Home Buyer's Guide


Buying a home can seem like a frightening prospect. Whether it is your first home or your fifth, so much is at stake: your savings, your credit rating, and your financial freedom. It is difficult to find the courage to sign on the dotted line even if you want that home. How do you determine whether the purchase of a home is the right thing to do?

Here is a Seven Steps plan. When you read this plan, you will learn how to separate wants from needs. You will discover how to prepare a good plan for your real estate venture, how to research the market, make better choices, finance options, and still survive the whole process.

STEP 1: DETERMINE YOUR NEEDS AND WANTS

Begin your search for a home by making a careful assessment of the kind of home you need and want. We recommend that you write it down. Be as specific as you can about your particular requirements. Make a list of the items your need vs. features that you desire.

STEP 2: DETERMINE HOW MUCH YOU CAN AFFORD

Decide how much you can afford to invest and what monthly payments are you comfortable with.  Most lenders suggest that your payments be in the range of 28-33 percent of your total monthly income. If you don’t plan to contribute a 20% down payment then remember to consider the taxes and insurance you will escrow.

STEP 3: GET PRE-QUALIFIED OR PRE-APPROVED BY A LENDER

You can save yourself time and heartache by meeting with a lender before you start your search for a home. A lender can let you know what specific loan programs would be best for you. He can also help you understand what it takes to qualify for the loan that you want. By taking a look at your financial situation and reviewing your credit history, a lender will advise you if you can qualify for the loan amount that you want.

Alternatively, you may want to ask to be “pre-approved.” In the approval process, all of your documentation is completed and submitted to an underwriter. The pre-approval that you will receive is called a loan commitment from a lender, which guarantees you loan approval.

STEP 4: FIND A SKILLED & INTERNET SAVVEY REAL ESTATE AGENT TO HELP YOU

In this market it’s important to have a qualified and experienced agent that will represent your interest in the home buying process. Many first time homebuyers go into the home buying process without representation and fail to benefit from the services of a competent agent. This is similar to appearing in court without your own lawyer or appearing at an IRS audit without an accountant.

STEP 5: FIND A HOME THAT MEETS YOUR NEEDS

To find a home that meets your needs, consider these tips for successful house hunting:

Keep an organized record of all your research data. Write down comments about the homes that you see. Keep track of your likes and dislikes. Make sure that your agent is aware of your time schedule and your expectations. Tell your agent about any homes that you are interested in and those you would like to know more about. Include those homes you discover as you explore the area yourself or those you see advertised in the internet or newspaper.

Convey your interest to your agent clearly.. Don’t hesitant to tell an agent what you think of a house. The agent is a professional and  won’t take your criticism personally. the best job for you. Honest communication is essential and enables your agent to do the best job he/she can.

STEP 6: MAKE AN OFFER

Your real estate agent can help you make an offer to buy the home that you select. Many agents work only for the seller. Therefore, it is important that you decide prior to viewing homes whether the agent will represent you or the seller. If the agent showing you the house is the listing or seller’s agent and you are not represented, he/she should disclose this information to you and explain your options. Only a “buyer’s agent” can give you all the information necessary to make an intelligent offer in your best interests.

STEP 7: SAVE AS MUCH AS YOU CAN ON YOUR INITIAL INVESTMENT

There are only two major investments to consider when buying a home. These are the initial investment (including down payment and closing costs) and the monthly payment (including principle, interest, taxes, and insurance).

Here are some ways to save on your initial investment:

  • Choose a low down payment loan. You do not necessarily have to put 20 percent, or even 10 percent, down. You can put 5 percent, or even 3 percent, down on some loans. Ask whether or not your loan includes “private mortgage insurance” or PMI.
  • As part of your offer, ask the seller to pay some of your closing costs. Sellers are usually allowed to contribute to a buyer's closing costs. In many cases, this is a negotiable item.
  • Shop around for your home insurance. A little shopping can save you a significant amount of money.
  • You can deduct money paid for discount points from your gross income before computing your income tax. Always check with your CPA to find out specific guidelines in your area.
Keep your monthly payments low:

  • Get a loan with no monthly mortgage insurance premiums. You may be able to reduce or eliminate them by paying a little more at closing. By putting 20 percent or more down, you may be able to eliminate them entirely.
  • Remember that interest payments on a primary residential mortgage are fully deductible in most circumstances. Your property taxes may also be deductible. Tax rates definitely favor homeowners.