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Tuesday, September 23, 2014
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Published: Thursday, 5/1/2003

Know What to Look For and Ask When You Prepare to Buy a Home

Gearing up to buy a home is exciting and scary. On the one hand, you are about to have something that is all your own, where you can live, raise a family and build a future. But, it's also a huge personal and financial commitment. Despite this, many have overcome nerves and risen to the challenge. According to the Department of Housing and Urban Development (HUD), the rate of U.S. homeownership was more than two-thirds during 2000, the highest rate ever.

April has been named "National Prepare To Buy a Home Month" by the National Association of Independent Real Estate Brokers. Purchasing a home is not difficult, but you will have to give your time, energy and of course, money to the process. These tips from HUD will make preparing to buy a home seem a bit less scary.

There are many questions you should ask yourself when you are considering purchasing a home. Assess your financials: make sure you have a steady source of income, good credit and money saved for both a down payment and monthly mortgage.

Determine your housing needs in advance. Make a list of your priorities - where you want the house to be located (near school or job), how large, what type of home you want. Set a minimum list of what your home must have and a wish list of what you want to have but don't consider essential. You can even get some ideas online on a site like www.owners.com, a national database of homes for sale by owners.

A good primer to help you navigate through the process is "Home Buying for Dummies" (John Wiley & Sons) by Eric Tyson and Ray Brown. It will help you with issues such as how to research neighborhoods and home values and select the best mortgage.

As you visit homes, make a checklist to see if all the homes have sufficient bedrooms, bathrooms, storage space and room for your furniture. If you see potential problems or maintenance issues, ask the seller or agent about it. Most homebuyers see an average of 15 homes before making an offer.

A mortgage is usually used to purchase a home. Simply put, a mortgage is a legal claim on the property that secures promise to pay the debt. Mortgage payments are affected by the amount of the down payment, size of the loan, interest rate, length of repayment term and payment schedule.

Choose your lender carefully. Ask friends, family and your real estate agent for recommendations. In the end, pick a company that you feel comfortable with. Look to mortgage providers like LendingTree and Champion Mortgages to get started. The type of loan you get depends on your lifestyle - your budget, your spending habits and income throughout the loan period and how long you plan to stay in your home.

A long-term Adjustable Rate Mortgage (ARM) of five years or longer is good if your income is fixed or expected to decline. ARMs start with an initial lower interest rate, though your monthly payment fluctuates based on the market (There is a cap on how much the interest can go up or down). A short-term ARM of three or fewer years is good if you expect your income to increase.

If you want the lowest monthly payment and will be in your home for more than five years, looked into a fixedterm mortgage if your income is fixed or expected to decline. Because the monthly payment is predictable, it makes budgeting easier. Or, try a short- or long-term ARM if you expect your income to rise. But remember, the sooner you repay the loan, the more you'll save in interest payments.

Even if you qualify for a loan, proceed with caution. Lending Tree discourages overborrowing because it may not work with your budget.

After you've applied for the loan, the lender will review your application. If the loan is approved, a closing date is set and you'll be able to move in. Make sure you have enough money for closing costs. These can include the appraisal fee, taxes, credit reporting charge, deed recording fee and other costs. During the final walk through, make sure that any problems you discovered

have been fixed.

Now, you can sit back and take a sigh of relief. Congratulations are in order. You are a homeowner!

Preparing to buy a home? It can be a daunting task. But if you are armed with the right questions, the process can be a little less painful.



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