Buyers’ Q & A

A: A home is an investment. When you rent, you write a monthly check and that money is gone forever. But when you own your own home, you can deduct the cost of your mortgage loan interest from your federal income taxes, and usually from your state taxes. This will save you a lot each year, because interest you pay will make up most of your monthly payment for most of the years of your mortgage. You can also deduct the property taxes you pay as a homeowner. In addition, the value of your home may go up over the years. Finally, you’ll enjoy having something that is yours – a home where your personal style will tell the world who you are.

A: Using a real estate broker is a very good idea. All the details involved in home buying, particularly the financial ones, can be mind-boggling. A good real estate professional can guide you through the entire process and make the experience much easier. A real estate broker will be well-acquainted with all the important things you’ll want to know about a neighborhood you may be considering… the quality of schools, the number of children in the area, the safety of the neighborhood, traffic volume, and more. He or she will help you figure the price range you can afford and search the multiple listing services for homes you’ll want to see. With immediate access to homes as soon as they’re put on the market, the broker can save you hours of wasted driving –around time. When it comes time to make an offer on a home, the broker can point out ways to structure your deal to save you money. He or she will explain the advantages and disadvantages of different types of mortgages, guide you through the paperwork, and be there to hold your hand and answer last-minute questions when you sign the final papers at closing. And you don’t have to pay the broker anything! The payment comes from the home seller.

A: After you make the decision to buy a home, you’ll want to plan a budget and contact a realtor to guide you through the entire process. You’ll need to research and compare available lenders to finance your home beyond your down payment. Your realtor will likely be able to suggest lenders if you need assistance. A lender will pre-qualify you for a loan in the amount it determines you to be able to afford, so sellers will consider you a serious and capable buyer. Once you’re pre-qualified your realtor will begin showing you possible homes. When you decide on a home, your realtor will make an offer on your behalf to the home’s seller-usually for a price slightly less than asking price. This may lead to a counter-offer, meaning that the seller tries to negotiate your purchase price closer to his or her original asking price.

A. Well, that depends on a number of factors, including the cost of the house and the type of mortgage you get. In general, you need to come up with enough money to cover three costs: earnest money – the deposit you make on the home when you submit your offer, to prove to the seller that you are serious about wanting to buy the house; the down payment, a percentage of the cost of the home that you must pay when you go to settlement; and closing costs, the costs associated with processing the paperwork to buy a house. When you make an offer on a home, your real estate broker will put your earnest money into an escrow account. If the offer is accepted, your earnest money will be applied to the down payment or closing costs. If your offer is not accepted, your earnest money will be returned to you. The amount of your earnest money varies. The more money you can put into your down payment, the lower your mortgage payments will be. Some types of loans require 5, 10 or 20% of the purchase price. That’s why many first-time homebuyers turn to HUD’s FHA loan for help. FHA requires very little down. Closing costs – which you will pay at settlement – average 3-4% of the price of your home. These costs cover various fees your lender charges and other processing expenses. When you apply for your loan, your lender will give you an estimate of the closing costs, so you won’t be caught by surprise.

A. Most loans have 4 parts: principal: the repayment of the amount you actually borrowed; interest: payment to the lender for the money you’ve borrowed; homeowner’s insurance: a monthly amount to insure the property against loss from fire, smoke, theft, and other hazards required by most lenders; and property taxes: the annual city / county taxes assessed on your property, divided by the number of mortgage payments you make in a year. Most loans are for 30 years, although 15 year loans are available, too. During the life of the loan, you’ll pay far more in interest than you will in principal sometimes two or three times more! Because of the way most loans are structured, in the first years you’ll be mostly interest in your monthly payments. In the final years, you’ll be paying mostly principal.

A: Good question! If you have everything with you when you visit your lender, you’ll save a good deal of time. You should have: 1.) social security numbers for both you and your spouse, if both of you are applying for the loan; 2.) copies of your checking and savings account statements for the past 6 months; 3.) evidence of any other assets like bonds or stocks; 4.) a recent paycheck stub detailing your earnings; 5.) a list of all credit card accounts and the approximate monthly amounts owed on each; 6.) a list of account numbers and balances due on outstanding loans, such as car loans; 7.) copies of your last 2 years’ income tax statements; and 8.) the name and address of someone who can verify your employment. Depending on your lender, you may be asked for other information.

A: Inspecting the physical condition of a house is an important part of the home-buying process and should be included in your purchase contract as a condition of closing the sale. One or more professional inspectors should look for defects or malfunctions in the building’s structure, systems, and physical components, such as the roof, plumbing, electrical and heating/cooling systems, floor surfaces and paint, windows, and doors, and foundation, and detect pest infestations or dry rot and similar damage. The inspector should also examine the land around the house for issues concerning grading, drainage, retaining walls, and plants affecting the house.

A: Most buyers get professional inspections only after they’re in contract to buy the property. The deal is commonly made contingent on the buyers’ approving the results of one or more inspections. The buyer arranges and schedules the inspections.

Before paying for a professional inspection, you can conduct your own informal inspection. Look for issues like sloping floors or bowing walls, signs of water damage, missing roof shingles or gutters coming loose, old or low-quality fixtures and appliances, and other signs of wear, tear, or needed repair. The best time to do this is before you make an offer, so that you can save yourself the trouble should you find serious problems.

A: Hire a home inspector / structural engineer to inspect all major house systems, from top to bottom, including the roof, plumbing, electrical and heating systems, foundation, and drainage. This will take two or three hours and cost you from $200 to $500, depending on the location, size, age, and type of home. Accompany the inspector during the examination, so that you can learn more about the maintenance and preservation of the house, ask questions, and get a real sense of which problems are serious and which are relatively minor. (The inspector will write everything down on the report, so reading it can be a bit scary if you hadn’t already seen that, for instance, “cellulose against the foundation” just meant a pile of old leaves that you could easily remove.) FOR MORE INFORMATION CLICK on the following link www.aei-group.net

A: In addition to the home inspector, it’s wise to hire a licensed structural pest control inspector, who will create a special pest report on the property (unless the seller has already commissioned one — pest inspectors, unlike general inspectors, traditionally accept work on properties they’ve inspected, so they have every interest in finding problems). The pest inspector will look for infestation by wood-boring insects such as termites and flying beetles, as well as evidence of dry rot and other fungal conditions. Depending on your lender this inspection maybe required for the loan. (For a rundown of all the critters that might munch on or otherwise damage your home check out www.sureshottulsa.com.

A: Title insurance is an insurance policy that protects you against loss that could result from defects in the title of the property you are buying. The premium is paid only once and is good until the property’s ownership changes. Unlike most types of insurance which protect the policyholders from future events, title insurance protects you against defects that could already exist.

A: Home Warranty of America offers a variety of home warranty options to cover a home’s appliances and major systems such as air conditioning, heating, electrical and plumbing. Coverage offered varies by package and state, so contact Home Warranty of America directly at www.hwahomewarranty.com for details specific to you. Home warranties provide peace of mind to buyers and add value to their property for sellers.

A: Basically, you’ll sit at a table with your broker, the broker for the seller, probably the seller, and a closing agent. The closing agent will have a stack of papers for you and the seller to sign. While he or she will give you a basic explanation of each paper, you may want to take the time to read each one and/or consult with your agent to make sure you know exactly what you’re signing. After all, this is a large amount of money you’re committing to pay for a lot of years! Before you go to closing, your lender is required to give you a booklet explaining the closing costs, a “good faith estimate” of how much cash you’ll have to supply at closing, and a list of documents you’ll need at closing. If you don’t get those items, be sure to call your lender BEFORE you go to closing. Don’t hesitate to ask questions.