Homebuyer's Guide

QUESTIONS & ANSWERS

First-TimeBuyersQuestionsFiguring OutFinancing

Homebuyer’s GuideSmart Tips for First Time Buyers

REPRESENTATION IS A MUST!

HOW TOCHOOSE

THE RIGHTREALTOR

PLUS

Home Insurance Guide

Time is Right forFirst-Time ‘Move Up’

Homebuyers

Inspection:Don’t Buya Home Without One

A Publication of The Norman Transcript • March 4, 2010

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4 HOMEBUYER’S GUIDE

uying a house is a purchaseevery individual and familywants to make. But buyers

should realize that their first home maynot be the home they’re going to live inforever. A first home is just that – a firsthome.

One of the best steps you can makeon the road to homeownership is tosearch for a house to live in – not aproject to take on, like the handymanspecials on HGTV. Know when to drawthe line when purchasing a home thatneeds renovations, says Linda Kepple ofthe Kepple Team at Keller WilliamsRealty, Peoria, Ill.

“Of course there are going to bethings they can do, but sometimes theytake on more than they actually can,”Kepple says.

Brenda Bonello, also of the Keppleteam, suggests not being afraid to buy ahouse that’s a little more expensive up-front.

“Paying $50 more a month in mort-gage is much easier on a first-timehomebuyer than having to take $10,000out of their pocket to update major sys-tems,” Bonello says.

FORGET FLIPPING ITAnother common mistake is puttingmore into the home than you can getout of it when it comes time to sell.First-time buyers often think that ifthey make major improvements to thehouse they will get those expenses backat resale.

But the wheeling and dealing of theboom years have passed. “You onlyrecoup a percentage of any remodelingproject or updating project,” Bonellosays.

INSPECT, INSPECT, INSPECTYou like what you see, so where do

you sign? Not so fast. Failing to get ahome inspection isn’t just foolish, it canbe financially crippling.

“Always, always, always get a homeinspection,” Bonello says.“[First-timebuyers] are not used to being home-owners and maintaining a home. Theyhave no idea what the crack in thefoundation can mean, or water in thebasement.”

GET PEOPLE IN YOUR COR-NER

Brett Kelley, owner of the ChicagoInspection Agency, says potential home-owners also should invest in the peoplethat protect them: lawyers.Without anattorney, it’s difficult to get the inspec-tion report read by the seller’s attorneyor to get desired improvements andrepairs written into the purchase con-tract. Lawyers also guide buyers throughthe legalese of the pile of documentsthey’ll sign at closing.

LOOK AT MORE THAN ONELOAN

Don’t go one-and-done when itcomes to lenders. Shop around, saysTony Garcia III, a sales manager withWells Fargo Home Mortgage, Covina,Calif.

“The biggest thing when they’re shop-ping for a lender is to make sure theyfeel comfortable with the person they’reworking with,” he says. “You need toreally feel a connection, that the person... is really taking the time to educate[you] to understand the process ... toanswer any questions they have. If [you]don’t feel comfortable, walk away.”

Also, be sure to understand what thelenders are telling you, Garcia says, aslenders often use terms that first-timebuyers won’t understand.

“If you don’t understand it ... youmay sign something or enter into a con-tract that you really didn’t want,” hesays.

© CTW Features

Smart Tips for First-Time BuyersLearn the common misstepsfirst-time buyers make on theway to their home purchase –and how to avoid them

BY TIM BEARDEN

CTW Features

B

HOMEBUYER’S GUIDE 5

he best $300 my fiancée and Ispent in the process of buyingour first home did not con-tribute in the slightest to the

actual purchase price. Rather, it kept usfrom purchasing a home that wouldhave been a disaster to live in.

The modest fee was the cost of thehome inspection on the first home weentered into contract on, a cosmeticallygorgeous three-bedroom, two-bathroomcondo with a huge backyard.

It was, in fact, too good to be true, asour hero home inspector eventually dis-covered. Among her findings:• An improperly sealed and pitched

roof, with chimneys is disrepair• Shoddy masonry and tuck pointing• Improperly installed mechanicals• Presence of mold in the basement• [Fill in the blank] not up to city code

We did not even complete a fullinspection, let alone read the report

before we decided then and there toback out. And, of course, our inspectorgained clients for life.

Hiring an inspector is a “makes sense”thing, says Steve Ramos, owner ofEnvirovue Home Inspection inPetaluma, Calif., and featured certifiedhome inspector on the HGTV program“House Detectives.”Ramos lays it out,simply: A buyer is going to pay a fewhundred dollars for an inspection that,on the low end, may find four to fivetimes that amount in repairs.

“There’s a lot that goes into decidingif you want to buy a house,” he says.“All it comes back to is value. Is whatI’m paying for the house worth it?

“You should need to look at theRealtor’s market analysis and theappraiser’s report in conjunction [withthe inspection], and those three reportsshould give you a good idea about whatyou’re buying.”

The urge to become a homeownershould not overpower the importance ofprotecting yourself with an inspection.

“I think there’s an element out there, alittle inexperience, a little eagernessbecause there is an opportunity and awindow to close,” Ramos says of thefirst-time buyer tax credit, noting thatbanks and other sellers are really trying

to shorten the time required to completean inspection. Good inspectors are goingto be busy, so buyers may find them-selves at the end of their contract contin-gency period with the bank or sellers try-ing to force a decision.

“Push for a 10- to 15-day inspectionperiod so you can make a little bit bet-ter-educated decision,” Ramos says,

INSPECTING YOURINSPECTOR

Just like your buyer’s agent, you wantto find an objective, independent inspec-tor who has only your interests in mind.

“If you can, get a referral from some-one you trust that doesn’t have a vestedinterest in the closing transaction,”Ramos says. Find some others, as well,to compare.

Be sure to ask how long the inspectorhas been in business and if you can see asample report. A lot of times you can tella lot of how an inspector inspects by read-ing their report, says Ramos.

Membership in professional organiza-tions, such as the American Society ofHome Inspectors, is a good indicator ofa knowledgeable inspector. In addition,check into any state requirements.

Ed Robinson, a Wichita, Kan.-basedreal estate attorney, worked to introduceand help pass new legislation in Kansasthat sets standards for anyone hoping tobecome a home inspector.

“Before this law there was no regula-tion. There was nothing in Kansas thatsaid ‘This what you need to do to be ahome inspector,’” Robinson says. As ofJan. 1, 2010, home inspectors in thestate must register with a state boardand meet minimum performance andeducation requirements.

“[Inspectors] have specialized knowl-edge, and people rely on them to makeimportant decisions,” says Robinson,adding that buyers should considerinspections a necessity, not an option.

“I would say to anyone buying a housethat you should get an inspection,” hesays. “They provide a lot of informationthat you’re not able to get on your own.Don’t think that you’re making a financial-ly good decision by saving that money bynot getting an inspection.”

Adds Ramos: “It’s kind of like aninvestment.”

INSPECTOR GADGETSA more general way to assess an

inspector it to look at the inspector’sbusiness as a whole.

“If an inspector is willing to invest alot of money in their business, they’reserious about what they do,” saysRamos, who says he has investedbetween $20,000 and $25,000 in techequipment for his business. “It helps mefind more potential issues for myclients,” he adds.

Infrared meters, for instance, candetect moisture by variances in wall andceiling temperatures, in addition tofinding missing insulation and potentialproblems with heating and cooling sys-tems.

An inspection can uncover problemsor major repairs needed on big-ticketsitems, such as roofs or the exterior ofthe structure, which can run anywherefrom a few thousand dollars to morethan $10,000, according to Ramos.

On the safety side, old electrical pan-els are a concern. Ground-fault circuitinterrupters – outlets with the littleturn-off button – should be anywhere“people, water and electricity cometogether” says Ramos, such as thekitchen and garage.

THE REMEDIATION PROCESSSome problems may be significant

enough that buyer wants them fixedbefore moving forward to contract – orto closing, if an offer has already beenmade.

“Start at the top of the list with safetyissues, such as GFCIs and updating thewiring/electrical panels,” Ramos says.“Almost as important is anything water-related. When you have leaking plumb-ing, it leads to one of two things: moldor wood rot,” Ramos says. “Water andwater damage cause a significant amountof property damage.”

There’s no harm in becoming well-versed in the inspection process.

“The most I’ve ever worked with aclient was three houses, maybe once ortwice,” Ramos says. “It’s a little morecommon to get a repeat customer, butthey’re usually a little more educated thenext time around.”

© CTW Features

Why You Need a Home InspectionIt’s the difference between yourdream home and a nightmare

BY TIMOTHY R. SCHULTE

CTW Features

T

he topic of insurance can bedaunting even for the most sea-soned homebuyer. But don’t wait

until it’s time to sign for your home tothink about it – the more research you doin advance, the more comfortable youwill feel the day you move in. Considerthe following choices below before buyingto avoid the wasted money and unneces-sary heartache that can result from over-paying on your policy or paying out-of-pocket in an emergency.

HOMEOWNER’S INSURANCEAs the most basic form of house

insurance, homeowner’s insurance isrequired for anyone who takes out amortgage. It covers the home, any ancil-lary buildings (such as garages or sheds)and personal property. Even for thosepaying with cash, homeowner’s insur-ance is important to cover investmentsin the case of serious circumstances. “Itprovides basic financial protectionagainst a variety of losses, such as theft,fire, hail, tornado or that dump trucknow parked in your living room,” saysAndrew Wallingford, author of ”TheClaim Game” (Quarter Sawn Books,2009). “This protection shields home-

owners from potentially crippling finan-cial loss.” While most insurers includefull replacement cost coverage for thehome and its contents, some requireadditional endorsements to cover per-sonal property.

Though it may be tempting to justsign the dotted line to move along thebuying process, don’t immediately settlewith the first package the insurer pres-ents. Melissa Walters, co-author of “MakeNo Mistakes About Buying Real Estate”(Mill City Press, 2009), says the biggestmistake first-time homebuyers make is tonot read through their homeowner’sinsurance contract carefully to determinewhat is and is not covered. Think critical-ly about whether you need personalizedadditions; for instance, if you have ahome office, you need an additionalendorsement for business pursuits. Alsoremember to document all your personalproperty through video recording toensure you have proof of what you cov-ered.

ANCILLARY INSURANCESAncillary insurances, such as flood

insurance or earthquake insurance, areadd-ons that are often missed by first-

time homebuyers if not required. Buteven for homes outside zone requirements(for instance, if it isn’t located in a floodzone), investing in the policies may be awise choice. “A high percentage of claimsinvolve homeowners with water problemswho are not in a flood zone,” says SidDavis, author of “A Survival Guide forBuying a Home” (AMACOM, 2009).“Most people don’t realize that basichomeowner’s insurance doesn’t coverwater damage from outside the house –there are a lot of problems that can reallyzap you.” He says many things, even theconstruction of a new subdivision nearby,can spur drainage problems that lead toserious water damage.

MORTGAGE INSURANCEMortgage protection insurance shields

a homeowner’s spouse from financialresponsibility in the event that the ownerpasses away before paying off the mort-gage. According to Walters, mortgageinsurance is one of the biggest thingsinsurers like to sneak in that buyers aresometimes not aware of. “Essentially youcan achieve same thing by getting plainold term insurance,” she says. “It’senough coverage to pay off the house, aswell as whatever else.”

Private mortgage insurance is a differ-ent type of coverage that is connectedwith conventional loans. Lenders requireit for anyone who makes a down pay-ment of less than 20 percent in order toprotect their investment in the event thatthe homeowner defaults.

TITLE INSURANCETitle insurance protects a homebuyer

from other individuals making a claim onthe property. The policy is paid for by theseller but can be negotiated by the buyer.For example, if a relative of the pastowner later insists he has ownership ofthe land, title insurance protects thebuyer against the legal costs associatedwith the investigation and research. Inmost states, it is required; however, if youchoose to buy in cash then you mustinsist on getting a title policy that guaran-tees you against fraud and problems thatcould later arise.

© CTW Features

Home Insurance Guidefor First-Time BuyersRenter’s policy no more! Here are the steps to take to pro-tect your new home

BY MELANIE WANZEK

CTW Features

T


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ith the government’sextension of the first-time homebuyer creditthrough April, even the

most entrenched renters are feeling theurge to become masters of their owndomiciles. But like the estimated 1.4 mil-lion first-time homebuyers who tookadvantage of the credit’s first incarnation,novices first need to find the right proper-

ty. Picking the right agent can make allthe difference in finding the right home.

There are many benefits to enlisting anexpert. Realtors – who are members ofthe National Association of Realtors andwho adhere to its Code of Ethics andStandards of Practice – are versed inwhich homes are a good value in the cur-rent market, what locations are mostdesirable, and how real estate law andcontracts work. “If a buyer doesn’t haveextensive knowledge of all the aspects ofa real estate transaction – such as negoti-ating price terms and conditions of pur-chase – they can easily be taken advan-tage of,” says Mark Minnis, abroker/owner and buyer’s agent withInSight Real Estate Portland, Ore. “But a

Realtor is obligated by law to protectyour interests.”

Retaining a Realtor usually requires noout-of-pocket expense on the part of thebuyer, says Brady Moore, a Dallas-basedRealtor with Dave Perry-Miller &Associates. An agent’s commission willdepend upon the listing and the contract.

To find a licensed broker or realtor,your best bet is to start with referralsfrom friends or family, says Minnis, espe-cially if they are located where you arelooking. If new to a city, use the “Find aREALTOR” function at Realtor.org.Sometimes new buyers are tempted to calllisting agents for properties they like, butbe cautious. Working with an agent whorepresents the seller may not be in yourbest interest. Consider finding a buyer’srealtor and have that person help you findproperties, Moore says.

To ensure this process goes smoothly,the experts agree that it’s important tofind someone who is a good personalityfit. “Buying a house is probably thebiggest financial transaction most people

will make in their lives,” says Moore. “Youshould do it with someone you can trust[and] enjoy spending time with.”

A good way to gauge if you will getalong is by interviewing potential realtorsin person. Ask about their areas ofexpertise, the neighborhoods in whichthe majority of their sales occur, if theyown any real estate themselves and howlong they’ve been in the business.

Keep in mind that many (not all) real-tors may require you to sign an exclusive-representation agreement, says Moore,the details of which can vary. In additionto reading over the contract, have afriend who understands real estate alsoread it over. Keep in mind that a goodrealtor will work hard to meet yourneeds. They may put in a lot of timehelping you search, and they won’t getpaid until the sale. When they see youare committed, they know they can dedi-cate their effort to your search.

© CTW Features

How to Choose theRight RealtorBefore beginning a homesearch, it helps to enlist apro to guide the way

By Anna SachseCTW Features

W


405.360.0303

www.centennialrealtors.com

360 24th Ave. NW • Norman, OK

Your Home Search Begins and Ends Here

ure, you’ll be the one unpack-ing the boxes, grilling on thepatio and hanging portraits on

the walls, but buying a home is a teameffort. Here are the key players you’llbe working with throughout theprocess:

THE LENDERThe mortgage lender is the first per-

son you should seek, says Sid Davis,author of “A Survival Guide for Buying

a Home” (AMACOM, 2009). Davissuggests talking to at least three lenders,choosing the ones you think you couldwork with the best and asking each fora Good Faith Estimate. Once you’vemade a final selection based on whichlender has the best annual percentagerate, you’ll fill out a formal application,and the lender will run your credit. Thelender then comes back with a figure ofhow much you can afford. Be carefulthough, warns Davis. “Even thoughlenders will let you borrow more thanyou can afford, you have to take someresponsibility and know your own limi-tations,” he says.

THE REALTOR“The Realtor is there to guide you

through the process from end to end,”says Stephanie Singer, manager ofmedia communications for the

National Association of Realtors. ARealtor can help you speak with mort-gage lenders, recommend homeinspectors and act on your behalfwhen dealing with the seller’s broker.But the Realtor’s most important job,says Davis, is to sit down with youand listen to your needs, and thenfind you a good deal on a great home.“This is where the agent’s expertisereally becomes important,” Davis says.

THE HOME INSPECTOROnce you’ve found that dream

home and your offer has been accept-ed, it’s time to find a home inspector.Often, your Realtor can recommendone, but Davis cautions against usingan inspector that a Realtor pressuresyou to hire. “If an inspector comesback with a bad inspection report itcan kill the deal,” Davis says. A goodplace to look is the American Societyof Home Inspectors Web site,www.ashi.com. When you’ve found aninspector, Davis recommends going

with him or her during the inspec-tion. “You want to have him explainwhat the problem is, how serious it is,how much it’ll cost you to fix it andwhat you can do with it,” Davis says.

THE APPRAISERHired by your lender, the appraiser

assesses the home’s value to be sureyou’re not overpaying. If the apprais-er’s value comes in at or above the saleprice, you’re on your way to closing.

THE CLOSING COMPANYThe closer can be an attorney, a

title company or the real estate bro-ker. No matter who it is, they will puttogether the final pieces of your homepurchase. “All the closer does is justescrow funds, accept funds and pro-vide a place to come in and sign thepaperwork. They don’t make any deci-sions on your behalf,” Davis says.

© CTW Features

Meet Your TeamHere’s the lineup of peopleyou need to know to hit ahome-run real estate deal

BY JESSICA ABELS

CTW Features

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s now your moment to buy a home?The warm prospect of more afford-

able home prices, attractive mortgagerates and a stable economy will likely

draw more real estate shoppers to the mar-ket this spring. But it’s the opportunity forcash back in their pockets that will turnmany shoppers into buyers – and quickly.The potential benefit is huge: as much asan $8,000 tax credit for first-time buyersand a $6,500 credit for move-up buyers.

First-timers who intend to make a moveshould act promptly, do their homeworkand proceed with caution. Review theguidelines closely. Consult a tax profes-sional if you have questions. And use theinfo in this guide to help clarify steps youneed to take on the journey to owning ahome.

$8,000 FIRST-TIME TAX CREDIT• The $8,000 tax credit is for first-time

homebuyers only. For the tax credit pro-gram, the IRS defines a first-time homebuyer as someone who has not owned aprincipal residence during the three-yearperiod prior to the purchase.

• The tax credit is equal to 10 percentof the home’s purchase price up to a maxi-mum of $8,000.

• The tax credit applies only to homespriced at $800,000 or less.

• The tax credit does not have to berepaid unless the home is sold or ceases tobe used as the buyer’s principal residencewithin three years after purchase.

• The tax credit now applies to salesoccurring on or after Jan. 1, 2009 and onor before April 30, 2010. In cases where a

binding sales contract is signed by April30, 2010 a home purchase completed byJune 30, 2010 will qualify.

• For homes purchased after Nov. 6,2009, and on or before April 30, 2010,single taxpayers with incomes up to$125,000 and married couples withincomes up to $225,000 qualify for thefull tax credit.

$6,500 REPEAT BUYER TAX CREDIT

• To be eligible to claim the tax credit,buyers must have owned and lived in theirprevious home for five consecutive yearsout of the last eight.

• The tax credit does not have to berepaid unless the home is sold or ceases tobe used as the buyer’s principal residencewithin three years after purchase.

• The tax credit is equal to 10 percentof the home’s purchase price up to a maxi-mum of $6,500.

• The tax credit applies only to homespriced at $800,000 or less.

• The credit is available for homes pur-chased after Nov. 6, 2009 and on orbefore April 30, 2010. However, in caseswhere a binding sales contract is signed byApril 30, 2010, the home purchase quali-fies provided it is completed by June 30,2010.

• Single taxpayers with incomes up to$125,000 and married couples withincomes up to $225,000 qualify for thefull tax credit.Source: National Association of Home Builders

© CTW Features

Time is Right for First-Time,‘Move Up’ Homebuyers

I

TAX CREDITS FROM NAHBWeb: www.federalhousingtaxcredit.comFacebook: www.facebook.com/federal-homebuyertaxcreditTwitter: www.twitter.com/FTHBtaxcredit

NATIONAL ASSOCIATION OF REALTORS HOMEBUYER TIPSwww.realtor.org/

IRS FIRST-TIME HOMEBUYER TAX CREDIT INFORMATIONWeb: www.irs.govYouTube: www.youtube.com(Search “IRS homebuyer credit”)

HUD TIPS ON BUYING A HOME Web: http://portal.hud.gov

© CTW Features


A mortgage lender takes a“snapshot” of yourfinances. You’ll want toensure that your moneymatters are pictured in themost favorable light:

ORGANIZE YOUR PAPERSYou’ll need to put yourhands on banking and bro-kerage statements, taxreturns, pay stubs and W2forms.

PAY BILLS ON TIMELate payments sink yourcredit score. With that,don’t open new creditaccounts, or seeks newloans before getting amortgage.

LIMIT YOUR MAXKeep credit card accountsfrom being “maxed” out,since this also lowers yourcredit score.

VIEW YOUR CREDIT REPORTOrder a free report.Review and take steps tofix any errors you mayfind.

© CTW Features

ave you ever checked offevery item on your to-dolist Friday, so that you canrelax all weekend?

It’s smart to apply the same strate-gy to homebuying.

First, you worry about what youcan afford and whether you qualifyfor a mortgage. Then, comes the funpart: touring homes and envisioningyourself living there.

In the wake of the credit crisis,however, the business end of buyinghas taken a more serious turn.Lenders are asking borrowers to fullyexpose their financial life and aretougher on credit and other factorsbefore they lend out mortgagemoney.

It can be intimidating, especiallyfor first-time buyers who are unfa-miliar with the process. Here, a lookat your to-do list, a step-by-stepguide to finessing financing:

EVALUATE YOUR LENDERYes, a lender will scrutinize your

money life. But before that happens,make sure the lender passes your test.

Although seeking a mortgage mayfeel akin to asking for a favor,lenders are in the service business.They should be attentive to yourquestions, keep you informed aboutthe status of your application andkeep the loan on track for a timelyclosing.

Ask for the name of a loan officerat a lending or banking firm from arealtor who sells a lot of homes, sug-gests David Reed, author of“Decoding the New MortgageMarket” (AMACOM, 2009).

“Good loan officers rely on steadyreferrals from top realtors and theyknow that if they mess up a transac-tion they no longer get that agent’sbusiness,” Reed says.

If you’re already banking with aninstitution you’re happy with, applyfor a mortgage there, suggests LeslieLinfield, executive director of theInstitute for Financial Literacy,Portland, Maine.

Applying where you bank oftenmeans you don’t have to gatherrecords showing your savings, sincethe bank has the information, adds

Jim Linnane, senior vice president ofWells Fargo Home Mortgage,Chicago.

Do a little comparison shoppingbefore you walk in, suggests BarryZigas, director of housing policy forthe Consumer Federation ofAmerica. Study mortgage ads in thenewspaper, says Zigas, or call a fewfirms and ask what their best rate ona mortgage of a certain size, and askabout fees.

If you have limited funds for adown payment, you may only qualifyfor a government-insured FHA loan.Find FHA-approved lenders atwww.hud.gov. Moreover, first-timebuyers with limited incomes mayqualify for mortgages backed bystates or localities, says Linfield.Many of these programs also are list-ed on the HUD site.

Face-to-Face withthe Loan Officer

Tips To ImproveYour Chances

Of FindingFinancing

Despite improvement in the economy, the lending environment isstill tough. Winning over cautious lenders requires creating a con-crete case for a mortgage

BY MARILYN KENNEDY MELIA

CTW Features

H


Below $100,000ADDRESS BR BA PRICE LISTING AGENT3000 S Chautauqua #113 1 1 $68,500 Barbara Canfield508 SW 2nd 2 1 $73,000 Karen, Bev, & Pam521 E. Hughbert (3 units) 1 1 $75,000 Dee & Tracey505-9 S. Jones (2 units) 2 1 $89,900 Karen, Bev, & Pam107-9 Castro (2 units) 3 1 $99,900 Karen, Bev, & Pam409 W Daws 2 1 $99,900 Dee & Tracey

$100,000-$200,0001540 High Trail 3 1.1 $106,000 Pat Wilson1820 Creekside Dr. 3 2 $142,000 Pat Wilson 718 Terrace Place 3 2.1 $169,500 Barbara Canfield419 Sundown 3 2 $173,000 Ginger Smith605 Gyrfalcon 3 2 $183,500 Dee & Tracey2920 Bretford 3 2 $199,900 Karen, Bev, & Pam

Above $200,0002124 Turtle Creek 2 2 $239,000 Dee & Tracey209 Olde Brook 3 2.1 $274,900 Dee & Tracey330 Lysbeth 4 3 $289,500 Dee & Tracey110 Nantucket 3 3 $310,000 Dee & Tracey506 W Symmes 3 2.1 $325,000 Dee & Tracey1405 Sawgrass 3 2.1 $339,000 Dee & Tracey 2241 Imhoff 4 2 $350,000 Dee & Tracey1305 Sawgrass 4 3 $358,000 Dee & Tracey4600 Pebble Beach 3 3.1 $395,000 Dee & Tracey2008 Hallbrooke 4 3.1 $424,800 Barbara Canfield4551 Augusta 3 2.2 $425,000 Dee & Tracey4412 Brookfield 3 3.1 $479,900 Karen, Bev, & Pam

Cobblestone Creek - Lots $40,000-$59,900 Dee & Tracey Vacant Land17151 Rolling Meadows - 1.32AC $15,000 Dee & TraceyCobblestone West - Lots $34,900 Dee & Tracey Cobblestone Creek - Lots $40,000-$59,900 Dee & TraceyWalnut Creek Estates - Lots $41,500-$75,000 Karen, Bev, & Pam4101 SE 108th - 10.57AC $70,000 Dee & Tracey 1908 Windermere - Lot $138,500 Karen, Bev, & Pam

PREPARE WITH PRE-APPROVALEven if you wanted to put pleasure

before business, today some realtorswon’t take you out to look at homesunless you’re “pre-approved” for amortgage of a certain amount andcan submit a purchase offer withconfidence, explains Brian Seibert,president of the MichiganAssociation of MortgageProfessionals.

Often, a pre-approval is free oravailable for a minimal fee. A lenderwill take your financial vital signs –credit score, income and savings –and then provide a preliminary idea

of the amount you’ll be able to bor-row.

Some potential borrowers will beadvised that they need to improvetheir credit standing or other factorsbefore pre-approval. A lender shouldbe able to give some guidance onhow to boost your financial profilein order to eventually qualify.

Even if you’re easily pre-approved,you’ll want to be on your best finan-cial behavior to ensure that you doactually qualify for the loan whenyou formally apply after finding ahome.

KNOW THE TERMSWhile pre-approval means that a

lender has confidence in your abilityto borrow and repay a loan, remem-ber its only a preliminary judgment.

Your lender may ask for verifica-tion of your income and assets,including documents like yourincome tax returns, W2 forms, paystubs and checking account andbank statements. If you don’t get thepaperwork in relatively quickly or ifit doesn’t match what you’ve told thelender, you may not get the loan.

The pre-approval offer doesn’tstretch out forever; it usually must

be renewed after 90 days.Once you find a home and formal-

ly apply for a mortgage, make sureyou understand all the papers yousign, Zigas says. You will receive adocument outlining all the fees asso-ciated with the loan when you closeon the loan. You may, for example,be charged a fee for an appraisal thelender orders. The fees outlined inthis document should closely matchwhat you actually pay at closing.

Knowledge is the key to confidenthome buying, Zigas says. If you’rereading this, you’re already followinghis advice to read as much as possi-ble and ask questions about allaspects of homebuying.

© CTW Features

In the wake of the credit crisis, the business end of buying has taken amore serious turn. Lenders are asking borrowers to fully expose theirfinancial life and are tougher on credit and other factors before they

lend out mortgage money.


QQ:: II’’mm aa ffiirrsstt--ttiimmee bbuuyyeerr.. II’’vvee hheeaarrdd tthhaatt IIccaann uussee tthhee $$88,,000000 ffiirrsstt--ttiimmee bbuuyyeerr ccrreeddiittiinn ppllaaccee ooff ccaasshh ffoorr aa ddoowwnn ppaayymmeenntt.. II’’vveeaallssoo hheeaarrdd tthhaatt II ccaann’’tt.. WWhhiicchh iiss iitt??AA:: Both. On May 29, 2009, HUD cameout with a revised “mortgage letter”regarding the tax credit that made twomain points:

1. “Buyers financing through stateHousing Finance Agencies and certainnon-profits will be able to use the taxcredit for their down payments via sec-ondary financing provided by the HFA ornon-profit.”

2. “Current law does not permitapproved lenders to monetize the tax creditto meet the required 3.5 percent minimumdown payment, but, under the terms oftoday’s announcement, lenders can nowmonetize the tax credit for use as addition-

al down payment, or for other closingcosts, which can help achieve a lower inter-est rate.”

So if you’re a first-time buyer and quali-fy for the $8,000 credit you can apply themoney to the FHA down payment, pro-vided that the credit advance comes froman approved nonprofit or governmentagency, such as a state housing program.However, if your financing comes from aprivate lender – say a bank – then the dealis different. You cannot get an advance onthe tax credit to pay the FHA down pay-ment. You must still come up with the3.5-percent down payment from yourown funds or from a gift. However, youcan get an advance to pay off other closingcosts or to increase your down payment.

QQ:: II wwaanntt ttoo bboorrrrooww $$115500,,000000,, bbuutt tthhee

lleennddeerr ssaayyss II qquuaalliiffyy ffoorr $$117755,,000000.. WWhhyy iisstthhee qquuaalliiffyyiinngg aammoouunntt hhiigghheerr tthhaann wwhhaatt IIccaann rreeaalliissttiiccaallllyy aaffffoorrdd??AA:: Lenders have traditional guidelines thatsuggest what’s affordable based on yourincome, credit and monthly costs. Thelender might say that as much as 38 percentof your gross monthly income can go tohousing costs and other expenses. That’sfine, and such guidelines likely work formost borrowers. But if you’re not comfort-able with the level of debt then say so. Lookfor properties where the maximum loanamount will be no more than $150,000.This is your decision, not the lender’s.

QQ:: WWee hhaavvee hhoommeess iinn oouurr ccoommmmuunniittyy tthhaattuusseedd ttoo ccoosstt $$550000,,000000 aanndd aarree nnooww sseelllliinnggffoorr $$330000,,000000.. AArree tthheessee hhoouusseess aa ggoooodd bbuuyy??AA:: What homes used to sell for doesn’tcount. Instead, ask yourself some ques-tions regarding the properties:

• If you bought a property for $300,000could you resell it now at a higher price?Enough to also cover marketing and clos-

ing fees?• If you bought a $300,000 property

could you rent it for enough to pay thecosts of mortgage interest and principal, aswell as property taxes, property insurance,repairs and other costs? If not, can youafford the monthly negative cost?

• Is this a property you want for yourpersonal use? Do you intend to own it formany years?

• Given your local market, could theprice fall even further?

All properties are unique. Speak withlocal brokers and get more informationabout local housing, population and jobtrends. Then see what makes sense in termsof your market, your preferences and yourfinancial situation.

QQ:: II wwoouulldd lliikkee ttoo hheellpp mmyy ssoonn bbuuyy hhiissffiirrsstt hhoommee.. WWhhaatt mmeetthhooddss aarree aavvaaiillaabbllee??AA:: Helping a family member buy a homeis not uncommon. A 2008 study by theNational Association of Realtors showsthat 26 percent of all first-time buyers hadhelp from a relative or friend. However,it’s important to say that with the financialmeltdown lender standards have tightenedand more cash may be needed to acquire ahome. The NAR study shows that a typi-cal 2008 first-time buyer put down 4 per-cent - that’s up from 2 percent in the2007 study. You can bet that down pay-ment averages will rise in 2010.

Here are some strategies to consider:1. Anyone can make a $13,000 tax-free

gift to anyone else in 2010. For a marriedcouple, that’s $26,000 a year to one person.Gifts can be tricky so get specific advicefrom a tax professional.

2. You can buy with your son as a co-owner under a concept called “equity-shar-ing.” Established under the Black LungBenefits Revenue Act of 1981, equity shar-ing allows a property to be owned by anowner/occupant (the resident) and a non-owner/occupant (an investor). The residentgets to write off a portion of the mortgageand property taxes while the investor getsreal estate write-offs plus some deprecia-tion. The investor has income from the res-ident for use of the investor’s portion of theproperty. To get a proper agreement, speakwith a real estate attorney.

© CTW Features

First-Time Buyers’ Burning QuestionsBY PETER G. MILLER | [email protected]

CTW Features


f you do not own a home, you might aswell buy one because you’re already con-tributing to a mortgage – your land-

lord’s. That’s one case for homeownership Seattle-

based broker Carolyn Warren makes on herWeb site, mortgage-helper.com. Although it’seasy to understand the benefits of owning ahome – especially now that house prices andinterest rates are so low – the buying process

is daunting.“I think everyone should have to take a little

class so they know what they’re getting them-selves into,” says mortgage banker Mary AnnMcGarry, adding that such classes are widelyavailable free through various organizations.

Here, we offer a sort of CliffsNotes studyguide in homebuying, from setting a budgetto signing on the dotted line.

KNOW YOUR CREDIT HISTORY AND SCORE

Check your credit report, resolve any inac-curacies and bone up on ways to boost yourscore if necessary. A FICO score of 620 usedto be the benchmark for getting a loan, butlenders now want scores in the 740 to 760range.

Track your fixed living expenses, discre-tionary expenses and miscellaneous purchasesfor 60 days to establish a target monthly

mortgage payment based on your income rel-ative to your expenses. At the same time, lookinto programs that offer down payment assis-tance to first-time buyers.

On top of a down payment, a buyershould have a “home expense fund” totaling2 percent of the projected purchase price. Soif you’re looking at homes in the $200,000range, you should have $6,000 squirreledaway for the ongoing costs of home owner-ship, including upkeep, emergency repairsand household purchases, such as a lawnmower and window blinds, says personalfinance expert Lynnette Khalfani-Cox,Mountainside, N.J., author or “Your FirstHome: The Smart Way to Get It and KeepIt” (Advantage World Press, 2008).

Buying a home doesn’t have to be hard. Here’s a guide to the insand outs of the process so you can start your dream-home searchon the right foot

BY DAWN KLINGENSMITH

CTW Features

I

Great Expectations


SOMETIMES when sizingup a house, people are socharmed by features or getso caught up picturingthemselves decorating andentertaining that they don’tnotice flaws both large andsmall, like a lack of closetspace. Other times, theyfocus on things that don’tmatter in the grand schemeof a home purchase. Toavoid buyer’s remorse, heedthese do’s and don’ts.

DO• “Visit the house at differ-

ent times of day, as traffic,noise level and neighborbehavior may vary,” saysreal estate broker DianeSaatchi of the CorcoranGroup, East Hampton,N.Y.

• Take a measuring tape tomake sure your furnitureand other items fit in the

new space.

• See to it that utility costsare verified and adjusted foryour use. For example, thesellers’ heating costs may below because they stay downSouth all winter.

• Compromise, when neces-sary, on things that can beswitched out, updated orfixed most easily. Forexample, if both a base-ment and a garage are onyour wish list, “it’s best togo with the basement,knowing a garage can beadded later,” Saatchi says.

• “Avoid buying homes inareas that are economicallydepressed, crime-ridden orpoorly situated. Thinkabout the prospect of sell-ing the home down theroad,” Khalfani-Cox says.You might not be bothered

living by train tracks or abusy highway, but a poorlocation is a turnoff forprospective buyers.

DON’T• Be so concerned about

resale that you forget yourneeds.

• Be seduced by trims andtrappings; you’re not buy-ing the décor. “Don’t letemotions cause you to payfor what you will not begetting. Sellers stagebecause buyers pay morefor well-dressed homes,”Saatchi says.

• Quibble over little thingslike mismatched switchplates – especially if it’s aploy to downplay yourinterest. Some sellers’agents say they love itwhen you fuss over detailsbecause it means you are

picturing yourself there,Khalfani-Cox says.

• Allow the home inspector’sreport to shatter your con-fidence and resolve if nomajor defects turn up. Thedocument will be long anddetailed, including suchminor flaws as a missingcabinet knob.

• Overlook the quality ofthe school district – even ifyou don’t have kids. “It’soften a big selling pointfor a home,” Elika says,“so it’s a factor to consider,as it may impact yourhome’s resale value.”

MAKE A PROPERTY WISH LISTDecide on features you want, and then

prioritize them, suggests real estate brokerGea Elika of Elika Associates, New York.For example, how close do you need to beto public transportation, an expressway, anairport or a playground? How many bed-rooms do you need?

GET A GOOD FAITH ESTIMATERequest up to three Good Faith

Estimates as a means of choosing yourloan officer. A GFE shows the loanamount, interest rate, monthly paymentand fees and costs. Warren offers the fol-lowing sample script in her book,“Homebuyers Beware” (FT Press, 2009):

“I am in the market to buy a house. I’mlooking in the $250,000 price range and Ihave 10 percent to put down. My creditscore is 805. Will you please e-mail aGood Faith Estimate so I can see what myloan would look like?”

An honest mortgage professional won’tinsist on pulling your credit report beforeproviding you with a GFE, Warren writes.

GET PRE-APPROVEDAND GET HUNTING

Organize the documentation a lenderwill need to pre-approve a loan, includingbank statements, pay stubs, personal iden-tification and tax forms. Get pre-approvedfor a loan before you start house hunting,and then select a buyer’s realtor. “A realtorcan pre-screen homes for you so you don’twaste time looking at houses that don’t fityour requirements,” Khalfani-Cox says.

When house hunting, don’t call theagent on the for-sale sign. “When you godirectly to a listing realtor, you’re not fullyprotected,” says Sang Oh, of the WallStreet-based brokerage PlatinumProperties. “The listing realtor’s position isto represent the seller and protect theirinterests by trying to get them the highestprice.”

Bring along a notepad and digital cam-era when visiting properties, Khalfani-Coxsuggests. After looking at several homes,it’s difficult to remember which one hadthe Viking oven range and which had thekoi pond.

Your buyer’s realtor will prepare andsubmit an offer when you find what youhope will be “Home Sweet Home.” Onceprice and other details have been negoti-ated, ask your buyer’s realtor to forward acopy to your loan officer, and lock inyour interest rate.

GET INSPECTEDGet a home inspection even if you’re

buying new construction. You will receivea detailed report of any code violationsand repairs that might need to be made,which will be your basis for further nego-tiations, Warren says.

You then will need to pay for anappraisal report, which your loan officerwill order.

At the closing, you will be presentedwith a breakdown of your loan costs calleda HUD-1 statement, which Warrendescribes as “the final draft of the GoodFaith Estimate.” You should compare thetwo because GFEs are “notoriously inaccu-rate,” Khalfani-Cox says. You’re entitled torequest a copy of the HUD-1 statement 24hours prior to the closing, and she recom-mends you do so because you’ll be morelikely to overlook errors and “junk fees”under pressure. Keep in mind, though,that certain discrepancies and add-ons,such as third-party fees, are inevitable.

© CTW Features

Documents

Homebuyer's Guide