Basics of Buying a Basics of Buying a HouseHouse

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The Steps to Buying a HouseThe Steps to Buying a House

Microsoft Word Document

Terms to know:Terms to know:

Microsoft Excel Worksheet

8 Factors to determine 8 Factors to determine a home’s wortha home’s worth

1.1. LOCATION, LOCATION, LOCATIONLOCATION, LOCATION, LOCATION – how desirable is – how desirable is the areathe area

2.2. Taxes – reasonable school and town taxesTaxes – reasonable school and town taxes3.3. Good schools,Good schools, preferably within easy walking distance. preferably within easy walking distance.

Even if you do not have school-age children, this will Even if you do not have school-age children, this will make a difference in your home's resale value. make a difference in your home's resale value.

4.4. Convenient access to shopping and business Convenient access to shopping and business centerscenters. You'll also want easy access to public transit, . You'll also want easy access to public transit, a major thoroughfare, or a freeway. However, you don't a major thoroughfare, or a freeway. However, you don't want to be so close that noise or traffic congestion want to be so close that noise or traffic congestion becomes a problem. Houses directly adjacent to main becomes a problem. Houses directly adjacent to main roads may have a lower value than similar houses roads may have a lower value than similar houses slightly further away.slightly further away.

http://www.realestateabc.com/homebuying/?cid=19083&ctry=&title=Buyer+Tipshttp://www.realestateabc.com/homebuying/?cid=19083&ctry=&title=Buyer+Tips

5. Houses in 5. Houses in well-planned communitieswell-planned communities tend to have higher values. In an tend to have higher values. In an unplanned area where there is vacant land, unplanned area where there is vacant land, future development may lower property future development may lower property values.values.

6. 6. A low crime rateA low crime rate. Everybody wants to . Everybody wants to feel safe at home. The presence of a feel safe at home. The presence of a neighborhood Block Watch program is also neighborhood Block Watch program is also beneficial.beneficial.

7. Good 7. Good EconomicEconomic Development – high Development – high employment opportunities employment opportunities

8. Houses on a cul-de-sac are especially 8. Houses on a cul-de-sac are especially appealing because there is appealing because there is minimal minimal traffictraffic and it generally comes from people and it generally comes from people who live there. who live there.

5 Features that make a Home more 5 Features that make a Home more Valuable Valuable

1.1. An An open floor planopen floor plan and lots of windowsand lots of windows that make the that make the house feel bright, roomy and comfortable. For houses larger house feel bright, roomy and comfortable. For houses larger than 2,000 square feet, many buyers will prefer multi-levels. than 2,000 square feet, many buyers will prefer multi-levels.

2.2. A large kitchenA large kitchen that provides easy access or is open to the that provides easy access or is open to the family room. Buyers want plenty of counter and cabinet space family room. Buyers want plenty of counter and cabinet space and an island can create an easily accessible work area. A and an island can create an easily accessible work area. A breakfast bar and up-to-date appliances are other key selling breakfast bar and up-to-date appliances are other key selling points. points.

3.3. A A large family room and master bedroomlarge family room and master bedroom suite are very suite are very popular now. Today's buyers prefer walk-in closets and plenty popular now. Today's buyers prefer walk-in closets and plenty of storage space. of storage space.

4.4. Buyers expect at Buyers expect at least two bathroomsleast two bathrooms, and in a two story , and in a two story house, at least one downstairs bathroom is important. house, at least one downstairs bathroom is important. Luxurious master bathrooms with dual sinks and a tub/shower Luxurious master bathrooms with dual sinks and a tub/shower combination create even more appeal. combination create even more appeal.

5.5. A A porch or patioporch or patio can also be an important selling feature, a can also be an important selling feature, a place where people can easily entertain outdoors when the place where people can easily entertain outdoors when the weather is nice. Covered patios are especially popular, as are weather is nice. Covered patios are especially popular, as are screened-in patios in areas where insects can be a problem. screened-in patios in areas where insects can be a problem.

Types of HomesTypes of Homes

Rancher house – 1 floorRancher house – 1 floor Colonial – 2 story, with a Colonial – 2 story, with a

basementbasement Split Level – multiple storiesSplit Level – multiple stories Condo / Townhouse Condo / Townhouse

(communities)(communities) Association feesAssociation fees

Row / Twin (attached)Row / Twin (attached)

How much can you afford?How much can you afford? Here's the super-quick rule of Here's the super-quick rule of

thumb: thumb:    Most people can afford a home that costs Most people can afford a home that costs

up to three times their annual household up to three times their annual household income, if they can make a 20% down income, if they can make a 20% down payment and have only a moderate payment and have only a moderate amount of other debt. amount of other debt.

If you have little to no debt and can put If you have little to no debt and can put 20% down you can probably buy a house 20% down you can probably buy a house worth up to four times your annual worth up to four times your annual income.income.

Calculator:Calculator: http://michaelbluejay.com/house/howmuchttp://michaelbluejay.com/house/howmuc

hhome.htmlhhome.html

The MortgageThe Mortgage You don't pay cash when you buy You don't pay cash when you buy

a home. a home. If you had to do that then If you had to do that then nobody could afford to buy a house. nobody could afford to buy a house.

Instead you make a down payment Instead you make a down payment (3 to 20% of the sale price) and (3 to 20% of the sale price) and qualify to receivequalify to receive a loan from a a loan from a bank to cover the rest. bank to cover the rest.

This loan is called a This loan is called a mortgage.mortgage. You You make payments on this loan every make payments on this loan every month for 15 to 30 years. month for 15 to 30 years.

Mortgages….Mortgages….

The bank loaning the money is the The bank loaning the money is the lenderlender.. The amount you pay to the bank each The amount you pay to the bank each

month is your month is your mortgage payment.mortgage payment. The rate of interest on the loan is the The rate of interest on the loan is the

mortgage rate mortgage rate (or the (or the interest rateinterest rate).). Interest rate is decided by your Credit Interest rate is decided by your Credit

Score and Market ConditionsScore and Market Conditions

If you don't make your mortgage If you don't make your mortgage payments then the bank will payments then the bank will repossess the house. Then they'll repossess the house. Then they'll sell it to make sure that they can sell it to make sure that they can recoup the money they loaned to recoup the money they loaned to you, and that you didn't pay back.you, and that you didn't pay back.

The number of years it takes to pay The number of years it takes to pay back the loan is called the back the loan is called the term,term, which is either 15 or 30 years.which is either 15 or 30 years.

15-year mortgage

. .30-year mortgage

• Saves a bundle on interest

• Pay off the loan in half the time

• Easier to qualifyfor• Lower monthly

payments• Allows you to

buy a higher-priced home

Lengths of MortgagesLengths of Mortgages

Paying the MortgagePaying the Mortgage

4 Parts:4 Parts:1.1. Part of your payment goes Part of your payment goes

towards the towards the principleprinciple (the (the amount the bank loaned you)amount the bank loaned you)

2.2. InterestInterest (the bank's profit from (the bank's profit from lending you money). lending you money).

3.3. Taxes – school taxes and real Taxes – school taxes and real estate taxesestate taxes

4.4. Homeowner’s InsuranceHomeowner’s Insurance

What type of loan for you?What type of loan for you?

There are several different loan There are several different loan types, each suitable for different types, each suitable for different homebuyers.homebuyers.

First determine whether you First determine whether you want a want a fixed-rate or an fixed-rate or an adjustable rateadjustable rate mortgage. mortgage.

With a With a fixed ratefixed rate, you lock in a , you lock in a monthly payment amount that will monthly payment amount that will remain constant throughout the life remain constant throughout the life of the loan, even if interest rates rise. of the loan, even if interest rates rise. If interest rates fall, you can either If interest rates fall, you can either continue paying your higher preset continue paying your higher preset rate, or you could rate, or you could refinancerefinance your your loan, though that would mean paying loan, though that would mean paying additional closing costs.additional closing costs.

AnAn adjustable-rate mortgage adjustable-rate mortgage (ARM), on the other hand, has an (ARM), on the other hand, has an interest rate that rises or falls in step interest rate that rises or falls in step with a financial index.with a financial index.

Lowering the Interest RateLowering the Interest Rate

You may also want to pay You may also want to pay pointspoints to to lower the interest rate on your loan. lower the interest rate on your loan.

Basically, points -- or the "loan Basically, points -- or the "loan discount cost," as they're more discount cost," as they're more formally known -- represent a portion formally known -- represent a portion of the interest that you pay up front of the interest that you pay up front in exchange for a lower rate in exchange for a lower rate thereafter. One point equals 1 thereafter. One point equals 1 percent of the loan amount. percent of the loan amount.

Compound Interest, NOT simple interestCompound Interest, NOT simple interest

We'll assume a $125,000 loan for 30 years at various interest rates.We'll assume a $125,000 loan for 30 years at various interest rates. Total Interest Paid Over the Life of the LoanTotal Interest Paid Over the Life of the Loan

NOTE: THIS IS JUST THE AMOUNT OF INTERST YOU ARE PAYING!NOTE: THIS IS JUST THE AMOUNT OF INTERST YOU ARE PAYING! Total Interest Paid Over the Life of the Loan

                                                                    

Financial Checklist to Qualify for a Financial Checklist to Qualify for a MortgageMortgage

1.1. Pay down your debt.Pay down your debt. The bank wants your total debt The bank wants your total debt to be no more than about 38% of your income. If your to be no more than about 38% of your income. If your income is $3000/mo. then the bank figures your total income is $3000/mo. then the bank figures your total debt can be $1140/mo. Pay down your debt as much debt can be $1140/mo. Pay down your debt as much as possible to increase your borrowing power. Pay as possible to increase your borrowing power. Pay down the highest-interest debt first (credit cards) down the highest-interest debt first (credit cards) before lower interest debt (car loans, student loans).before lower interest debt (car loans, student loans).

2.2. Get the down payment together.Get the down payment together. If you don't If you don't already have a already have a down paymentdown payment saved, start saving now. saved, start saving now.

3.3. Clean up your credit report.Clean up your credit report. Good credit not only Good credit not only helps you qualify for a loan in the first place, it helps helps you qualify for a loan in the first place, it helps you get a better deal when you you get a better deal when you dodo get a loan. get a loan.

Homeowner’s Insurance:Homeowner’s Insurance:http://finance.yahoo.com/columnist/article/moneymatters/11166?p=1http://finance.yahoo.com/columnist/article/moneymatters/11166?p=1 Just because you have homeowners insurance doesn't mean Just because you have homeowners insurance doesn't mean

you're protected.you're protected.

True protection is when you know for a fact that your policy will True protection is when you know for a fact that your policy will provide you and your family coverage that allows you to repair, provide you and your family coverage that allows you to repair, rebuild, and restart after a major loss. Not assume, not guess, rebuild, and restart after a major loss. Not assume, not guess, but but knowknow you have the right coverage. you have the right coverage.

Yet time and again I've seen homeowners who buy a policy that Yet time and again I've seen homeowners who buy a policy that "seems OK," without really understanding the coverage they "seems OK," without really understanding the coverage they have. Often, it's a decision simply based on which company is have. Often, it's a decision simply based on which company is offering the basic coverage demanded by a mortgage lender at offering the basic coverage demanded by a mortgage lender at the cheapest premium. You as a buyer figure that if the mortgage the cheapest premium. You as a buyer figure that if the mortgage lender is fine with it, then you're amply covered. lender is fine with it, then you're amply covered.

You're not. All mortgage lenders care about is that your You're not. All mortgage lenders care about is that your insurance at least covers the value of the loan. That covers their insurance at least covers the value of the loan. That covers their financial risk, but it doesn't cover everything you need to be truly financial risk, but it doesn't cover everything you need to be truly secure.secure.

Real Estate TaxesReal Estate Taxes

Real Estate taxes based on the Real Estate taxes based on the assessed value of the propertyassessed value of the property

Real estate taxes support local Real estate taxes support local services and facilities such as: services and facilities such as: schools, roads, fire departments, schools, roads, fire departments, park districts, and county, city, park districts, and county, city, village and township governments.village and township governments.

A MAJOR FACTOR determining if you A MAJOR FACTOR determining if you can afford a housecan afford a house

Divide tax amount by 12 and then Divide tax amount by 12 and then add that to your monthly payment add that to your monthly payment

Home Inspection and Home Inspection and AppraisalAppraisal Home Inspection: paid for by the Home Inspection: paid for by the

bidder, the buyerbidder, the buyer Ensures the home meets all your Ensures the home meets all your

expectations, codes, safety (checks expectations, codes, safety (checks roof, heater, A/C, plumbing, overall roof, heater, A/C, plumbing, overall condition of home)condition of home)

Allows the buyers to back out of bid if Allows the buyers to back out of bid if there is something they do not likethere is something they do not like

Appraisal: the value of your home as Appraisal: the value of your home as calculated by the local governmentcalculated by the local government

Making the BidMaking the Bid

1.1. Try to line up data on at least three houses that have Try to line up data on at least three houses that have sold recently in the neighborhood. Calculate the sold recently in the neighborhood. Calculate the difference between the original list price and the final difference between the original list price and the final price of the homes sold. price of the homes sold.

2.2. Usually you will bid 5 – 15 % below asking price, Usually you will bid 5 – 15 % below asking price, leaving yourself a little room to negotiate after the leaving yourself a little room to negotiate after the HOME INSPECTION. HOME INSPECTION.

1.1. However, if it is a However, if it is a fair asking pricefair asking price and you are competing and you are competing with other bids, you may want to give the sellers what they with other bids, you may want to give the sellers what they are askingare asking

3.3. Be creative about finding ways to satisfy the seller's Be creative about finding ways to satisfy the seller's needs. For instance, ask if the seller would throw in needs. For instance, ask if the seller would throw in kitchen and laundry appliances if you meet his price -- kitchen and laundry appliances if you meet his price -- or take them away in exchange for a lower price. or take them away in exchange for a lower price.

How a news story can How a news story can DECREASE property valueDECREASE property value Residents Ask State to Investigate "Diseased" StreetResidents Ask State to Investigate "Diseased" Street Last Edited: Monday, 09 Oct 2006, 10:46 PM EDTCreated: Monday, 09 Last Edited: Monday, 09 Oct 2006, 10:46 PM EDTCreated: Monday, 09

Oct 2006, 10:46 PM EDT   Oct 2006, 10:46 PM EDT   State health experts want to know why at least one resident in twelve State health experts want to know why at least one resident in twelve

homes on the same side of Schoolhouse Lane in Mt. Laurel, New Jersey homes on the same side of Schoolhouse Lane in Mt. Laurel, New Jersey have all fallen ill with cancer or a chronic disease.have all fallen ill with cancer or a chronic disease.  In one instance, three separate owners of one house developed cancer,   In one instance, three separate owners of one house developed cancer, according to one area resident.according to one area resident.   Each of the homes backs up to the Pennsauken Creek, which    Each of the homes backs up to the Pennsauken Creek, which occasionally floods the properties. occasionally floods the properties.   The land used to be a farm and an industrial park sits on the other side   The land used to be a farm and an industrial park sits on the other side of the creek. of the creek.   So residents wonder whether the soil or water could be contaminated.   So residents wonder whether the soil or water could be contaminated.   An informal survey revealed 29 cases of cancer as well as eleven   An informal survey revealed 29 cases of cancer as well as eleven gastrointestinal illnesses, seven neurological diseases and six pets with gastrointestinal illnesses, seven neurological diseases and six pets with cancer.cancer.  “I don’t think it’s a coincidence,” said another resident.  “If it is, we're just   “I don’t think it’s a coincidence,” said another resident.  “If it is, we're just asking the township or the state to prove us wrong."asking the township or the state to prove us wrong."  Hear what’s next for the residents in this report from FOX-29’s Claudia   Hear what’s next for the residents in this report from FOX-29’s Claudia Gomez.Gomez.

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Home Equity LoanHome Equity Loan

A special kind of loan which is A special kind of loan which is secured against a property and secured against a property and allows the owner to borrow and allows the owner to borrow and repay money to repay money to make make improvementsimprovements to the home. to the home.

10 priciest cities for renters10 priciest cities for renters* *

Annual rent Annual rent New York**$2,469 New York**$2,469 San Francisco$1,9478San Francisco$1,9478 Los Angeles$1,5866Los Angeles$1,5866 San Jose,Calif.$1,487San Jose,Calif.$1,487 Orange County, Calif.$1,3876Orange County, Calif.$1,3876 Boston$1,3322Boston$1,3322 Oakland$1,2485Oakland$1,2485 San Diego$1,2133San Diego$1,2133 Washington, DC$1,2054Washington, DC$1,2054 Fort Lauderdale, Fla.$1,1349Fort Lauderdale, Fla.$1,1349

What is your home Worth?What is your home Worth?

www.zillow.comwww.zillow.com

Value of landValue of land

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Top 10 cities: Where to buy nowTop 10 cities: Where to buy nowThe real estate slump could get The real estate slump could get worse before it gets better. But worse before it gets better. But these 10 markets offer great these 10 markets offer great opportunities for those who opportunities for those who have the patience to buy and have the patience to buy and hold.hold. http://money.cnn.com/popups/2http://money.cnn.com/popups/2

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