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Buying a new home |
by Jerry Watson Buying a new home, whether your first, a second home, vacation cabin or condo, can seem complicated, even intimidating. Take things one step at a time and before you know it, you'll be unlocking your own front door.
The government Department of Housing and Urban Development has a list of nine steps that pose a good starting place for a new home purchase.
Decide how much new home you can afford
This may seem simple, even trite advice. Many people embark on a new home purchase without any idea of the costs involved, especially first time home buyers. This comes about, in part, because the government encourages first time home buyers with a number of innovative programs designed to encourage them to make a purchase. It is wise to consider some of the following before starting your search.
• What kind of job do you have? Is it steady? How long have you been employed there? What are your future employment prospects?
• Are you married? Single? Do you have children? What are your housing needs now?
• If you are married, does your spouse work? If so, is his/her job steady? What are his/her future employment prospects?
• Are you looking for a starter home? A second home? A vacation home? A cottage? A condo? A rental?
• How much money do you have set aside for a down payment?
Know your rights
• There are many aspects to new home purchases that are obscure, confusing, even intentionally glossed over in the effort to force a sale.
• Take the time to educate yourself. It is time well spent. Following are some information resources you should take advantage of to learn as much as possible about your prospective purchase. These can be found on the Department of Housing and Urban Development website.
o Fair Housing: Equal Opportunity for All
o Real Estate Settlement Procedures Act (RESPA)
o Borrower's rights
o Predatory lending
• In addition, learn all you can about two real estate principles in detail. These two principles alone can transform your dream home into a living nightmare.
o Adverse possession.
o Prescriptive rights.
Shop for a loan
• You should take the time to approach a home loan vendor and get pre-qualified. You do this by filling out an application for a home loan. This will tell you how much a prospective lender is willing to loan you for your new home purchase.
• It's best to approach more than one lender, if possible.
• Above all, be honest in filling out your application. It will, almost certainly, be checked for accuracy.
• Remember, the more money you have set aside for a down payment, the better terms you can get for your loan.
Learn about home buying programs
• Each one of the fifty United States has a number of home buying programs.
• Take advantage of this vast reservoir of information. There are programs available for first time home buyers, veterans, seniors, low income, disabled, and any number of agencies and counseling services available to help.
• The one place you should approach with a certain amount of trepidation when searching for information about home buying programs is any real estate office. Remember, they are professionals whose main goal is to sell real estate. That is how they make their living. In most cases, they are not concerned about the sale after the fact, although there are reputable real estate agents whose concern for their clients runs well past the initial sale. Ask around for references.
Shop for a home
• Here's where things get really fun! Now is the time to gather everybody in the car and cruise for castles. What are your desires? What things is your spouse interested in? A view? Landscaping? A school, a church, a store nearby? Lots of wide open spaces?
• Don't take your friendly, neighborhood real estate agent with you at first. Take the time, if possible, to see what's out there. Cruise the neighborhoods. Talk to people. Years ago my father took the time to chat and by doing so, avoided a part of the county notorious for heavy winter storms and bought a beautiful small farm in a small area that was a noted banana belt.
• Be sure to talk to the neighbors. You may be surprised at their response. Better to find out now than after you've signed the papers. Maybe they will welcome you to the neighborhood with open arms. Then again, you may discover your prospective neighbor is also the local grouch, crazy person, town character, etc.
Found the place you just can't live without?
Well, now's the time to make the home owner or their real estate agent an offer. Before you do, take some time to talk with your spouse and children.
• Get some outside advice. Others may see things you missed.
• Don't be in a hurry to make an offer just yet. If someone, like a real estate agent, is pressuring you to do so, take that as a bad sign and back away. The bullet you dodge may have had your name on it.
Hire a home inspector
Here an important word about home inspections may be called for. Usually the lender will require the property to be inspected by a home inspector and they may require you to hire them. Be aware that even if you pay for the home inspector, they are working for the lender. Their purpose is to protect the lender's investment. No matter what they tell you, their concern is not for your welfare. That is a ploy to get you to pay their bill. They are there to make sure the property is up to current codes and standards. In the main, that is to your benefit, but never forget it's all a money game. And the lender holds the money you want. They will insist that their investment be protected. Shop around before agreeing to any particular home inspector. Make sure they are members of ASHI, The American Society of Home Inspectors. As with any important purchase, ask around, talk to friends, family, acquaintances, get referrals.
Shop for homeowner's insurance
The lender will require you to have homeowner's insurance. Shop around for the best value.
Sign the papers at closing
If you've never done this before, it can be a lengthy process. Be sure to set aside enough time to do it. You must read all the documents before signing them. If you don't understand them, consider hiring an attorney or another real estate broker or agent to explain them to you before you sign. Don't rely on the seller's agent to do that for you. Relying on your own agent may also be a little bit of a negative. Remember, your agent is hoping to make the sale. That's his or her paycheck. At this point money will change hands. The larger down payment you can make the better. If you have at least twenty percent of the sale price for a down payment, the lender may allow you to make your own property tax and insurance payment. If you don't, the lender will require that you put enough in escrow to cover these costs annually. That can add up to a lot of money. In the long run, it will serve you better to save patiently until you have that twenty percent down payment.
Saving money in the long run
Education is the key. The more you know, the more you stand to save on a prospective home purchase.
• Don't buy more than you need for the present and the foreseeable future.
• Don't buy more than you can afford to maintain.
• Consider your skills. Can you do some or all of the work yourself? If so, you may be able to pocket even more of the costs of maintenance and repairs.
• Don't overlook the opportunities to negotiate directly with the homeowner. If they, or you, have already signed a real estate contract, that may not be possible.
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