s why it’s important. making sure they are doing their jobs.

TIMING. Shortly after you signed the sales contract • Open and close all windows and doors, mak-
you should have had the home inspected during the ing sure they open and close fully. Make sure
due diligence period. Any significant repairs should screens, storm windows and shutters are intact.
have been negotiated and completed. Now, for • Look for any signs of water damage to ceilings,
the final walk through, you will confirm that the floors and walls.
agreed-upon repairs were done and also make sure
that nothing new has happened to significantly alter • Make sure the seller hasn’t removed any fixtures
the condition of the property. In general, the final inside or out that should remain with the house.
walk through is scheduled one to two days before Make certain that no trees or shrubs have been
closing. dug up and removed.

WHO SHOULD BE THERE? You and your agent • Make certain no unwanted chemicals, paint or
should conduct the final walk through. Keep in mind, debris have been left behind.
this review is not a formal inspection. It is merely a
If there are any additional repairs that the seller
final follow up. Bring the sales contract, any disclo-
must complete, you may choose to write an adden-
sure forms and the list of agreed-upon repairs.
dum to the contract. Note that work should be com-
THE CHECKLIST. First, review the list to make pleted by a licensed contractor, evidence of the work
sure repairs have been done to your satisfaction. Af- should be provided and payment made in advance of
ter that, do the following: closing. If the work is not completed as agreed, then
you may ask to withhold the reasonable expense of
• Walk around the property looking for any dam- doing the repair correctly at settlement.
age since the inspection, especially storm dam-
age.

• Make sure all the lights work, inside and out. Do

the same for all faucets. Look for leaks near any
plumbing. Make sure sinks, showers and tubs
drain properly. Flush all toilets and wait for the
tanks to refill and stop when they should.

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PREPARING FOR HOMEOWNERSHIP FINANCING YOUR HOME BUYING YOUR HOME MOVING INTO YOUR HOME

DO-IT-YOURSELF PACKING AND MOVING

With a little planning, the right materials and the help of some First, load the big items such as appliances, sofas, armoires,
strong volunteers, packing up and moving your household is mattresses and box springs. Use the slates on the interior sides
doable. Here are a few tips to make a DIY move go smoothly. of the truck to secure these pieces with straps so they don’t shift
while in transit. Before loading dressers, remove drawers. Replace
HOW MUCH TRUCK DO YOU NEED? Generally, the furniture drawers during transit, then remove them again when you reach
filling a three-bedroom house with one living area and one dining your destination. Tape shut doors and drawers. Next, wrap all large
area will need a twenty-two foot truck or larger. To figure the size items in heavy moving blankets.
with precision, Penske has a handy calculator. Larger rentable
trucks will have a pull-out ramp for carrying things into the truck. With furniture and appliances properly wrapped, you can stack
Even better is a hydraulic tailgate lift for handling big pieces. smaller, lighter items on top. Fill in the center of the truck with
boxes stacked as efficiently as possible, heaviest on bottom
MATERIALS YOU WILL NEED. Several weeks in advance of working toward the rear of the truck. Add lighter, smaller boxes,
your move, start packing your belongings in cardboard boxes. small furniture and accessories to the middle and back. Utilize
Boxes in different sizes can be purchased from moving companies, every crevice and fill to the ceiling.
truck rental stores and large hardware stores. But with any luck,
you should be able to find boxes curbside or by asking for them on DO THE MATH. Renting a truck for a DIY move seems
Craigslist or online buy-sell-trade sites. Many folks offer boxes for cheaper than paying professionals, but there are several other
free after a move. You’ll also need packing tape, and newspapers considerations. Figure the fuel usage as well as any per-mileage
or other cushioning materials to help with packing. charges over certain maximums. Count the cost of your time and
the physical exhaustion of moving. Also consider insurance liability,
The day of the move you’ll need thick furniture blankets and if something should break. Finally, consider the complexity of a
dollies, which can be rented along with your truck. Also on moving move, such as moving heavy furniture up or down flights of stairs.
day, don’t forget screwdrivers and wrenches for disassembling Can you and your helpers handle the job?
furniture, sealable bags to hold loose hardware and straps to
firmly anchor appliances and large furniture pieces to the interior REWARD YOUR HELPERS. Keep a cooler of soft drinks and
sides of the truck. Ratcheting straps with hooked ends, which cost water available on moving day and don’t forget to feed your friends
about $25, are the best for securing loads with exactly the right when the work is done. It’s also nice to return the favor, helping
amount of tension. your friends when it’s their turn to move.

LOADING UP. Consider transporting fragile items such as flat-

screen televisions, china, aquariums, lamps, artwork and sculptures
in the cab of the truck or in your personal vehicle. Remove light
bulbs from lamps and transport them separately.

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PREPARING FOR HOMEOWNERSHIP FINANCING YOUR HOME BUYING YOUR HOME MOVING INTO YOUR HOME

7 MUST-DOS ON MOVE-IN DAY

If ever there was a day requiring a detailed checklist, it’s Moving Day. Here’s a life-saving list to get you through what can
be a drama-filled 24 hours.

1. CLEAN UP. You never know how well a seller will 4. GET YOUR HOME ONLINE. Schedule an instal-
leave your new home so it’s best to plan on a com- lation appointment with your internet provider so
prehensive cleanup before you move your belongings you’ll have service to work from home and stay con-
into the house. Steam clean the carpets, if any, and nected with the outside world.
vacuum and mop the tile and hardwoods. Wipe down
the counters and cabinets, inside and out. Give the 5. PEST CONTROL. Check the house for signs of in-
bathrooms a good scrubbing. If the timeline is tight, sects and rodents. If necessary, call a pest control
consider hiring a professional cleaning service. service.

2. CHANGE THE DOOR LOCKS. The old owners 6. SWAP YOUR SEATS. Changing out the toilet
gave you all the keys, but you can’t be sure there seats is a good idea whenever you move into a new
aren’t extra copies in the possession of neighbors, home.
pet-sitters or relatives. Better safe than sorry.
7. GET TO KNOW YOUR HOME. Find out where
3. MAKE SURE the utilities and security system are the fuse box is located. Take note of the water and
turned on and in your name. gas shut-off valves. Make sure the fire extinguisher
is up to code. Find out when the trash and recycling
will be picked up.

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HOM EBUYER'S CHECKLIST

1 2 MON T HS  Check Your Credit History and Make Credit Repairs

9 MON T HS  Learn About Mortg ag e Application and Required Documents

6 MON T HS  Determine Budg et and g et Mortg ag e Pre-Approved

 Interview and Hire a Licensed Real Estate Ag ent
 Consider Your Ideal Type of Home and Location

3 MON T HS  Conduct Home Search with Your Ag ent

2 MON T HS  Calculate Your Best Offer

 Hire Settlement Ag ent and Other Pros
 Submit Offer to Purchase and Contract
 Neg otiate Final Price of Home Ch r ist ie Va ler i
 Apply for Mortg ag e Upon Offer Acceptance
REALTOR®
 Conduct Home Inspections
(770) 630-7588
1 MON T H  Review and Neg otiate Necessary Repairs
 Hire Movers and Beg in Packing
cvaleri@fathomrealty.com
 Purchase Homeowners Insurance Policy https://christievaleri.fathomrealty.com/

1 WEEK  Conduct Final Walkthroug h with Your Ag ent

 Review Closing Documents and Prepare Funds Transfer
 Attend Settlement with Your Ag ent
 Move In to Your New Home!