House hunting
- What should I do before starting
to house-hunt?
- How should I start my house
hunting?
- What should I do when I visit a
house?
Negotiations
- What happens next if I like a
house that's in my price range?
- What is negotiable?
- Once I've made the offer, what happens?
- If the offer is accepted, do I sign a contract to buy the
house?
Financing
- Is getting a mortgage as
challenging as finding the right house?
- How much of a down payment will I
have to make?
- Are there other things I must do
to obtain a mortgage?
- What about a down payment?
After the sale
- Once I've bought the house,
what else should I remember to do?
House-hunting
Be
practical. Determine a price range you can afford and pick neighborhoods in
communities that appeal to you. Make a wish list of what's important --
closeness to work, quality of schools, type of house, condition of house,
sufficient number of bedrooms and bathrooms, sizable kitchen, family room,
two-car garage, landscaping, pool, etc. Also think about crime, security,
police and fire protection, water quality and other public services.
You
may not be able to find the perfect home in your price range, but the list will
help point you in the right direction.
Equally
important, get your own financial house in order. Take care of credit card
debt, for example, and make sure you don't have any blemishes in your financial
past or present. This will become important when you shop for a mortgage to
finance your purchase.
Once you
figure out your budget, where you want to live and the style of house you like,
check out real estate advertisements, talk with real estate agents, call phone
numbers on lawn signs, visit open houses and use one of the growing number of
Internet real estate services. Agents who specialize in an area will usually
have many homes to show you, but bear in mind that they represent and are paid
by sellers -- not you. You might want to hire a "buyer's broker" with
a network of contacts and listings in a certain community. The broker may
charge a fee or receive part of the commission when you buy your house.
Don't be
afraid to ask questions of the real estate agent and/or owner. Inspect nooks
and crannies, such as the plumbing, wiring, roof, windows, closets, etc. Turn
on lights. Flush toilets. Turn on showers and fill tubs. Try the dishwasher and
oven. See if the sprinklers work. Put the air conditioner or heat through the
paces. Write down everything you like and dislike. Even bring a still camera or
video camera to record the visit. For the homes that make your final cut list,
try to visit more than once, at different times of the day. You may find the
neighborhood is quite different at night when everybody is home, for example,
than it is during the day. Also, listen for noise from nearby roads and
highways, and for planes flying overhead.
Negotiations
Whether
you're single, married or married with children, consider the pros and cons of
the house. You may decide it's your dream house, even with certain flaws that
can be improved. In that case, don't hesitate to make an offer. If you like it,
someone else will too. But in making an offer, don't just try to undercut the
seller's asking price. Find out what recent comparable sales have been in the
neighborhood -- your agent can help you with this -- and make an intelligent
offer. The offer will often be done in writing.
Essentially,
everything. If you don't like the hot tub in the back yard, ask if the owner
will remove it. If you like the antique chandelier in the living room, but your
told it's not included, ask to have it included. The worst that can happen is
you're told no.
The real
estate agent will convey your offer to the seller, who will accept it, reject
it outright, or respond, with a higher counter offer. If the latter is the case,
counter with a final offer. This negotiating dance should not go on
indefinitely, for it will end in bitterness and anger.
Yes, you
will sign a purchase and sale agreement and make a deposit, which is normally 5
percent of the purchase price. It will be put in an escrow account, a
third-party account at a bank.
The
purchase and sale contract, based on negotiations between you and the seller,
should spell out any improvements to be done by the seller before the sale is
completed. You have the right to hire a private inspector to review the
property, including wiring, plumbing, roof and termite inspections. Many
standard contracts include provisions for the owner to pay up to a certain
amount -- usually a percentage of the sale price -- for repairs that an
inspector found were needed.
The
contract should also spell out the terms of the sale. Make sure it specifies
that you will get your money back from the escrow account should you fail to
obtain mortgage financing for the purchase within a reasonable period of time.
Read
the contract carefully. If there is something that you don't understand, ask
the agent or another source to explain it. If there is something in the
contract you don't like, ask that it be changed to your liking. Remember that
everything, essentially, is negotiable.
Financing
It
can be. Again, you have to do your homework. Ask the real estate agent involved
in the transaction if they know of reputable mortgage lenders. But don't just
rely on their advice. Seek out mortgage rates from a variety of sources, such
as banks, mortgage lenders, mortgage brokers and the Federal Housing
Administration. It insures favorable loans for eligible low- and middle-income
people.
Long
before this process, make sure your financial house is in order. A problem
could delay or prevent securing the mortgage.
As
you try to obtain the lowest rate, keep in mind that lenders may charge points
for your home loan. Points are upfront charges for the loan; they normally
range from zero percent to three percent of the total loan. For example, one
point on a $100,000 mortgage equals a charge of $1,000.
If
you expect to be living in your house for a few years, try to avoid paying
points for your mortgage; if you expect to be living there for many years,
consider paying points because it will reduce the interest rate on your loan.
Another
thing to consider is the type of loan: 30-year, fixed-rate mortgages are the
most common. They make sense in today's market because rates are in the
historically low percent range. There also are adjustable rate mortgages.
They're lower than fixed rates but can fluctuate yearly to your advantage or
disadvantage depending on the direction of interest rates.
The down
payment toward the purchase price is normally 10 to 20 percent of the sales
price, but can be as low as 5 percent with a conventional lender -- and even
less through federal programs. The down payment is due at the closing.
The
down payment affects the size of the mortgage needed to finance the purchase,
and possibly the type of rate you can get, or the number of points you'll have
to pay.
With
a down payment of less than 20 percent, your lender may require that you pay
for mortgage insurance, which would pay the bank should you default.
Yes, you
must buy property and casualty insurance and you must get title insurance. The
latter will clarify whether there are any liens -- debt obligations -- on the
property. At the same time, you should have the house re-inspected to make sure
the seller took care of those improvements stipulated in the purchase and sale
contract. Schedule a walk-through of the house right before closing to verify
that all is in order.
You
might consider hiring a real estate attorney to assist you, especially at the
closing. The closing, which brings together the seller, buyer, mortgage lender
and title insurer, finalizes the sale. The attorney's role is to protect your
financial interests, checking the fine print. And there will be plenty of fine
print, as well as piles of papers to be signed.
When
all is said and done, you will likely spend between $3,500 and $5,500 on an
appraisal of your house, inspections, mortgage fees, loan points, title
insurance, state taxes, attorney's fees and other miscellaneous costs for a
$100,000 mortgage. The seller pays the commission to the real estate agent.
The down
payment toward the purchase price is normally 10 to 20 percent of the sales
price, and is due at the closing. The down payment affects the size of the
mortgage needed to finance the purchase, and the type of rate you can get.
After the sale
Make
sure the new deed for your house is registered locally soon after the closing.
In Texas, you can apply for a homestead exemption during the year in which you
bought your home. Gaining this
exemption will take a big bite out of your tax bill each year.
