• Install new locks.
• Make extra sets of keys.
• Buy a fire extinguisher for the kitchen and garage.
• Install or check the batteries in the smoke detectors.

Who’s Taking Pictures?

• The first 6 months you will notice people taking pictures of your house.
• They are real estate appraisers.
• When you had an appraisal for your purchase, the appraiser had to take photos
• of similar home sales. Lenders require photos of comparable sales used in an appraisal.
• Now your house is being used as a comparable on appraisals being done for other sales
• or refinancing.

Keep Your House In Shape

• Make repairs and do preventative maintenance as needed early on.
• Keep an eye open for termite droppings and wet wood condition.
• Keep rain gutters and downspouts working properly to drain water away from the house.

Home Safety Check List

• Install good sturdy handrails.
• Service all heating equipment.
• Install carbon monoxide detectors.
• Use anti-skid material under area rugs.
• Install smoke detectors in key locations.
• Install an automatic night light outside bedrooms.
• Keep fire extinguishers handy in kitchen and garage.
• Keep medicines, poisons and firearms in child secured cabinets.
• Properly store paints, solvents and gasoline in a well-ventilated area.
• Provide rope or chain ladders on upper stories if there is no fire escape.
• Install ground fault circuit interrupters (GFCI) in bathrooms and by kitchen sink.

Hurricane Preparedness

• Food for a week.
• Bleach to purify water.
• Camp stove and extra fuel.
• Brace chimneys to the structure.
• Strap water heater to studs in the wall.
• Fire extinguisher and first aid kit handy.
• Know where to turn off utilities and water mains.
• Water: 1 gallon a day per person for at least three days.
• Place bed away from windows and threat of broken glass.
• Protect glassware and dishes with childproof locks on cabinet doors.
• Keep flashlights, spare batteries, matches and candles in a special drawer.

Start A House File
Keep all important house related papers, title insurance, loan information, property insurance, etc. in a central “house file” system.
Important: save all receipts for any home improvements for later “possible” tax write-offs.

Thinking Of Adding On?

• Always get permits.
• Don’t over improve for the neighborhood.
• Use professionals to maximize your investment.
• Addition should blend well with the existing architecture.

Well-planned and executed remodeling jobs are a good investment and some specific home improvements even can increase the value above the initial cost. Any owner contemplating an addition and/or change to his or her property should first check with the appropriate county or municipal building department to avoid any building code violations, which will generally render a seller’s title unmarketable. In addition a seller’s failure to disclose such violations (they have knowledge of) may constitute a material misrepresentation, entitling the buyer to rescind the transaction and obtain the return of his or her money.

What Makes More Sense Adding on or Buying a Bigger?

• Homeowners should consider several questions before making a choice between adding on to an existing home or moving up in the market to a bigger house.
• How much money is available, either from cash reserves or through a home improvement loan, to remodel the current house?
• How much additional space is required?
• Would the foundation support a second floor?
• What do local zoning and building ordinances permit?
• How much equity already exists in the property?
• Are there affordable properties for sale that would satisfy housing needs?

Consider limitations of your neighborhood. It makes more sense to add on to the smallest house than to further improve the largest one in the area. Ultimately, the decision should be based on individual needs, the extent of work involved and what will add the most value.

Choosing a Reliable Contractor
Never hire a contractor without first taking the following steps:

1. Call the Florida State License Board to verify the license number of the contractor. And ask the board if there are any outstanding complaints against that license holder.
2. The state license board’s phone number is (850) 487-1395. Their website is http://www.myflorida.com/
3. Contact your local Better Business Bureau to see if there are any complaints on file. http://www.bbb.org/
4. When interviewing, ask prospects about their workman’s compensation insurance.
5. Get the policy number and phone number of the insurance carrier. Call to be sure the contractor is covered. If he or she is not, any work-related injury on your property could become a liability to you.
6. Check to see that the contractor has an umbrella general liability policy.
7. Always ask for references. Always take the time to call and verify them.
8. Do not give in to pressure to make a decision. Believe it or not, there are more contractors than there is work to be done. If a contractor insists that you make a quick decision, move on to someone else.
9. Never pay a deposit to a contractor. If you are asked to pay a deposit fee at the first meeting, simply end the meeting.
10. If you are unsure what you are doing, call the State of Florida at (850) 487-1395 for more information or visit their web site: http://www.myflorida.com/

Special Government Programs for Rehab?
HUD’s Rehabilitation Loan Program, Section 203 (K) is designed to facilitate major structural rehabilitation of houses with one to four units that are more than one year old. Condominiums are not eligible.
The 203 (K) loan is usually done as a combination loan to purchase a fixer-upper property “as is” and rehabilitate it, or to refinance a temporary loan to buy the property and do the rehabilitation. It can also be done as a rehabilitation-only loan. Plans and specifications for the proposed work must be submitted for architectural review and cost estimation. Mortgage proceeds are advanced periodically during the rehabilitation period to finance the construction costs.

At this time, only select lenders are participating.
For a lender list, call HUD at (202) 708-2720.

Some Home Improvement Expenses are Tax Deductible.
Mortgage interest payments on acquiring and improving a principal residence are fully deductible from income for tax purposes In addition, expenditures for permanent improvements can be added into your home’s cost basis, or amount of money invested in a home, which reduces capital gains.

Save all receipts of money spent for permanent improvements, repairs after a fire, flood or storm and special property tax assessments for neighborhood improvements.

Capital gains are determined by the difference in price from the time a home is purchased and the time it is sold, minus the cost of any permanent improvements.

Thinking Of Refinancing?

• Don’t list your house for sale if you are thinking of refinancing.
• Lenders usually require your house not to be listed in the recent past.
• Appraisers are required to make such disclosures if known.
• Keep your insurance up to date
• Keep records of any improvements as you have them done.
• Keep in a binder, receipts and owner’s manuals of any equipment you buy.
• Take photos or video’s of all your rooms and keep them in a safe place.
• Property values can rise dramatically in just a few years which is why it is important to have replacement cost insurance. Should you have a theft or fire, these will be very valuable for claims.

Know Your Neighborhood

• After you are settled in, introduce yourself to your neighbors and invite them over.
• Most people want to know who their neighbors are, but most are shy about making that first introduction.
• Break the ice first and introduce yourself.
• Get involved in the neighborhood watch program. In areas of high crime, community watch programs organized by homeowners can lower the crime rate and rid a neighborhood of graffiti. These improvements also can enhance property values.

Check out this Rent vs. Buying web site to compare the advantages of each. Thinking about changing jobs? It might be best to wait until after your purchase. Look at your work history. Is it sporadic or did you just start a new job? Lenders like to see someone with a steady work history and with job changes in the same line of work. Lenders will require your work history along with past tax returns.

Look at your credit report before you go to a lender. It is not uncommon to find problems with reports, especially if you have a common last name. If you find a problem, start with the reporting agency to clear it up. It is common to have a late payment at some time or another. These problems can usually be taken care of with a letter of explanation from you to the lender.

FICO Scores: What They are and Why They are Important
To get copies of your credit report, start at:
Experian
My FICO Score
Free Annual Credit Report

Banks/Savings and Loans vs. Loan Brokers

• Loan officers at a bank work for the bank.
• Loan brokers work for you and have a fiduciary relationship.
• Most banks cooperate with loan brokers.
• You can go to a broker and obtain a loan through a bank.
• Most banks will offer you a menu of programs while a loan broker will offer a
• menu of lenders. Banks and loan brokers are under different government controls.
• A complaint regarding a bank would go to the State Department of Banking.
• A complaint regarding a loan broker would go to the State Department of Real Estate.
• Contact someone from each source to see what special programs they have to offer.

Loan Pre-Approval

• Getting pre-approved for a loan is a necessary step when buying real estate.
• If you are pre-approved first you will save considerable time looking for a property.
• You will know how much a lender will commit so you won’t waste time looking at property you can’t qualify for.
• You will have a better chance of having an offer accepted if it is accompanied with a pre-approval letter.
• The best agents won’t work with buyers until they are pre-approved.

A lender will let you know your maximum loan amount after providing them:

• Income from all sources.
• Funds available for a down payment and closing costs.
• Your monthly obligations (auto loans, credit card payments, alimony, child support)
• Price range of homes where you want to locate.

Selecting a Lender
You should pick a lender based on experience, customer service and recommendations. Work with a lender who is experienced in the business, knows the availability of the different type loans and how to handle the demands of processing. Don’t make the decision based solely on which lender is offering the lowest rates. If a company is offering a mortgage package that is well below market rates, you should beware. All mortgage companies generally choose from the same pool of investors. A company offering abnormally low rates might make up the difference by increasing closing costs or tacking on additional settlement fees.

Determine how long you expect to live in the new home. This decision will not only affect the houses you look at, but also will determine the type and term of loan you choose. Get everything in writing and a copy of everything you sign.

Ask your lender at application what fees typically are included in the finance charge computation, and what fees may be charged separately at closing.

How Much Can I Qualify For?
Most lenders require your housing payments not to exceed 25-33% (depending on your down payment) of your gross monthly income called “housing expense ratio”. Your total debt payments should not exceed 33-38%, figured on a monthly basis. This figure is called your “total debt ratio”. Use the mortgage calculators to find out how much you can afford.

How Much Do I Need?
Besides setting aside money for a down payment, you will need money for closing costs. Those costs can range from $3,000 to $10,000, depending on the type of loan, the loan fees and the community the property is located in. The smartest and most time efficient thing to do is get pre-approved up front, before you start looking for a home. Next, find a Boca Raton real estate agent familiar with the area you want to live and you are comfortable with. Educate your self about local property values and the current market trend.

Time to Close
Closing at the beginning of a month, the lender will require you to “prepay” the interest on your loan from the day of closing to the end of the month. Therefore the cash you need to close will be more than if you close at the end of the month. Talk with your lender about this.

Buyers Remorse
It’s common for buyers to feel stressed or remorseful during and after the purchase of a home, Educating yourself about the buying process will help minimize “buyers remorse”. You will probably forget it soon after you move into your new home.

Notify Services & Utilities
Don’t forget to contact services such as: post office, insurance, movers, telephone, utilities, newspaper, etc. a few weeks prior to you moving out to “change over” billing/mailing addresses.

Arrange for Mover
Get a couple of written estimates from movers on the services they provide for the costs of your move. Check the local Yellow Pages to get quotes and contacts.

Final Walk Through
Do a final walk through as close to the sign off as possible. Check appliances for operability. Test outlets with a radio or test device. Turn on light switches. Check water faucets and toilets. Make sure promised cleaning and repairs have been completed. Check that all items included in the purchase of the home(review contract) are present. For new construction, write down what needs to be completed or fixed, have builder sign. Include the date when these items will be completed.

Closing Costs
You will have to have your closing cost monies deposited in escrow before you can close. Don’t bring in a personal check to pay. Money should be in the form of a certified check or a money wire transfer. Check with your escrow officer.

That’s why it is a good idea to get pre-qualified through a lender before you even start to look for a home. Pre-qualification lets a buyer know exactly how much a lender is willing to loan them. With pre-qualification in hand, the buyer can save a lot of time-and frustration.

Pre-qualification does not obligate buyers to take a loan from the lender, nor should it involve any fees (until later, when they actually apply for the loan). At the same time, you must understand that pre-qualification is not pre-approval for a loan either which is a much more involved formalized process that results in an actual letter of credit from a lending institution for a specific loan. Depending on your unique circumstances, you may wish to consider pre-approval as an option, but it is not necessary-consult with your real estate professional to decide what’s right for you.

The less formal process of pre-qualifying on the other hand is a tremendous tool for buyers to have when making an offer. Usually, pre-qualified buyers have an edge when making a purchase offer because the seller knows that the buyer is pre-qualified, and that there is at least one lender ready to make it happen. In addition, it allows you the flexibility to choose the mortgage that is best for you at the time of actual purchase-which is sometimes months down the road. That can be important given the volatility of interest rates. When a lender pre-qualifies, they are more concerned about the buyer’s paying ability than the price of the property.

For this reason, lenders are interested in more than just a buyer’s income. They also want to know how much existing debt a buyer has, what their on-going financial obligations happen to be, and what the buyer’s monthly budget looks like.

Lenders use an established debt-to-income ratio, usually between .28 to 1 and .38 to 1, to calculate the amount of the loan they are willing to give to a buyer. For instance, a lender who uses a .3 to 1 debt-to-income ratio has determined that payments toward debt reduction-including existing debt plus new debt associated with buying a home-cannot be more than 30% of they buyer’s gross monthly income.

An important factor that may influence a lender to authorize a loan with a higher debt-to-income ratio – (where debt payments take a higher percentage of a buyer’s income) – is a larger down payment. Buyers who put a larger percentage of the purchase price down (5%, 10%, 15%, 20%, etc.) are considered better “risks,” because the theory is that the more a person has actually invested in the purchase, the less likely they are to default on the loan.

Buyers usually discover that the pre-qualification process will produce a home purchase price that is roughly 2 1/2 to 3 times their gross annual income. The 2 1/2 -to-3 guideline is only a general rule of thumb, however, and it doesn’t take a buyer’s full financial situation into consideration. Since the lender’s calculations will also consider a buyer’s actual debts and ongoing expenses, the loan pre-qualification amount may be higher or lower. Regardless of the price bracket a buyer targets, they should keep pre-qualification in mind.

How much should you budget to own your own home?
Aside from the down payment, the three largest expenditures involved with the purchase of a home are usually your monthly mortgage payment, insurance and taxes. Obviously, the amount of your mortgage payment depends upon your down payment, rate of interest and the price of the property.

Take, for example, a home that has a $200,000 mortgage. An 7% fixed mortgage for 30 years, will run approximately $1330 per month. What about taxes? The rate will often times vary from city-to-city, but generally you might expect your yearly tax bill to total around 1.25% of the purchase price.That means, for a home with a market value of $250,000, yearly taxes might run around $3125. A local real estate agent can help prospective homeowners refine these figures.

In addition, it is important to keep in mind that there are many additional expenses incurred with home ownership, some of the most obvious are utilities and trash collection. Smart homeowners should also budget for one other item, maintenance and upkeep of the home. If possible, a small amount should be set aside each month to pay for those “rainy day” repairs such as painting, plumbing (hot water heaters, garbage disposals), adding storm windows (to improve energy usage), insulation (in attics), etc.

But home ownership is not just a one way street-that is, aside from spending money on repairs and maintenance, homeowners can profit from their property. The most significant benefit is the tax deduction. It is no secret that among the last real income tax deductions available to consumers today are the interest paid on the home loan, and the property taxes. This can amount to thousands of dollars in deductions each year. And, of course, the primary benefit of home ownership is appreciation-equity that builds every month. A home, aside from being a place that provides shelter, can be a profitable investment, and the rising value of the property oftentimes provides another “savings” account.

So, when it comes to buying a new home, remember one thing … the purchase of a property requires budgeting and planning.

How do you go about finding a mortgage?
The commotion of house hunting is finally over. You found just the right house, and your offer has been accepted. It was a great buy. Now, just one more hurdle-getting a loan-and you’re home free. Often, buyers are so eager to get this “final detail” behind them, they rush through this portion of the transaction, and end up with less-than-ideal terms. Borrowers, however, have something lenders want-their business. This positions them to negotiate the best possible price (cost of loan), terms and service.

Let’s look at price, or the cost of the loan. The first thing to do is find out what the current rates are, information readily available on the internet, in your newspaper or from your real estate agent. When comparing rates, figure the annual percentage rate (APR), which includes interest, extra fees and costs amortized over the life of the loan. Also determine the number of points, if any, that the lender will charge to make the loan.

(A point is equal to one percent of the loan amount.)

Next, consider what loan options the lender offers. There are six or seven basic types of loans, which vary in their duration. Check how rates are calculated (fixed versus variable), and whether charges are fully amortized over the life of the loan, or whether you’ll have to pay points up front and/or balloon payments at the end.

Is there a prepayment penalty clause?
Which terms are best for you depends on such factors as what changes you expect in your income and what you predict will happen in loan rates in the years ahead. For example, if you only plan to reside in the home for a year or two, starting with a lower Adjustable Rate Mortgage (ARM) might be the best choice. If you have no plans to move, and feel that inflation will rise rapidly, a fixed rate would obviously be better.

Finally, and perhaps most importantly, consider speed and service. Buyers shouldn’t have to wait days for approval and weeks for closing just because the lender is slow. Remember, qualified buyers are great prospects for lenders – so give your business to the lender who demonstrates they not only want it, they deserve it.

How difficult is it to qualify for a mortgage if you have a past credit problem?
Credit problems can make it harder to qualify, but it’s quite possible for buyers with poor credit to obtain a home loan.

Anyone who has had a financial problem-whether it was a matter of late credit payment, delinquent taxes, or even a judgment that was filed-should expect this data to be a factor when applying for a mortgage.

How critical a factor? Minor lapses will probably have little or no effect. However, buyers with serious problems may still qualify for a loan, but they may have to pay a higher rate of interest or provide a larger down payment. There are three steps that a person with past credit problems should take before applying for a loan.

First, request a credit profile from one of three major credit reporting agencies. To get copies of your credit report, start at: CreditNow – Credit Reports

Second, the buyer should optimize his or her credit profile by citing prompt payment of rent, utilities, and other bills not reported on the credit profiles.

Finally, the buyer should be prepared to provide comprehensive and candid explanations for any late payments to the loan officer. This is important because problems not reported by the buyer but discovered by the lender will reflect unfavorable.

Many lenders are understanding about one-time problems such as the loss of a job, a medical emergency, etc.

Buyers with patterns of delinquent payments might want to consider adding six months or a year of flawless credit to their track record before pursuing their home-buying plans. So remember-if you are thinking about purchasing a home, but are worried about your past financial record-don’t give up. There are solutions, lenders and agents who are in business to help.

What are the five most common mistakes made by first-time buyers-and how can you avoid them?
A good home-buying decision is one that fits your lifestyle and your budget-a house you’ll be able to resell when the time is right. Sound simple? Not always.

Five common mistakes frequently made by first-time buyers.
1. Looking outside your price range. To avoid disappointment, contact a real estate agent who can help you pre-qualify before you start looking for a home. The agent can also provide valuable insight on taxes and other expenses associated with a home (utility bills, etc.)
2. Buying on impulse. Buyers-especially first-timers-may be impressed by the first two or three homes they view. Look at a good selection. List the positives and negatives. Narrow the prospects to three or four, and then return for a closer look. Evaluate more than just the property. Look at the surrounding area and community amenities. Is this what you-and your family-want and need?
3. Not planning ahead. Think seriously about any personal changes you are planning in the next five to seven years.
For instance, if you are planning on having children, consider how the home will meet both your current and future needs. If a double-income is necessary to qualify for financing-and make your payments-do your plans foresee an income sufficient to continue making payments?
4. Failure to focus on location. Don’t just focus on the house, examine the neighborhood. Is the area safe, well maintained, moderately quiet and close to work, stores, and schools?
Find out about zoning and what new construction is planned on any vacant land in the immediate neighborhood.
Will the property be easy to market when you are prepared to sell it?
5. Failure to understand the home buying process. Once you select a home, get involved. Find a real estate agent willing to spend time with you, and don’t hesitate to ask questions. Have them explain the negotiation, financing and escrow processes and other elements involved in the transaction.

Home-buying involves knowing the price, and what’s inside and around the property.Consider all your options carefully. This may be the most important financial transaction of your life.

What’s the real difference between a new home and an old one?
While each offers its own style and charm, the difference usually boils down to two things:
1. How the home fits into the buyer’s lifestyle.
2. The condition of the property.

Homes that are 10 years old or less are generally better insulated – or have dual-glazed windows or thermal panes – which translate into lower heating and cooling bills. And, in today’s rising energy cost environment, these considerations are significant. Although there are some exceptions, homes that have been built with all-electric systems, generally have higher utility bills.

Homes that range between 15 and 20 years old may be in need of new water pipes, especially if the old ones were galvanized and if a water softener was used. Water softeners and galvanized pipe can be deadly and, after 15-20 years, re- plumbing is usually required. Have a plumber or general contractor inspect the pipes. Needless to say, it can be expensive to re-plumb an entire system. Check the built-in fixtures and appliances for any signs of damage.

Flush toilets, test all the water taps and the electrical sockets, open and shut the windows, and try all the lights.

A window that will not open may be a sign of a more significant problem-for example, a wall may have shifted, or worse yet, it could indicate a problem with the foundation itself. It is also a good idea to ask the seller for copies of past utility bills. Examine them for some insight into what you can expect monthly gas and electric costs to be. Although newer homes may be free of significant physical or structural problems, there are other things to consider in making your decision.

Generally, room size and yard size tend to be smaller in some newer homes. While, on the other hand, they usually offer the benefit of the latest building and design technology. Many new homes also have more windows and natural light incorporated into their design plan, allowing for a more spacious feel and efficient energy usage.

Should a buyer get a professional inspection for the home they are buying?
Definitely. Hiring a professional home inspector can save a great deal of grief for buyers. The one exception would be when the home is new and carries a written warranty by the builder. Many buyers mistakenly believe that the only reason to have a home inspection is to make sure that the house they’re buying doesn’t have defects serious enough to warrant backing out of the transaction. But there’s more to it than that.

Certainly, an inspection will usually reveal major problems that may even surprise the seller. The obvious ones are corroded plumbing, antiquated and unsafe electrical systems, or structural and foundation problems. And, the discovery of such problems may cause the buyer to re- think his or her offer. Although a competent inspector can uncover deal-crushing defects, these problems are usually not commonplace. Typically, the seller will already have told the buyer about anything major. More often, inspections reveal less serious problems; problems that may not be serious but can be aggravating.

For instance, there could be a minor electrical defect, or inferior ventilation of a heating system or fireplace. If so, the buyer is usually in the position of having the purchase price reduced, or the defect corrected. More important, it also prevents the minor problem from developing into a major disaster a year or two down the road.

There is, of course, the possibility that the home inspection will produce another outcome: everything is fine. In this case, they buyer gains piece of mind, confident about the major investment he or she is about to make. That, too, is an enormous benefit for the cost of the inspection.

Now, how does a buyer find a home inspection?
By asking their real estate agent, friends, or lender. Inspectors are also listed in the Yellow Pages under “Home Inspection Services.” But, a word of advice, don’t hire a contractor. Contractors earn their living doing repair and renovation work, so their recommendations aren’t likely to be as objective as those of a professional inspector.

Is real estate a wise investment?
There are fewer investments that have shown a better return. However, the key to investing wisely in real estate is understanding how the industry differs from others.

For example, when the defense industry dips, it usually shows a national decline and the stock prices of defense-oriented firms drop across the board. The same is true of most industries. They are impacted nationally. That is not the case with real estate, which is actually an industry and investment driven by local conditions. One community may suddenly lose a manufacturing facility, and almost overnight the market is flooded with properties for sale.

Obviously, the key to successful real estate investing, like stocks and bonds, is to buy low and sell high. But, how do you know when the “low” has been reached? Or, for that matter, how can you judge when you property may be peaking in value? Some investors rely partially on the media. They read the daily newspaper, watch television and follow the trends. Although the media provides a good deal of information, remember that by the time things are printed or broadcast, the news may be old.

For instance, you will find statistics frequently quoted in the media that have been supplied by the National Association of REALTORS (NAR). But, NAR statistics-like most- tell you where things have been, not where they are going.

So what can you do? First, check local economic indicators. Also, the local chamber of commerce can frequently help. They usually have information on which companies are moving in and out of an area.

Logically, the relocation of a firm into a community generally indicates that demand for real estate in that marketplace will increase-while if firms are moving out of the area, housing demand will often shrink. Aside from economic indicators, check real estate trends and cycles. Talk to a real estate agent. They can provide statistics on how quickly homes have sold, how prices have fluctuated in the past six to 12 months, and projections of future home sales. They can show you how today’s market compares to last year’s. Are sales headed up? Down? The same? The answers will not only help you determine what the market is like in your area, but they will also be critically important in helping you determine when and where to make your real estate investment.

Does a home warranty protect a buyer in the event something goes wrong after they have purchased a property?
Sometimes. That’s because home warranties are often times misunderstood and not every warranty provides the same protection. All warranty companies are not equal, either.

Warranties, of course, were designed to protect buyers from problems that emerged after they moved into a dwelling. For example, if a major appliance breaks or the roof leaks, the ideal warranty kicks in and pays for the repairs.

On the surface, this sounds simple and straight-forward. But, most of the time it is not.

First, all warranties differ. Aside form the obvious differences, the amount of deductible required, they may also vary as what is covered and what is not. For instance, with some warranties if the hot water heater works on the day of closing, but suddenly does not work six months later, then it may be covered. And, with other policies if the water heater was not in good working condition when the home was purchased, and it breaks a week or two later, there is no coverage.

Warranties can be critically important when it comes to new construction, too. Obviously, the reputation of the builder is an important consideration. However, problems with new homes can be enormously expensive if they are not covered by a warranty.

There are two types of defects when it comes to new homes – patent or latent. Patent are those problems which can be seen. Cracked plaster, a fence that is off level, etc. Latent problems develop later, and may not show up for five or six months. Ground shifting, for example. Latent problems are usually more expensive than patent problems.

Thus, the warranty for a new home can be one of the most important documents executed during the buying process.
Whether you’re purchasing a new home or a resale, remember that warranties definitely have a place when it comes to protection and peace or mind in the real estate transaction, but make sure that you check them out carefully.

Is a final walk through, an inspection of the property by the buyer before they move in — really important? Yes, it is. The intent of a pre-closing inspection is to give the buyer one last opportunity to verify that they are getting all that was promised in the sales contract. Although buyers still have legal recourse if they discover-even after closing-that the condition of the home is not as it should be.

The best time to identify problems is before closing, when the seller will be motivated to correct any deficiencies in order to close the transaction. Typically, a buyer takes possession of a property one to three months after signing the sales agreement. But, a lot can happen before the actual move-in. Appliances and fixtures can break down, and walls, carpets and doors can be damaged during the seller’s move-out. Sometimes the seller will simply have forgotten that he or she had agreed to leave the refrigerator or window coverings with the house. Whatever the reason, problems identified before closing have the best chance of being remedied.

If possible, schedule the inspection right before the closing, such as the day before. Ask your real estate agent to attend the inspection with you. What should you be inspecting? Using a copy of the sales contract as a checklist, first make sure that all items that should be in place (appliances, built-in furniture, window coverings, fixtures, etc.) are there.

Test each appliance to make sure they work properly. Test all electrical switches and the garage door opener, if there is one. Run the garbage disposal and turn on every water faucet, checking under the sinks for leaks. Flush the toilets. Inspect the floors, carpets, walls and doors for recent damage. If you discover that something is damaged or missing, make a note of it and inform your agent immediately.

In most cases, the seller is usually able to take care of small problems immediately, either by making a needed repair or offering compensation to handle it. And, if there are major problems the seller can even sign a statement acknowledging the deficiency and agree to correct it. Although pre-closing inspections take time and may be inconvenient, they are important and well worth the buyer’s time.

What are “contingencies” and why are they important?
A “contingency,” is an escape-clause that is added in-writing to a contract which allows a buyer to back out of the transaction if certain conditions aren’t met. Some contingencies, often called `riders’-like attorney approval of the contract, or the passing of a home inspection-are obviously designed to protect buyers from a poorly written contract or a defective home.

Other purchase contingencies may hinge on the buyer’s current living situation, or his or her cash-flow. For example, when it comes to contingencies many first-time buyers can be better prospects for a seller’s home than move-up buyers. Why? Because offers from homeowners usually are contingent upon the sale of their present home. And, even if a move-up buyer has an offer for their home in-hand, their buyer’s offer may be contingent on another contingency (or sale) and so on down the line. If one transaction in the chain falls through, they all might. Cash offers can also be more attractive to sellers.

Why? After all, the seller will get their money at closing whether or not the buyer has cash or takes out a loan. True, but cash offers don’t require lender approval, and loan approval is never a certainty and may delay or prevent closing. (Incidentally, for this reason, buyers who get pre-qualified for a loan have an edge over other buyers. A pre-qualified buyer is the same as a cash buyer.)

Buyers offering a larger-than-customary amount of “earnest money”, (a deposit that accompanies an offer) can be more appealing too. More money deposited with the signed contract often demonstrates greater sincerity and motivation to close the transaction.

Know Your Credit Worthiness
Look at your credit report before you go to a lender. It is not uncommon to find problems with reports, especially if you have a common last name. To get copies of your credit report, start at My FICO Score.

Get Pre-Approved
After you see your credit report and any problems are cleared up, get pre-approved with a lender. Take the steps necessary to get a letter from the lender stating you are “pre-approved” for a loan in a specific price range. It’s important to have this letter before you make a contract offer to buy real estate. Once your pre-approved, you know what price range of homes you should be looking at.

What Kind of House is Right?
Determine the specifics you want or need in a home.
– What are your day to day and future needs?
– Do you enjoy swinging a hammer?
– Older houses have great charm, but may need updating.
– New homes offer the latest energy efficiency and design features.
– Larger lots can give room for additions and swimming pools.
– A fixer upper can dramatically increase in worth.
– A PUD may have private recreational facilities such as a pool and play parks.
– A condo or town-house will relieve you of yard work and exterior maintenance.

Sit down with your real estate agent and make up a wants and needs list. Knowing your price range, your agent can determine in what neighborhoods or towns to start looking. You may find that you are limited to where you look based on your situation. There is no sense in wasting your or your agent’s time in areas out of your price range.

Wants and Needs
– Price range
– Building style/design
– New construction
– Remodeled
– Fixer upper
– Minimum # bedrooms
– Bathrooms
– Family room
– Fire place
– Office/den
– Hardwood floors
– Swimming pool / Spa
– In-law quarters
– Workshop
– Central air conditioning
– Parking facilities
– Yard size
– School district
– Work locations
– Special zoning or location

With a list of houses that you can afford to buy, drive-by them and check out the surrounding neighborhood. Next make an appointment with your real estate agent to view the interior of the ones you are interested in. After you have narrowed your selection to few houses it is important to visit them at different times of the day. Visit them during the morning commute time. If you visit only during the middle of the day, you might not notice if the street in front of the home is used as a minor thoroughfare or a shortcut. This is also a good time to find out how you emerge from you residential area into traffic on a thoroughfare or how long it takes for freeway access. Go back after dark and walk around the block. You might notice that headlights from approaching traffic shine into the home or hear sounds from a nearby night club or park that you were not aware of.

After previewing a number of homes, you will want to preview some a second time. This is the time to make measurements, ask questions and make a closer self-inspection. When you want to make an offer, ask your agent for sales comps to arrive at an offering price. A “seller’s market” or “buyer’s market” can have big effect on how much to offer. There is no sense in making a low offer on a well priced home in a seller’s market.

A properly written contract will allow a buyer a number of outs if certain items are not met or approved. Get a copy of a typical real estate contract prior to making an offer and have your agent go over it with you.

FICO Scores: What They are and Why They are Important

Next gather all your financial data. Lenders will want to see bank account statements, paycheck stubs, W-2 forms and tax returns for the last two years, investments and proof of any other sources of income.

Down Payment Sources

• Savings
• Sell a car, boat or other property
• Receive a tax-free gift from parents or relatives
• Borrow against a pension plan or a life insurance policy
• Equity share with parents or friends
• Use your business as collateral

If you can make only a small down payment or have credit problems, consider asking the seller to help you with the financing. Example: Sellers can “carry back” a second mortgage to reduce the amount of the first mortgage you need. By reducing the loan-to-value ratio of the first mortgage to 80% or less, buyers often avoid paying for private mortgage insurance when they use a seller-provided second mortgage.

Other Financing Options
If you can’t qualify for a conventional loan because of income, don’t give up. There are a number of special programs to get you into a home. Some cities have BMR (below market rate) housing programs that allow qualified buyers to purchase new homes substantially below market value.

Programs to Help Lower Income Families:

• VA (Veteran)
• Community Homebuyer loan program
• FHA’s 203(k) program (for fixer-upper)
• Mortgage Credit Certificate program (MCC)
• Enhance Fannie Neighbors mortgage program
• Fannie Home Style loan program (for fixer-upper)

… Ask your mortgage loan officer for more information about these programs.

Comparing Programs (ask yourself):

1. How long will I live there?
2. What are the tax implications?
3. Can I expect earnings to increase or decrease?
4. Are interest rates likely to go up or down in the near future?
5. Questions a Borrower Should Ask
6. Are there any “up front” fees?
7. What is the annual percentage rate?
8. What and how much are the points?
9. Is there a prepayment penalty?
10. Is there a balloon payment?
11. Is the loan assumable by someone later?
12. How much money must I have at closing?
13. What is the interest rate and term of the loan?
14. What is the monthly payment for principal and interest?
15. What happens if interest rates change during the loan process?
16. Do not hesitate to ask questions.
17. Take the time to carefully examine the programs being offered.
18. Get a written cost estimate up front.

Financing Facts

• Interest rates are negotiable. Costs for fees may be negotiable.
• Save money by shopping around for your mortgage.
• A larger down payment isn’t necessarily the best way to go.
• It may not be to your advantage to pay off your mortgage early.
• Larger monthly mortgage payments means a larger tax deduction.
• Interest rates on mortgages may be high, but the interest is tax deductible.
• A short-term mortgage will build more equity for you in a shorter period of time.
• Mortgage insurance may be required if the down payment is less than 20%.
• A second mortgage or equity line on top of a low rate first mortgage may be cheaper than refinancing a new first mortgage.

What is the Best Loan?
You can save thousands of dollars or increase your home purchasing power by selecting the right loan. New mortgage programs are constantly entering the market place in response to consumer needs. Take the time to understand and compare programs available to you.

Tax Advantages
With many tax deductions being eliminated, it’s comforting to know that mortgage interest is still deductible. Besides the interest, you also can deduct any points paid to secure a loan on your first or second home. Property taxes on your home are fully deductible. These can add up to a sizable savings on your income tax bill.

Other Savings
You may deduct a portion of your house expenses if you have a qualifying home office.

Tips to Expedite the Loan Process:

• Pay off credit cards before lender orders a credit report.
• Don’t buy a car or take out a loan prior to applying for a loan.
• Don’t charge expensive items on charge cards before getting a credit report.
• Have verification of the down payment and an explanation of the source of money.
• Getting money from relatives? A Gift letter from them will be needed.
• Completely fill out the loan application, providing addresses with zip codes and all account numbers.