Tips for buyers Provided courtesy of the US Department of Housing and Urban Development www.hud.gov

Knowledge is said to open doors. This is literally true when it comes to buying a home. To become a first-time home buyer, you need to know where and how to begin the home buying process. The following questions and answers have been carefully selected to give you a foundation of basic knowledge.

Getting Started
Finding Your Home
Home Insurance
Writing an Offer
Home Inspection
Closing

Getting started

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

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


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Finding your home

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

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

*Is there enough room for both the present and the future?
*Are there enough bedrooms and bathrooms?
*Is the house structurally sound?
*Do the mechanical systems and appliances work?
*Is the yard big enough?
*Do you like the floor plan?
*Will your furniture fit in the space?
*Is there enough storage space? (Bring a tape measure to better answer these questions.)
*Does anything need to be repaired or replaced?
*Will the seller repair or replace the items?
*Imagine the house in good weather and bad, and in each season. Will you be happy with it year-round? Take your time and think carefully about each house you see.
*Ask me to point out the pros and cons of each home from a professional standpoint.

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

How can I keep track of all the homes I see? If possible, take photographs of each house: the outside, the major rooms, the yard, and extra features that you like or ones you see as potential problems. Never hesitate to return for a second look. Ask me to email you a copy of the listings you are interested in.

How many homes should I consider before I choose one? There isn't a set number of houses you should see before you decide. Visit as many as it takes to find the one you want. On average, home buyers see 15 houses before choosing one.

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Home Insurance

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

What steps could I take to lower my homeowner's insurance cost? Be sure to shop around among several insurance companies. Also, consider the cost of insurance when you look at homes. Newer homes and homes constructed with materials like brick tend to have lower premiums. Think about avoiding areas prone to natural disasters, like flooding. Choose a home with a fire hydrant or a fire department nearby.
A new home's electrical, heating and plumbing systems and overall structure are likely to be in better shape than those of an older house. Insurers may offer you a discount of 8 to 15 percent if your house is new. Check the home's construction: In the East brick is better, because of its resistance to wind damage, and in the West frame is better, because of its resistance to earthquake damage. Choosing wisely could cut your premium by 5 to 15 percent. Avoiding areas that are prone to floods can save you about $400 a year for flood insurance. Homeowners insurance does not cover flood-related damage. The closer your house is to firefighters and their equipment, the lower your premium will be.

Is the home located in a flood plain? If you live in a flood plain, the lender will require that you have flood insurance before lending any money to you. But if you live near a flood plain, you may choose whether or not to get flood insurance coverage for your home.

Additional insurance may be required if you live in or near the desert or Boise foothills.

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Writing an Offer

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

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

Details of the deal. Remember that a sale commitment depends on negotiating a satisfactory contract with the seller, not just making an offer. There could be counter-offers between the seller and buyer until a final contract is accepted.

How do I determine the initial offer? Calculating your offer should involve several factors: what homes sell for in the area, the home's condition, how long it's been on the market, financing terms, and the seller's situation. By the time you're ready to make an offer, you should have a good idea of what the home is worth and what you can afford. And, be prepared for give-and-take negotiation, which is very common when buying a home. The buyer and seller may often go back and forth until they can agree on a price.

What is earnest money? How much should I set aside? Earnest money is money put down to demonstrate your seriousness about buying a home. It must be substantial enough to demonstrate good faith and is usually between 1-5% of the purchase price (though the amount can vary with local customs and conditions). If your offer is accepted, the earnest money becomes part of your down payment or closing costs. If the offer is rejected, your money is returned to you. If you back out of a deal, you may forfeit the entire amount.

What are "Home Warranties", and should I consider them? Who offers them and how can I get more information if I am interested? Home warranties offer you protection for a specific period of time (e.g., one year) against potentially costly problems, like unexpected repairs on appliances or home systems, which are not covered by homeowner's insurance. Warranties are becoming more popular because they offer protection during the time immediately following the purchase of a home, a time when many people find themselves cash-strapped.

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Home Inspection

Should I have a home inspection? Yes!! A home inspection is done within several days of the offer being accepted in writing by all parties. It is a buyer's fee and paid for at the time the inspector does the inspection. A home inspection helps you to know what may or may not be defective in the home. It is a great insurance policy for the buyer to konw what items need immediate repair, repair within the first year and for years after that. It is not limited to but can show if there is a water leak, insulation is falling down and needs repaired, missing or worn shingles on the roof to painting the exterior, broken dryer vents and such. The inspector is an impartial 3rd party trained to recognized what to look for when it comes to repairs needed on a home. A good inspector will allow you to follow them around during the inspection and ask questions. See my list of recommended inspectors.

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Closing

What happens after I've applied for my loan? It's not unusual for the lender to ask for more information once the application has been submitted. The sooner you can provide the information, the faster your application will be processed. Once all the information has been verified, the lender will call you to let you know the outcome of your application.

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

What makes up closing costs? Closing cost are usually made up of the following:

*Attorney's or escrow fees (Yours and your lender's if applicable)
*Property taxes (to cover tax period to date)
*Interest (paid from date of closing to 30 days before first monthly payment)
*Loan Origination fee (covers lenders administrative cost)
*Recording fees
*Survey fee
*First premium of mortgage Insurance (if applicable)
*Title Insurance (yours and lender's)
*Loan discount points
*First payment to escrow account for future real estate taxes and insurance
*Paid receipt for homeowner's insurance policy (and fire and flood insurance if applicable)
*Any documentation preparation fees
*Tax Service fee
*Flood Certification fee

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