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| BUYER F.A.Q. |
- When I start visiting homes, what should I be looking for the first time
through?
- Is an older home as good a value as a new home?
- Do I need to bring anything along when I'm looking at homes?
- What should I ask about each home that I look at?
- What should I tell about the homes I look at?
- How many homes should I look at before I buy?
- What should I think about when I'm deciding which community I want to live in?
- Where can I get information about local schools?
- How can I find out what homes are selling for in a given neighborhood?
- I'd like to have a professional look at the home before I buy it. What
does a home inspector do?
- Should I be present during the inspection?
- Do I need to talk to my insurance agent?
- What's "earnest money," and how much do I need?
- Is there any way I can protect myself against emergency repair bills in my
new home?
- How do I determine the amount of my initial offer?
- If I'm moving a considerable distance, is there any way I can gather information
before I start traveling?
- Should I move myself or use a moving company?
- What is a mortgage, and what are the benefits of different kinds of mortgages?
- What are the different types of lenders, and how do I choose the right one
for me?
- Are there any mortgages especially designed for first-time buyers?
- Can I get an FHA or VA mortgage?
- How much of a down payment will I need to buy a home?
- How does a lender determine the maximum mortgage I can afford?
- What are the steps involved in the loan process?
- What are "Points"?
- What is APR, and how is it calculated?
- What is a good faith estimate?
- What does my monthly mortgage payment include? And what does PI and PITI stand
for?
- What are the respective advantages of 15-year and 30-year terms?
- Do adjustable rate mortgages offer any protection against rising rates?
- How can I find out what my property tax bill will be?
- What can I do if I have a fixed rate loan, and interest rates go down?
- What is the difference between pre-qualifying and pre-approval?
- Can I pay off my loan early?
|
 When
I start visiting homes, what should I be looking for the first time through?
The house you ultimately choose to call home will play a major role in your family's life. A home can be an excellent
investment, of course, but more importantly, it should fit the way you really live, with spaces and features that appeal
to everyone in the family. "At each home, pay close attention to these important considerations." Is there enough room
for you now, and in the near future? Is the home's floor plan right for your family? Is there enough storage space?
Will you have to replace the appliances? Is the yard the size that you want? Are there enough bathrooms? Will your
present furniture work in this home? |
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Is
an older home as good a value as a new home?
It's a matter of personal preference. Both new and older homes offer distinct advantages, depending upon your unique
taste and lifestyle. New homes generally have more space in the rooms where today's families do their living, like
a family room or activity area. They're usually easier to maintain, too. However, many homes built years ago offer
more total space for the money, as well as larger yards. Taxes on some older homes may also be lower. Some people are
charmed by the elegance of an older home but shy away because they're concerned about potential maintenance costs.
Consider a home warranty to get the peace of mind you deserve. A good Home Warranty plan protects you against unexpected
repairs on many home systems and appliances for a full year or more after you move in. |
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Do
I need to bring anything along when I'm looking at homes?
Bring your own notebook and pen for note taking and a flashlight for seeing enclosed areas. Be prepared to "snoop around" a
little. After all, you want to know as much as possible about the home you buy. Sellers understand that because their
home is on the market, it will be looked over pretty thoroughly. Don't forget to bring along this Home Buyer's Workbook
as a reference guide when you are looking at homes. The pages in the back of the book allow you to make notes on specific
homes, which will make it easier to remember the specifics about each home. If you need to go back to a home for another
look, we will be happy to schedule an appointment. Be sure to ask any questions you have about the home,
even if you feel you're being nosy. You have a right to know. It's important to know that the seller will supply the
buyer with a Residential Property Disclosure, which will disclose any defects known by the seller. |
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What
should I ask about each home that I look at?
As a rule of thumb, ask any questions you have about specific rooms, features or functions. Pay particular attention
to areas that you feel could become "problem" areas-additions, defects, areas that have been repaired. And above all,
if you don't feel your question has been answered, ask until you do understand and are satisfied. In most cases, we
will be able to provide you with detailed information. |
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What
should I tell The Realty Store about the homes I look at?
Tell us what you liked and didn't like about each home you saw. It is important for us to really
get a feel for what you're looking for in a home in order to find your dream home. Don't be shy about talking about
a home's shortcomings. Was the home perfect except for the carpeting? Let us know that, too! |
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How
many homes should I look at before I buy?
There is no set number of homes you should look at before you decide to make an offer on one. That's why providing
us with as many details as possible up front is so helpful. The perfect home may be waiting for you on your
first visit. Even if it isn't, the house-hunting process will help you get a feeling for the homes in the community
and narrow your choices to a few homes that are worth a second look. If you're looking in more than one community,
try to make the most of each house-hunting trip. Stop by the local Chamber of Commerce to pick up promotional literature
about the community. Or ask us for welcome kits, maps, and information about schools, churches, and recreational
facilities. Also, be sure to take along a camera and snap some pictures of all the homes you like. That'll make it
easier to remember. |
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What
should I think about when I'm deciding which community I want to live in?
Good city services, nice parks and playground facilities, convenient shopping and transportation, a track record of
sound development and good planning-these are just a few considerations that are important to many people when they
choose a community in which to live. As for individual neighborhoods within a village or city, there is no better source
of information than The Realty Store! We know the people and the communities we serve, and chances are,
we can help you find a neighborhood that really fits your family's needs. |
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Where
can I get information about local schools?
Again, we are perhaps your best source. We know where the local schools are, and can provide you with valuable
information about school districts, including test scores, extracurricular activities, bus service and more. If you're
relocating, we may even be able to put you in touch with teachers and principals when you visit the area. |
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How
can I find out what homes are selling for in a given neighborhood?
Home sales are a matter of public record. The Recorder's Office, a local residential appraiser, the planning department
for the locality or the public information department of the local Multiple Listing Service (if they have such a department)
are all resources the buyer can call on. All can be searched for recent sale histories, sale prices (or average sales
prices), time on the market and other listing information for sales in any given area. |
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I'd
like to have a professional look at the home before I buy it. What does a home inspector do?
For your own safety, and to make sure you're getting your money's worth in the home you choose, using a professional
home inspector is highly recommended. A home inspector will check a home's plumbing, heating and cooling, electrical
systems, and look for structural problems, like a damp or leaky basement. Usually, you call an inspector immediately
after you've made an offer on a home. However, before you sign any written offer, make sure that it includes an inspection
clause or other language which says that your purchase obligation is contingent on the findings of a professional home
inspector. Your home cannot "pass" or "fail" an
inspection, and your inspector will not tell you whether he or she thinks the home is worth the money you are offering.
The inspector's job is to make you aware of repairs that are recommended or necessary. A seller may be willing to renegotiate
a price to accommodate needed repairs, or you may decide that the home will take too much work and money. A professional
inspection will help you make a clear-headed decision. In addition to the overall inspection, you may wish to have
separate tests conducted to check for termites, or the presence of radon gas. Talk to us for information
about these tests and companies in the area that perform them. In choosing a home inspector, consider one that has
been certified as a qualified and experienced member by a trade association. We may refer you to several
qualified inspectors. |
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Should
I be present during the inspection?
Yes. It's not required, but it is very much to your advantage. You'll be able to clearly understand the inspection
report, and know exactly which areas need attention. Plus, you can get answers to many questions, tips for maintenance,
and a lot of general information that will help you when you move into your new home. Most important, you'll see the
home through the eyes of an objective third party. |
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Do
I need to talk to my insurance agent?
Yes, and the sooner, the better. Most insurance professionals have a lot of experience in working with homeowners and
can offer useful tips about home ownership, particularly regarding home safety and keeping your premiums low. Once
you've found a home, work together to develop a homeowner's policy that meets your individual insurance needs. You'll
need to supply your pre-paid policy to your mortgage lender prior to closing. |
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What's "earnest
money," and how much do I need?
When you sign an offer to purchase, we will ask you for earnest money-that is, money that shows you are serious
about wanting to buy. Usually, you will be asked to write a check for one percent to five percent of the sale price,
made payable to The Realty Store. This money will be held in a special escrow account. If your offer is accepted,
your earnest money will be included as part of your down payment. If your offer is not accepted, you'll get back all
your earnest money. But keep in mind that if you back out, you forfeit the full amount. |
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Is
there any way I can protect myself against emergency repair bills in my new home?
Yes. Home warranties offer you protection against many potentially costly problems not covered by your homeowner's
insurance. They've become increasingly popular in recent years, and for good reason: the coverage can save you thousands
in the event of a major mechanical breakdown, at a time when your cash reserves have been depleted by your down payment
and moving expenses. Ask us whether a Home Warranty is offered when looking at homes. But remember, if it
is not offered, feel free to ask for it when writing the offer to purchase. The Home Warranty will give you the peace
of mind necessary to feel comfortable in your new home. In most cases, the warranty plan will cover appliances, hot
water heater, air conditioning units, electrical systems, garage door openers, plumbing systems, heating systems, faucets,
ceiling fans and water softeners. Check with us regarding the specifics of the Home Warranty plan! |
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How
do I determine the amount of my initial offer?
There is really no rule to use in calculating a realistic offer. Naturally, the buyer wants the best value and the
seller wants the best price, but negotiations can be influenced by many factors, such as a seller who may be changing
jobs and wants to sell quickly, or a buyer who really wants a specific home. After you've looked at the home's features,
asked questions, checked comparables, and talked about it with us, you should have a good idea of what the
home's value is in the current market. Consider what you can afford and make an offer that you consider to be fair.
Most buyers and sellers negotiate on price, with both sides "giving" a little until both agree. When the price is agreed
upon, the paperwork will be initialled by both parties. At that point, you typically will begin the process of arranging
for an inspection and applying for a mortgage. |
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If
I'm moving a considerable distance, is there any way I can gather information before I start traveling?
Yes, we are proud to be associated with some of the best relocation companies in the nation. Whether you're
moving across town, across the nation, or around the world, we can help. Our Relocation Networks are skilled in handling
the special needs of families involved in the relocation process. We understand your needs, concerns, fears, anxieties
and joys, but most of all, We know how to get you and your family from here to there with minimal stress and inconvenience.
In addition, today's Multiple Listing Services-which
include up to 90% or more of the homes listed in any given community-have made it relatively easy for buyers to access
detailed information on homes for sale practically anywhere in the country. |
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Should
I move myself or use a moving company?
In almost every case, you can save yourself time and energy by using a reputable moving company to help you move. Ask
us, friends, and co-workers for recommendations, then get estimates from several companies. Don't choose
a mover based on price alone-consider the reputation and professionalism of the company, too. Work closely with the
moving company to coordinate your efforts and your move will be achieved with maximum efficiency. |
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What
is a mortgage, and what are the benefits of different kinds of mortgages?
Simply put, a mortgage is a loan that a home buyer obtains directly from a lender to purchase real estate. The mortgage
is a lien on the property that secures a promissory note (promise to repay the debt) that states the terms of the loan,
including the interest rate, and the number of payments. The most popular mortgages available to home buyers today
can be divided into two general categories: those which offer fixed interest rates and monthly payments, and those
where one or both of those factors are adjustable. Fixed rate/fixed payment loans are more traditional, and remain
the most popular home financing method, currently accounting for about two-thirds of all residential mortgages. Their
advantages are well-known: You always know what your monthly principal and interest payment will be, so your basic
housing cost will remain unaffected by interest rate changes until the mortgage is paid off. Mortgages that entail
flexible rates and/or payments have grown in popularity during periods of high interest rates and/or rapidly rising
home prices. Many, including the popular ARMs (Adjustable Rate Mortgages), offer lower-than-market initial interest
rates that allow buyers a measure of affordability unavailable in fixed-rate loans. The tradeoff may be higher interest
rates and higher monthly payments later on. |
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What
are the different types of lenders, and how do I choose the right one for me?
Before someone lends you the money to purchase your home, they'll want to know a lot about you. And you're entitled
to know as much as you can about them, too. It's important because getting a mortgage is not just a one-time signing
of documents, a handshake and a check. You will be depending on your lender to fund the loan as promised, on time,
and over the life of the loan, to keep good payment records, pay your taxes and insurance (if included in your monthly
payment) and many other continuing services. Look for a lender that has the authority to approve and process your loan
locally. It's easier to obtain information on the status of your loan and discuss conditions directly with the person
who will approve your loan, rather than some far away loan committee. It's important that your lender know home values
and conditions in your local area. And while biggest doesn't always mean best, financial stability, reputation, qualifying
procedures, and unique programs benefit are what they offer home buyers. |
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Are
there any mortgages especially designed for first-time buyers?
Today, first-time buyers enjoy a number of mortgage options that make purchasing a home more affordable by minimizing
down payments and keeping monthly payments as low as possible during the early years of the loan. Most ARMs feature
an interest rate that is often below market for the first year, and may only rise gradually after that. VA and FHA-insured
loans call for extremely low down payment (0-5% of the purchase price), and often offer a below market interest rate.
Similarly favorable terms can also be arranged with the help of Private Mortgage Insurance or PMI. Finally, first-timers
who can find a cooperative seller or third-party investor can look into such non-traditional financing methods as a
lease/buy arrangement. |
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Can
I get an FHA or VA mortgage?
Just about anyone can apply for an FHA-insured mortgage through banks and other lending institutions. They are particularly
well-suited for buyers of moderate income; the low down payment requirements (as low as 3% of the purchase price) are
matched by a relatively low maximum mortgage amount. Similarly, VA-guaranteed loans often require no down payment for
up to four times the amount guaranteed by the VA. These loans are reserved for either active military personnel or
veterans, or spouses of veterans who died of service-related injuries. If there is a downside to these loans, it's
the qualifying process. Though you apply for government-insured financing through a lending institution, the Federal
Housing Administration or the Department of Veterans Affairs must insure or guarantee the loan and may require specific
documentation or procedures not necessarily required for conventional financing. That may take more time than is generally
required for conventional mortgage approval. Additionally, FHA-required insurance must be added to your payment. Make
sure the lender you select has approved authority by each of these agencies to ensure a quicker loan process. |
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How
much of a down payment will I need to buy a home?
A down payment of 20 percent has been the benchmark for conventional financing, but today, many options are available,
some requiring as little as 5 percent down. For buyers who qualify for conventional financing but can't handle the
high down payment requirements, lenders offer this financing with PMI, or Private Mortgage Insurance. Designed to protect
the lender against default by the borrower, PMI allows you to obtain traditional financing with a down payment significantly
lower than the standard 20 percent. By using PMI, you may be able to get a fixed rate or adjustable rate mortgage by
putting as little as 5 percent down. As with an FHA-insured loan, you must pay premiums for PMI coverage, the amount
of which are determined by the lender. Moreover, PMI premiums are often lower than FHA insurance, and may be paid as
part of your monthly mortgage payment, in annual installments, or in a lump sum at the time you obtain the loan. Your
mortgage expert can help you determine which down payment option is right for you and your budget. |
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How
does a lender determine the maximum mortgage I can afford?
The three primary areas lenders examine in determining the size of mortgage you can handle include your monthly income,
non-housing expenses, and cash available for down payment, moving expenses and closing costs. There are a number of
different ways lenders interpret these variables to estimate your mortgage capacity. The most popular method is detailed
here. Most lenders feel a family should spend no more than 28% of its gross monthly income on housing costs, including
the mortgage, insurance, and real estate taxes. Also, these housing costs plus your long-term debts (car loans, student
loans, etc.) shouldn't exceed 36% of your income. If your down payment is 10% or lower, most lenders will tighten these
restrictions even further. Some lenders may also include home maintenance costs and utility payments in their calculations. |
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What
are the steps involved in the loan process?
The information your lender needs is not much different than what is needed when you apply for a major credit card:
names and addresses of your employer and bank account numbers and balances. The lender will also need other financial
information such as installment payments, auto loans, charge cards, and department store accounts. The location and
description of the property also are required. Your lender will verify this information with your present and past
employers, order a routine credit report on your current and past accounts, and order a professional appraisal of the
property you're wanting to purchase. Allow yourself two to four weeks to complete the application process. Then once
all the verifications have been completed, your lender will underwrite and approve the loan. Overall, the time from
the date of application to the date of move-in is generally four to five weeks for conventional loans and five to seven
weeks from the date of application for FHA and VA loans. |
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What
are "Points"?
In real estate, the term "point" refers to 1% of the total mortgage loan amount. Buyers often pay lenders this supplemental
fee, calculated in points, to get a better interest rate on a particular mortgage. For instance, a lender may offer
you a choice of two 30-year mortgages: the first at 10% with no points, and the second at 9-1/2% with an additional
three points. If the loan is for $100,000, those three points will cost you an extra $3,000 up front-but you'll get
a payback of significantly lower monthly payments ($840.85 vs. $877.57) for the lifetime of the loan. Many lenders
will advise you to pay the points for the better rate if you can afford it, especially if you plan on keeping the home
for more than a few years. Like interest, the money you pay for points may be tax-deductible, and the investment may
pay for itself through savings generated by lower monthly payments. We suggest you call your tax preparer. |
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What
is APR, and how is it calculated?
The Annual Percentage Rate is a calculated rate of interest for a loan over its projected life. This rate includes
the interest, all points (which are considered prepaid interest), mortgage insurance, and other charges associated
with making the loan that the lender collects from the borrower. The APR is calculated by a standard formula that all
lenders use. This enables the borrower to comparison shop between lenders and/or loan products. |
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What
is a good faith estimate?
Your lender or loan agent must provide you with a good-faith estimate within three days of your application. This is
the information you need to make a fair and accurate judgment when shopping for a loan. Your estimate is a written
document that shows all the costs that can be estimated in advance by the lender. You need this information so there
are no surprises on the day you close your sale on the property to be purchased. You will be expected to pay closing
costs. You should review all costs, know which are non-refundable in the event your loan is not approved, and be prepared
to pay outstanding fees at closing. You may also want to compare these costs to those charged by other lenders when
shopping for your home plan. |
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What
does my monthly mortgage payment include? And what does PI and PITI stand for?
The bulk of your monthly mortgage payment goes toward paying off the principal and interest of your loan. (You may
hear lenders refer to this as "PI", for Principal & Interest). In addition, most lenders require that you pay a sufficient
amount to cover your local real estate tax, plus your homeowner's or hazard insurance. (You may hear this "total" payment
referred to as "PITI", or Principal, Interest, Taxes & Insurance.) This amount is placed in an escrow account, from
which your lender then pays your tax and insurance bills as they come due. When shopping for a loan, it is important
to ask the lender if the monthly payment you are being quoted is PI or PITI. |
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What
are the respective advantages of 15-year and 30-year terms?
The 30-year fixed rate mortgage remains the standard mortgage, with an array of valuable benefits designed especially
for buyers who expect to stay in their homes for a long time. Because the borrower pays more interest than principal
for the first 23 years, the tax deduction is substantial. And as inflation causes income and living expenses to increase,
your unchanging monthly mortgage payments account for a relatively smaller portion of income as the years go by. As
you'd expect, a 15-year monthly mortgage means higher monthly payments than an equivalent 30-year loan ... but not
as much higher as you may think. At the same rate of interest, payments on the 15-year mortgage are roughly 20-25 %
higher than a loan that takes twice as long to pay off. And one of the benefits of choosing a 15-year mortgage is that
you can generally get a lower interest rate for an otherwise similar loan. Another advantage is faster equity build-up
because a larger portion of your early payments are going to pay off principal. This makes the 15-year mortgage an
ideal alternative for couples approaching retirement or anyone else interested in owning their home free and clear
as quickly as possible |
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Do
adjustable rate mortgages offer any protection against rising rates?
Yes. ARMs and other variable rate or payment plans offer lower-than-market interest rates initially, but because they
are tied to the interest rates of U.S. Treasury Bills or other indexes, interest rates later in the loan term may rise.
However, many such loans offer built-in safeguards designed to minimize the effect of any rapid escalation in interest
rates. One such safeguard is the rate cap. Many ARMs include provisions for the maximum amount your rate can rise,
both annually and over the life of the loan. For example, if your initial rate is 8%, the loan may include 1 % annual
and 5% lifetime caps ... which means even if rates rise dramatically, you'll pay no more than 9% next year, 10% the
following year, and so on until a maximum rate of 13 % is reached. ARMs may also allow your rate to decrease when the
index it is tied to goes down. As you might expect, decreases are usually capped as well. A second protective device
included in some ARMs is the payment cap. Under this provision, your monthly payments may rise by only a set dollar
amount. The potential disadvantage of this type of cap is that it can slow or even reverse your equity build-up. If
rates rise dramatically, you could actually wind up owing more principal at the end of the year than you did at the
beginning. Of course, ARM holders can also consider refinancing to a fixed rate loan after a few years. Some ARMs even
include a provision for converting to a fixed rate after a set period of time. |
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How
can I find out what my property tax bill will be?
Usually, the total amount of the previous year's property taxes is included on the listing information sheet for the
home you're interested in. Remember, tax rates change from year to year, so the previous year's bill should be considered
simply as a "ballpark" figure of what you would pay. For a more precise projection, call the local assessor's office
for assistance, or simply ask us. |
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What
can I do if I have a fixed rate loan, and interest rates go down?
When interest rates drop significantly, the homeowner should investigate the financial advantages of refinancing. Essentially,
this means taking out a new loan to pay off your existing loan. Refinancing may require paying many of the same fees
paid at the original closing, plus origination fees. Most mortgage experts agree that if you can get a rate 2% less
than your existing loan, and you plan on staying in your home for at least 18 months, refinancing is a good investment. |
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What
is the difference between pre-qualifying and pre-approval?
Pre-qualifying for a mortgage up to a certain amount is an increasingly popular practice among buyers who don't want
to worry about going through the approval process after they've found the home they want. It's a verbal exchange in
which the lender tells you in advance approximately how much money the buyer is able to borrow, based upon the information
you provide the lender on your debt and income. Pre-approval goes a step further than pre-qualifying. It is an actual
commitment to lend, provided that, when the borrower is ready to buy, he or she still meets all the qualifying conditions
that were met at the time of conditional approval. We strongly recommend it! |
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Can
I pay off my loan early?
If you can afford it, and are interested in the considerable advantages of having more equity and/or owning your home
free and clear at the earliest possible date, the answer in most cases is yes. The FHA, VA, and even some states do
not allow lenders to charge penalties for paying mortgages early or refinancing. In fact, many lenders now include
space on monthly statements for borrowers to itemize any additional principal payment they wish to include with their
regular payment. If your're unsure about the rules governing pre-payment, review your mortgage agreement. |
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