Use the Five Ws of HomebuyingTo prepare yourself for your home purchase, ask yourself some questions. Figuring out the answers will help you achieve your dream.
Who will Assist you in Buying your Home?
If you choose a real estate agent, make sure it's someone you can trust. Start by asking your family and friends for recommendations. Alternatively, check with your local Association of Realtors, a national referral service or A+FCU partner, CU Realty Services. CU Realty provides agent referrals, property referrals, market analysis, and community research could save you hundreds, even thousands, of dollars just for using an approved CU Realty agent. When selecting a realtor, interview two to three real estate agents before settling on one.
If you plan to use a real estate agent, know the difference between a real estate agent and a REALTOR®. Basically, the difference between REALTORS® and real estate agents is that REALTORS® must subscribe to the REALTORS® Code of Ethics.
Who will Lend You the Money?
You may be very familiar with a particular financial institution, which is probably a good place to start your search for the right mortgage lender. Don't discount other sources, though. Consider government agencies for special loan programs, nonprofit organizations, or even individual sellers.
Compare at least three lenders' mortgage programs within a 60 day time period on the following factors:
- Lender's name
- Mortgage loan amount
- Type of loan
- Down payment
- Term of mortgage
- Monthly interest rate and APR
- Other costs and fees
- Prepayment penalties
Who will Inspect your New Home?
Once you have selected a house and made an offer, you should will want to have the housed inspected by a professional home inspector, which will cost between $250-$300.
The inspector will examine the house's structure and mechanics. The structural inspection should include the foundation, roof, doors, windows, ceilings, walls, and floors. The mechanical inspection should include plumbing, electrical systems, heating, air conditioning, insulation, ventilation, and septic systems.
Accompany the inspector during the home inspection. Take the opportunity to gain knowledge of major systems, appliances and fixtures, learn maintenance schedules and tips, and ask questions about the condition of the home.
The inspector will go over each of these with you calling attention to any needed repairs. He will give you a copy of the inspection report and may also give you a list of recommended repair companies if needed.
The inspection may be helpful in negotiating the purchase of the home. If there are significant damages or renovations needed, you could either ask the seller to discount the purchase price or to pay for the repairs.
Who Else Should be on your Team?
Escrow Officer. This person keeps the original purchase contract and other documents and holds your earnest money. This may be your real estate agent if you have chosen to use one, your attorney, an escrow company or a title insurance company.
Title Insurance Officer. This person reviews the title of the home you want to purchase to ensure there are no liens against the property, to determine what the taxes are and if they have been paid, any deed or zoning restrictions, and what, if any, homeowners' association dues are required.
Appraiser. This person determines if a home's value is sufficient for the loan request. The value is determined by more than a structural inspection. The appraisal also takes into account the home's market value, i.e., what other similar homes in the area are selling for, as well as what it would cost to re-build the house from scratch, but adjusted for depreciation (depending on the age of the home).
Surveyor. This person assesses the boundaries of the property and outlines the location of the residence, fence lines, and any improvements that have been made to the property such as a deck or pool to be sure they do not go over the borderline of your neighbors' property. A surveyor will also point out any established easements, access to any public right of way and determine if everything is up to code.
Insurance Agent. Communication with an agent is the key to finding the policy that protects your new home as well as your pocketbook. It's to sit down with a few insurance agents to discuss the details. Lenders will want you to take the maximum protection policy available while you may want the least expensive policy. The insurance agent will help you find a happy medium that fits your budget. You may also qualify for discounts by reviewing your appraisal with the agent.
What? The Specifics of your New Home.
Detached single-family. A house that isn't connected to any other houses, which is intended for one family to occupy.
Duplex. A single building with two to four separate entrances and a shared wall that is intended for multiple families. If you purchase a duplex to live in, it is considered owner-occupied, and you can take out a conventional loan for it. The benefit of having renters in the second, third, or fourth unit is that you can claim their rent as income. If you will not inhabit the duplex, but instead rent it out to multiple tenants, you will have to take out an investment loan instead.
Planned unit development (PUD). A designed grouping of varied land uses including residential, recreation, commercial, and industrial, all within one contained development or subdivision.
Townhouse or row house. A home that shares a building with other units, generally with no other units above or below. Most townhouses have a small yard. They usually have an HOA that takes care of roof repair and replacement, exterior maintenance, common area maintenance, and other expenses, which means you can maintain a low maintenance lifestyle.
Condominium. Basically, a condo is an apartment that you own instead of rent. While they may look very similar, the major difference between condos and apartments is ownership.