Is Buying a Home Right for Me?

• Can I Afford to Buy a House?
• Advantages & Disadvantages Chart
• Buy vs. Rent Comparison Chart
• Buy vs. Rent Calculator
• Monthly Budget Calculator
• Monthy Costs of Buying a Home
• Mistakes to Avoid When Buying a Home







Can I afford to buy a House?

Your income, savings, and monthly expenses play an important role in determining how large a mortgage you can afford. To figure out the amount you can afford, please click Affordability.

View the advantages of buying a home versus renting one in the Buy vs. Rent Comparison Chart, or view a financial comparison of buying versus renting in the Buy vs. Rent Calculator.





Advantages & Disadvantages of Buying a Home Chart


Advantages Considerations Buy Property builds equity Responsible for maintenance Sense of community, stability, and security Responsible for property taxes Free to change decor and landscaping Possibility of foreclosure and loss of equity Not dependent on landlord to maintain property Less mobility than renting   Rent Little or no responsibility for maintenance No tax benefits Easier to move No equity is built up   No control over rent increases   Possibility of eviction









Buy vs. Rent Comparision Chart


In the chart below, a renter starts paying $800 per month for rent with an annual increase of 5%. The homeowner purchases a home for $110,000 and pays a monthly mortgage of $1000. After 6 years, the homeowner's payment is lower than the renter's monthly payment. With the tax savings of homeownership, the homeowner's payment is less than the rental payment after 3 years.


Years Rent Payment Mortgage Payment Monthly Difference After Tax Savings Yearly Difference After Tax Savings 1 800 1000 -200 -50 -2400 -600 2 840 1000 -160 -10 -1920 -120 3 882 1000 -118 +32 -1416 +384 4 926 1000 -74 +76 -888 +912 5 972 1000 -28 +122 -336 +1464 6 1021 1000 +21 +171 +252 +2052 7 1072 1000 +72 +222 +864 +2664 8-30     Savings increase every year








Monthly Costs of Buying a Home


Your rental company takes part of your rent payment to cover certain housing expenses. When you decide to purchase a home, you accept responsibility for paying for these expenses (listed below).
They are additional costs to your monthly mortgage payment and should be included in your budget estimates:

- Property Taxes and Special Assessments
- Home/Hazard Insurance
- Utilities
- Maintenance
-Home Owner Association (HOA) Fee
(Doesn't apply to all purchases. It pays for trash and snow removal and maintenance of common grounds, if applicable)
- Membership Fee
(It may pay for recreational facilities and other services, such as cable TV)

Mistakes to Avoid When Buying a Home

- Most people these days use financing to afford their home, and a very common mistake that is made by many home buyers is making a major purchase, such as a car, not long before trying to buy their new home. This may not sound like a problem initially, but lenders use something called the debt to income ratio to help determine whether or not you can actually afford a home that is in a certain price range. Unfortunately, by increasing your consumer debt for purchases like a car or some other installment payment, you only decrease the amount of house that you can buy through most lending institutions. So avoid this mistake and eliminate all major purchases as much as possible before purchasing a home.

- Another common mistake is changing jobs just before buying a home. Again, lenders don't like to see this. They prefer instead to see consistency at the job, so do your best to stick it out at your job, at least until your home is bought and the papers are signed.
If you happen to be buying your home as a for sale by owner deal, a big mistake that you want to avoid is to be careful not to give any down payment money to the homeowner themselves before the transaction is actually completed. Unfortunately, some unscrupulous homeowners have taken the down payment money that they have received and spent it before the deal was closed. If for any reason the deal falls through, you can imagine how difficult it would be trying to get your money back in such a situation. The wise course of action is to put the down payment in a trust fund overseen by an attorney, so that access to the money cannot be gained by either party until either the house closes or the deal falls through.

- Believe it or not, some home buyers actually forget to arrange to have their utilities activated in their new home before they move in. This can lead to some very uncomfortable days spent in your new home that are unnecessary. So make a note to yourself to both arrange for turning off utilities at your old residence, and getting them turned on in time at your new home.

- Having a good real estate agent to look out for your interests as you buy your new home is an important asset that you don't want to overlook either. It's their job to keep up with all the details of the deal from day-to-day, and keep everything moving smoothly on track toward closing. They can help shield you from much of the frustration and day-to-day angst associated with buying a new home.

- Some home buyers fail to stay up with the requirements of the lender as the home progresses to closing too, and then find themselves way behind in the process at the very last minute. Sometimes this can lead to delay or even cancellation of the house closing, so take care of your end of the deal by staying on the same page as the lender all the way through the process.
The more education that you have about possible costly mistakes that could be made in buying a home, the more chance you have to keep the whole home buying process moving along smoothly and quickly toward a successful close.

How do you draw the line between a money pit and a diamond in the rough?
Here are three things to keep in mind. Depending on the circumstances, these might be reasons not to buy.

Neighborhood
Unlike the rental world, where neighbors last a year, a house is a long-term commitment. Your neighbors when you move in may very well be your neighbors for some time to come, and that's something to keep in mind when looking at a potential new home.

Also consider proximity of the house to things like schools, stores, and major roads. If there's a highway nearby, some questionable properties, an unfriendly feeling, or anything else that feels uncertain, it might be wise to give that house a pass. After all, you might be able to fix your house, but you can't fix your neighborhood.

Major repairs.
Many inexperienced home buyers make the mistake of not checking out every aspect of the property thoroughly. Getting a great deal on a house with a roof that needs replacing is not that great of a deal. Check out the furnace, central air, and the plumbing and electrical systems.
Major problems don't necessarily mean you shouldn't buy the property, but they should be included in the price negotiations. A good realtor or seller will factor in such considerations, and you may be able to buy the house for less if it's understood that you're responsible for replacing the roof. Just don't get duped. Don't take anyone's word that the furnace is new- make sure of it.

Water Damage.
Check this one out- thoroughly. Is the house located in a high-flood area? Is something important (like the roof or basement) leaking? If water damage occurred once it's not likely to stop unless the problem -- aka the flow of water -- is corrected. This could lead to expensive irrigation systems and internal repairs.

I heard a horror story of a house that began with a water spot on a wall, and led to removing the floor and vacuuming out two feet of water. Water damage is often a sign of a bigger problem. Unless you can trace it to its source and identify how to stop it, it might be best to steer away from water-damaged property altogether. Why sign up for trouble?

Keeping your eyes open going into a real estate negotiation is the most important thing. If something doesn't feel right, trace it backwards until you figure out why, and then decide if it's worth it to go ahead with the purchase.

Sometimes you'll find it's easy to walk away from a great house in a bad neighborhood. Other times, you can get your purchase price substantially reduced if you can point out exactly what repairs are needed. The trick is to catch those needed fixes -- because the seller may not point them out for you.

My Rights as a Homebuyer

• Fair Housing (Housing Discrimination)
• Mortgage Borrowers Rights
• Real Estate Settlement Procedures Act (RESPA)
• Predatory Lending

Fair Housing (Housing Discrimination) & Equal Opportunity

Their mission is to create equal housing opportunities for all persons living in America by administering laws that prohibit discrimination in housing on the basis of race,color, religion, sex, national origin, disability, and familial status.

What they do
The Office of Fair Housing and Equal Opportunity administers federal laws and establishes national policies that make sure all Americans have equal access to the housing of their choice.

Click Here for Fair Housing: Equal Opportunity for All- brochure

Mortgage Borrowers Rights

This may be the largest and most important loan you get during your lifetime. You should be aware of certain rights before you enter into any loan agreement.

1. You have the RIGHT to shop for the best loan for you and compare the charges of different mortgage brokers and lenders.

2. You have the RIGHT to be informed about the total cost of your loan including the interest rate, points and other fees.

3. You have the RIGHT to ask for a Good Faith Estimate of all loan and settlement charges before you agree to the loan and pay any fees.

4. You have the RIGHT to know what fees are not refundable if you decide to cancel the loan agreement.

5 .You have the RIGHT to ask your mortgage broker to explain exactly what the mortgage broker will do for you.

6. You have the RIGHT to know how much the mortgage broker is getting paid by you and the lender for your loan.

7. You have the RIGHT to ask questions about charges and loan terms that you do not understand.

8. You have the RIGHT to a credit decision that is not based on your race, color, religion, national origin, sex, marital status, age, or whether any income is from public assistance.

9. You have the RIGHT to know the reason if your loan was turned down.

10. You have a RIGHT to ask for the HUD settlement cost booklet “Shopping for Your Home Loan”.

Real Estate Settlement Procedures Act (RESPA)

RESPA is about closing costs and settlement procedures. RESPA requires that consumers receive disclosures at various times in the transaction and outlaws kickbacks that increase the cost of settlement services. RESPA is a HUD consumer protection statute designed to help homebuyers be better shoppers in the home buying process, and is enforced by HUD.

HUD is requiring that loan originators provide borrowers with a standard Good Faith Estimate that clearly discloses key loan terms and closing costs and that closing agents provide borrowers with a newHUD-1 settlement statement. New RESPA regulations were published November 17, 2008 and are scheduled to take full effect on January 1, 2010. The "New RESPA Rule FAQs" were comprised from industry questions and are posted to facilitate implementation of these new requirements.

Click here for more information about RESPA

Predatory Lending

Over the last several years, our nation has made enormous progress in expanding access to capital for previously under served borrowers. Despite this progress, however, too many families are suffering today because of a growing incidence of abusive practices in a segment of the mortgage lending market. Predatory mortgage lending practices strip borrowers of home equity and threaten families with foreclosure, destabilizing the very communities that are beginning to enjoy the fruits of our nation’s economic success.

If you believe you have been a victim of predatory lending practices there are Federal agencies that can help. Please refer to the list of agencies below and contact the organization or agency that you think can help address your specific problem.

- Protect yourself from predatory lenders: For information about loan fraud and advice about preventing it, see Don't Be A Victim of Loan Fraud.

- Local information on predatory lending: Here are some Local Resources by state, that can help you avoid being a victim of predatory lending.

- For FHA loans: For problems relating to origination, underwriting, or appraisals of FHA loans, contact the FHA Resource Center.

- Avoiding foreclosure on an FHA loan: Visit the HUD National Servicing Center web page and have your FHA case number at hand. You will find your case number on the mortgage settlement statement.

- Non-FHA mortgage loans: For complaints concerning practices which include disclosure of interest rates and finance charges (APR), prepayment penalties, credit life insurance, fraud, deception, etc. contact the appropriate agency from this list to complain about the mortgage lender or mortgage broker.

- Lender threatening to foreclose or mortgage in default: HUD funds housing counseling agencies throughout the country. To find a housing counseling agency near you, call toll-free (800) 569-4287 immediately for free guidance or visit the web page.

- Settlement Procedures:(FHA and non-FHA mortgages). Visit the RESPA web page for information on RESPA disclosure requirements such as the Good Faith Estimate, HUD-1 and escrow account statements, and how to file a complaint with your lender concerning the servicing of your loan.
If you are still unsure who can best help you, please contact HUD.

- File a housing discrimination complaint: Discrimination in mortgage lending is prohibited by the federal Fair Housing Act and HUD's Office of Fair Housing and Equal Opportunity actively enforces those provisions of the law. Learn how the Fair Housing Act can help you fight predatory lending.

Homebuying Tools

• Shopping for the Best Mortgage Loan
• Loan Payments Calculator
• Choose a Realtor
• Dream Home Wish List (features you want in a home)
• Comparision Check List (take with you, when comparing homes)
• Finding Homes for Sale

Homebuying Assistance Programs

• Housing and Urban Development (HUD) Special Programs
• Considering FHA Loans and Why?

Shopping for the Best Mortgage Loan (compare & negotiate)

Shopping, comparing, and negotiating may save you thousands of dollars. Click here to view a booklet showing you how to find the best deal!

Shopping around for a home loan or mortgage will help you to get the best financing deal.

A mortgage—whether it’s a home purchase, a refinancing, or a home equity loan—is a product, so the price and terms may be negotiable. You’ll want to compare all the costs involved in obtaining a mortgage.

 

Loan Payments Calculator

Providing the information below will allow you to calculate how much you can afford to spend on a home. However, many additional factors play a part in the loan qualification process.
Click here to Calculate Estimated Loan Payments

Choose a Realtor

There's a common saying in the real estate industry regarding the vast number of agents in the business: "If you don't have any friends who are agents, then you probably don't have any friends at all."

With so many agent out there, how can you make an intelligent decision? Do you choose a friend, neighbor or coworker? Should you work with an agent at a large firm, a small firm, a franchise or an independent?

While there's an exception to every rule, and every marketplace has its own nuances, here are some solid rules to apply when you want the best representation to protect your interests.

Demand Experience
The real estate profession is plagued by high turnover. This creates a workforce that is made up of many newcomers. While there are brand new agents with good intentions, why trust one of the largest investment you'll ever buy or sell to someone without experience?

Always look for an agent with at least two years of experience. Anyone still in the business after two years has probably learned at least the fundamentals of real estate.

Look for Commitment
Another problem we have in the industry is a large number of part time and recreational salespeople. These folks have either retired from some other career, work in real estate seasonally or are earning a second income for the family and honestly don't need to work full time.

No matter how long they have been in real estate, their lack of full-time commitment makes it impossible for them to keep up with the vast changes in law, marketing and business practices that are occurring in the profession today.

If an agent isn't working at least thirty hours a week, fifty weeks a year, look for someone else.

Consider Education
In the majority of states, the requirements for real estate licensing are substantially less than those for cutting hair. In Michigan, for example, all that is required is a forty-hour class and a multiple choice test. You cannot rely on licensing to indicate competence. And, unfortunately, many agent's real estate education ends with their pre-license education.

While there are numerous advanced real estate education courses available, the only technical and competence based program available nationwide is the Graduate, REALTORS® Institute (GRI) series, which is administered under the direction of the National Association of REALTORS®.

A REALTOR® who completes the fifteen eight-hour modules, and passes examinations, may then use the designation of GRI. While only 15%-20% of agents have earned this accreditation, it should not be too difficult finding a GRI in your marketplace as they will commonly print the designation behind their name in advertising as well as on letterhead and business cards.

Conduct Interviews
Before you hire an agent to help you buy or sell a home, you should interview at least three agents in person. In order to do this, first get recommendations from friends, family and neighbors. Then look on the web, in homes magazines and the local newspaper to see what kind of marketing the various companies are doing in your area and call a few that impress you.

Then make brief fact-finding calls to determine which of the agents on your list are full time, experienced and either hold the GRI designation or are at least working aggressively toward it. You will probably need to call ten to fifteen agents in order to find three that are worth interviewing.

The interview itself need not be a formal one. It is simply an opportunity for you to meet the candidate and explain your needs; and to determine whether you would be comfortable working with them. Ask whatever questions you like, or simply explain your goals and listen carefully to what they propose to do for you in meeting your needs.

The decision
If you follow the suggestions above, you will find that there are excellent agents working for firms both large and small; both franchised and independent. Thus, the real decision must be made based on the competency of the individual agent you will be working with on a day-to-day basis.

Stephen M. Canale is President, Broker/Instructor of Acclaim Residential Marketing
Ann Arbor, Michigan

Dream Home Wish List (features you want in a home)

View list here

Comparision Check List (take with you, when comparing homes)

View list here

Finding Homes for Sale

Several federal agencies have properties to sell. Check them out here- one might be just what you're looking for!

 

 

Making an Offer that Closes the Deal

• What are the Steps in Making an Offer?
• When the Offer becomes a Contract
• Homebuying Money Saving Tips

Making an offer on a home is an exciting step - you've found the house you want and you're working towards making it your home.

Be sure you're serious about buying before you make an offer. If the seller accepts your offer, it becomes a legal contract after a few days.

Details and planning are important. Know what you would like to pay but also think about the most you're willing to pay and the total pre-approved loan amount. Be specific, and put everything in writing.

What are the Steps in Making an Offer?

Negotiate a sales price. Negotiating is a standard practice in real estate, and something that your real estate agent will do on your behalf. Learn more about it so it works for you.

Make an offer in writing. Understand what should be included in your offer. This is the time to think carefully about what you want and what you can afford. If your offer is accepted, it becomes a legally binding contract. Make sure you don't include anything in the offer that you're not totally comfortable with doing.

Make sure you put everything in writing. Offers usually include items like:

• Proposed purchase price
  Remember, the seller may counter-offer with a higher purchase price - consider that when you decide on your proposed purchase price.
• Concessions
  This includes things you'd like the seller to help pay for, like closing costs.
• Conveyances
  This covers any personal property to be included in the sale, like the washer and dryer or the refrigerator.
• Home inspection contingencies
  Make sure you're prepared if the home inspection report shows major problems. Know what you will ask the seller to fix prior to buying the home and what you will ask a reduction in price for to account for the cost of repairs that you will do yourself.
• Earnest money
  Earnest money is a deposit you offer to show you're serious about purchasing the house. Earnest money is usually held in escrow and applied to your closing costs at settlement. If you fail to meet the terms of your contract, you may lose this deposit.
• Acceptance
  This covers how long the seller has to respond to your offer before the offer is no longer binding.
• Mediation and arbitration
  These are legal methods for handling contract disagreements between you and the property seller. These methods are not necessarily beneficial to you, and you do not need to agree to them.

When the Offer Becomes a Contract

Once the seller accepts your offer, the offer becomes a contract. What's in a contract varies from state to state, depends on the state where the house resides, but some common things you'll find include:

• Legal description
  This describes the property you are buying in terms of its dimensions relative to a fixed point (like a road) or in relation to a recorded subdivision plat or declaration of condominium. It often includes the street address of the property.
• Selling price and deposit
  This is the price you and the buyer agreed upon, as well as the amount of earnest money you'll pay when you sign the contract.
• Mortgage contingency
  A contingency protects you by stating that the sale depends on a lender approving you for a specific mortgage, rate, and term.
• Closing date and location
  The closing date (also called the settlement) can be several weeks to several months away to meet the seller's and your needs.
• Conveyances
  Double check these conveyances to make sure that the items are there and are what you and the seller agreed on in the offer.
• Home inspection
  If you've made the contract contingent on a home inspection, this will set an inspection date and provide an explanation of what will happen if the inspection identifies any problems.
• Possession date
  This is the date you can move in. It's usually the closing day or very soon after it.
• Property insurance
  This details the home insurance policy that will cover the property until the closing date. This can be the buyer's or seller's policy.
• Property disclosures
  This includes legal notification of any required information concerning the property. For example, it could contain copies of the documents from the homeowners' association. This section would also outline any problems with the property that must be disclosed.

Homebuying Money Saving Tips

Negotiating a Sales Price
Before you negotiate a sales price, it's important to determine if you or the seller has the stronger position. Knowing this will help you plan your negotiation.

The seller may have the stronger position if:
• The local real estate market is strong and homes are selling quickly.
• They aren't in a rush to move.
• Similar houses have sold for close to or above their asking price.
• There are other offers being made on the house at the same time as you.

The buyer may have the stronger position if:
• The local real estate market is weak.
• The seller needs to move quickly.
• The house has been on the market for a long time.

When negotiating, more information is better. Look at your notes from when you looked at the house. If there's anything that needs to be repaired or replaced, you may want to consider including these costs in the negotiation. If you want certain appliances or fixtures to stay, be sure to include them as well. You may also want to make your offer contingent upon your obtaining financing or the house passing a professional home inspection, especially if it is an older home.

There are several steps to negotiating:

1. Asking price.
   This is the price the sellers have originally listed. In a buyer's market, you may be able to successfully offer below the asking price. However, in a seller's market you may want to be prepared to offer more. Before making an offer in a seller's market, know how much above asking price you are willing, and able, to bid in case the seller gets multiple offers.
2. Initial purchase offer.
   This is your first offer. It may include contingencies (such as a requirement that the home pass a professional inspection or that you receive adequate financing from your lender.)
3. Acceptance of offer or counter-offer.
   The seller can accept your offer or make a counter-offer of a new price or additional contingencies.

• If you've made a home inspection part of the contingencies and something serious is found during the inspection, you may want to submit a new counter-offer and discuss the situation with your lender. The process may go back and forth several times before you and the seller reach an offer that is acceptable to you both. Remember that in some instances, your lender may not approve your mortgage if the home has serious deficiencies that could affect its value.

Older Homes

Older homes can be charming, but you should be aware of special issues with them so you're not surprised once you own the home. Foundation problems, overloaded electrical systems and lead paint are not unusual in many older homes.

Get a Home Inspection

• Hire a Professional Home Inspector
Hiring a professional home inspector is one of the most important things you can do to make sure your home is in good condition. An independent authorized inspector can uncover defects with the house that could cost you a lot of money down the road. Your real estate agent can be a good reference for a home inspector.

If the home inspector finds a serious problem, for example, the roof needs to be replaced, you'll know up front and can negotiate with the seller for the cost of the repair or replacement. If you don't find out until after you own the house, the problem (and cost) are yours alone.

When getting a home professionally inspected, you may also want to think about testing for environmental hazards like lead paint, asbestos, mold, and radon. More Info

Home Inspection Tips

Never forgo a professional home inspection and don’t think you can do it yourself – a professional can uncover problems before you buy, potentially saving you thousands of dollars down the road.
Schedule your home inspection when you can be there. It's not required that you be there but you may learn valuable things about your home, including how best to maintain it.

Every house needs an inspection. Even if it seems like it's in great shape, a professional home inspection protects you from unpleasant surprises in the future.

No home can "fail" a home inspection, but certain problems can be brought to light. Make sure you factor in any potential problems and the costs to fix them when looking at your housing budget and making your offer.

The Closing Process : Knowing What to Expect

Buying a house is an exciting time and the more you know about the process, the more relaxed you'll be going through it. The Closing consists of the final steps to sealing the deal on the purchase of your new home.

The Steps to Closing include:
• The Offer
• The Deposit
• Contingencies
• Home Inspection
• Homeowner's Insurance
• The Contract
• Settlement Sheet
• Closing Documentation
• Closing Costs
• Final Arrangements
• Settlement
• Closing Questions & Answers
• Owning and Managing Your Home

The Offer
Make an Offer that’s 8-10 percent lower then the asking price. This allows you to be able to negotiate and not go over the maximum amount you can afford.

The Deposit
Also known as Earnest Money, and is used to display a commitment to the seller from the buyer. The real estate agent or the seller’s lawyer holds on to the deposit in trust until the deal closes. If you decide not to close once the offer has been accepted then you maybe sued for damages and lose your deposit.

Contingencies
These are certain requirements specified in a contract that need to be met before the buyer is required to close. Typical among them: the buyer's securing of financing and an acceptable house inspection. Generally speaking, an inspection contingency covers a 10-to-14-day period from the acceptance of the contract, and financing contingencies run for 30 days. But in a seller's market, buyers may be asked to fulfill their contingency requirements in shorter time frames.

Home Inspection
In a home inspection, a professional conducts a thorough examination of a property to assess its structural and mechanical condition. The idea here is that a trained home inspector will be able to catch potential problems that a buyer might not detect.

Homeowner’s Insurance
You may be able to save hundreds of dollars a year on homeowners insurance by shopping around. You can also save money with these tips.

Consider a higher deductible. Increasing your deductible by just a few hundred dollars can make a big difference in your premium.

Ask your insurance agent about discounts. You may be able to get a lower premium if your home has safety features such as dead-bolt locks, smoke detectors, an alarm system, storm shutters or fire retardant roofing material. Persons over 55 years of age or long-term customers may also be offered discounts.

Insure your house NOT the land under it. After a disaster, the land is still there. If you don't subtract the value of the land when deciding how much homeowner's insurance to buy, you will pay more than you should.
Don't wait till you have a loss to find out if you have the right type and amount of insurance.

Make certain you purchase enough coverage to replace what is insured. "Replacement" coverage gives you the money to rebuild your home and replace its contents. An "Actual Cash Value" policy is cheaper but pays only what your property is worth at the time of loss-your cost minus depreciation for age and wear.

Ask about special coverage you might need. You may have to pay extra for computers, cameras, jewelry, art, antiques, musical instruments, stamp collections, etc.

Remember that flood and earthquake damage are not covered by a standard homeowners policy. The cost of a separate earthquake policy will depend on the likelihood of earthquakes in your area. Homeowners who live in areas prone to flooding should take advantage of the National Flood Insurance Program.

12 ways to lower your homeowner's insurance

1. Shop Around
It'll take some time, but could save you a good sum of money. Ask your friends, check the Yellow Pages or contact your state insurance department. (Phone numbers and Web sites are listed here.) National Association of Insurance Commissioners (www.naic.org) has information to help you choose an insurer in your state, including complaints. States often make information available on typical rates charged by major insurers and many states provide the frequency of consumer complaints by company.

Also check consumer guides, insurance agents, companies and online insurance quote services. This will give you an idea of price ranges and tell you which companies have the lowest prices. But don't consider price alone. The insurer you select should offer a fair price and deliver the quality service you would expect if you needed assistance in filing a claim. So in assessing service quality, use the complaint information cited above and talk to a number of insurers to get a feeling for the type of service they give. Ask them what they would do to lower your costs.
Check the financial stability of the companies you are considering with rating companies such as A.M. Best (www.ambest.com) and Standard & Poor’s (www.standardandpoors.com) and consult consumer magazines. When you've narrowed the field to three insurers, get price quotes.

2. Raise Your Deductible
Deductibles are the amount of money you have to pay toward a loss before your insurance company starts to pay a claim, according to the terms of your policy. The higher your deductible, the more money you can save on your premiums. Nowadays, most insurance companies recommend a deductible of at least $500. If you can afford to raise your deductible to $1,000, you may save as much as 25 percent. Remember, if you live in a disaster-prone area, your insurance policy may have a separate deductible for certain kinds of damage. If you live near the coast in the East, you may have a separate windstorm deductible; if you live in a state vulnerable to hail storms, you may have a separate deductible for hail; and if you live in an earthquake-prone area, your earthquake policy has a deductible.

3. Don’t confuse what you paid for your house with rebuilding costs
The land under your house isn't at risk from theft, windstorm, fire and the other perils covered in your homeowners policy. So don't include its value in deciding how much homeowners insurance to buy. If you do, you will pay a higher premium than you should.

4. Buy your home and auto policies from the same insurer
Some companies that sell homeowners, auto and liability coverage will take 5 to 15 percent off your premium if you buy two or more policies from them. But make certain this combined price is lower than buying the different coverages from different companies.

5. Make your home more disaster resistant
Find out from your insurance agent or company representative what steps you can take to make your home more resistant to windstorms and other natural disasters. You may be able to save on your premiums by adding storm shutters, reinforcing your roof or buying stronger roofing materials. Older homes can be retrofitted to make them better able to withstand earthquakes. In addition, consider modernizing your heating, plumbing and electrical systems to reduce the risk of fire and water damage.

6. Improve your home security
You can usually get discounts of at least 5 percent for a smoke detector, burglar alarm or dead-bolt locks. Some companies offer to cut your premium by as much as 15 or 20 percent if you install a sophisticated sprinkler system and a fire and burglar alarm that rings at the police, fire or other monitoring stations. These systems aren't cheap and not every system qualifies for a discount. Before you buy such a system, find out what kind your insurer recommends, how much the device would cost and how much you'd save on premiums.

7. Seek out other discounts
Companies offer several types of discounts, but they don't all offer the same discount or the same amount of discount in all states. For example, since retired people stay at home more than working people they are less likely to be burglarized and may spot fires sooner, too. Retired people also have more time for maintaining their homes. If you're at least 55 years old and retired, you may qualify for a discount of up to 10 percent at some companies. Some employers and professional associations administer group insurance programs that may offer a better deal than you can get elsewhere.

8. Maintain a good credit record
Establishing a solid credit history can cut your insurance costs. Insurers are increasingly using credit information to price homeowners insurance policies. In most states, your insurer must advise you of any adverse action, such as a higher rate, at which time you should verify the accuracy of the information on which the insurer relied. To protect your credit standing, pay your bills on time, don't obtain more credit than you need and keep your credit balances as low as possible. Check your credit record on a regular basis and have any errors corrected promptly so that your record remains accurate.

9. Stay with the same insurer
If you've kept your coverage with a company for several years, you may receive a special discount for being a long-term policyholder. Some insurers will reduce their premiums by 5 percent if you stay with them for three to five years and by 10 percent if you remain a policyholder for six years or more. But make certain to periodically compare this price with that of other policies.

10. Review the limits in your policy and the value of your possessions at least once a year
You want your policy to cover any major purchases or additions to your home. But you don't want to spend money for coverage you don't need. If your five-year-old fur coat is no longer worth the $5,000 you paid for it, you'll want to reduce or cancel your floater (extra insurance for items whose full value is not covered by standard homeowners policies such as expensive jewelry, high-end computers and valuable art work) and pocket the difference.

11. Look for private insurance if you are in a government plan
If you live in a high-risk area -- say, one that is especially vulnerable to coastal storms, fires, or crime -- and have been buying your homeowners insurance through a government plan, you should check with an insurance agent or company representative or contact your state department of insurance for the names of companies that might be interested in your business. You may find that there are steps you can take that would allow you to buy insurance at a lower price in the private market.

12. When you’re buying a home, consider the cost of homeowners insurance
You may pay less for insurance if you buy a house close to a fire hydrant or in a community that has a professional rather than a volunteer fire department. It may also be cheaper if your home’s electrical, heating and plumbing systems are less than 10 years old. If you live in the East, consider a brick home because it's more wind resistant. If you live in an earthquake-prone area, look for a wooden frame house because it is more likely to withstand this type of disaster. Choosing wisely could cut your premiums by 5 to 15 percent.

Check the CLUE (Comprehensive Loss Underwriting Exchange) report of the home you are thinking of buying. These reports contain the insurance claim history of the property and can help you judge some of the problems the house may have.

Remember that flood insurance and earthquake damage are not covered by a standard homeowners policy. If you buy a house in a flood-prone area, you'll have to pay for a flood insurance policy that costs an average of $400 a year. The Federal Emergency Management Agency provides useful information on flood insurance on its Web site at FloodSmart.gov. A separate earthquake policy is available from most insurance companies. The cost of the coverage will depend on the likelihood of earthquakes in your area. In California the California Earthquake Authority (www.earthquakeauthority.com) provides this coverage.

If you have questions about insurance for any of your possessions, be sure to ask your agent or company representative when you're shopping around for a policy. For example, if you run a business out of your home, be sure to discuss coverage for that business. Most homeowners policies cover business equipment in the home, but only up to $2,500 and they offer no business liability insurance. Although you want to lower your homeowners insurance cost, you also want to make certain you have all the coverage you need.

The Contract
This follows the acceptance of an offer by the seller, and it is a legal and binding obligation, on the part of the buyer, to purchase the property if any contingencies are met. It outlines the details of the transaction, including: a description of the property, the selling price, the date of closing, the possession date and any applicable contingencies.

Settlement Sheet
Also called a "closing statement" or a "settlement statement," this is a document that the Department of Housing and Urban Development requires to account for all financial aspects surrounding the sale and purchase of a home. It provides an enumerated list of the funds that were paid at closing. Items on the statement include real estate commissions and initial escrow amounts (money or securities deposited with a neutral third party - the escrow agent - to be delivered upon fulfillment of certain conditions). The Real Estate Settlement Procedures Act requires that a copy of the settlement sheet be distributed to both parties at least one day prior to settlement.

Closing Documentation
Before you can close on a house, some paperwork must be completed. This includes a title search to make sure the title is clear, title insurance to protect the buyer and the lender from an oversight regarding a claim on some aspect of the property and an application for homeowner's insurance (necessary for securing a mortgage).

Closing Costs
The total amount of closing costs varies, but may include:

• a loan origination fee
• an appraisal fee
• the cost of a credit report
• a lender's inspection fee
• the cost of title insurance
• a mortgage broker fee
• property taxes
• fee for document preparation.

Your lender is required to give you prior notice of fees associated with your loan.

Final Arrangements
Before the deal is closed and you take possession, you must make some practical arrangements regarding utility service and first mortgage payment.

Settlement
Settlement describes the payment of the balance of the purchase price the buyer owes on the property, and the transfer of the title. It takes place on the possession date specified in the agreement.

Closing Questions & Answers

• WHAT HAPPENS AFTER I'VE APPLIED FOR MY LOAN?
• WHAT SHOULD I LOOK OUT FOR DURING THE FINAL WALK-THROUGH?
• WHAT MAKES UP CLOSING COSTS?
• WHAT CAN I EXPECT TO HAPPEN ON CLOSING DAY?
• WHAT DO I GET AT CLOSING?

WHAT HAPPENS AFTER I'VE APPLIED FOR MY LOAN?
It usually takes a lender between 1-6 weeks to complete the evaluation of your application. Its not unusual for the lender to ask for more information once the application has been submitted. The sooner you can provide the information, the faster your application will be processed. Once all the information has been verified the lender will call you to let you know the outcome of your application. If the loan is approved, a closing date is set up and the lender will review the closing with you. And after closing, you'll be able to move into your new home.

WHAT SHOULD I LOOK OUT FOR DURING THE FINAL WALK-THROUGH?
This will likely be the first opportunity to examine the house without furniture, giving you a clear view of everything. Check the walls and ceilings carefully, as well as any work the seller agreed to do in response to the inspection. Any problems discovered previously that you find uncorrected should be brought up prior to closing. It is the seller's responsibility to fix them.

WHAT MAKES UP CLOSING COSTS?
There may be closing cost customary or unique to a certain locality, but closing cost are usually made up of the following:

• Attorney's or escrow fees (Yours and your lender's if applicable)
• Property taxes (to cover tax period to date)
• Interest (paid from date of closing to 30 days before first monthly payment)
• Loan Origination fee (covers lenders administrative cost)
• Recording fees
• Survey fee
• First premium of mortgage Insurance (if applicable)
• Title Insurance (yours and lender's)
• Loan discount points
• First payment to escrow account for future real estate taxes and insurance
• Paid receipt for homeowner's insurance policy (and fire and flood insurance if applicable)
• Any documentation preparation fees

WHAT CAN I EXPECT TO HAPPEN ON CLOSING DAY?
You'll present your paid homeowner's insurance policy or a binder and receipt showing that the premium has been paid. The closing agent will then list the money you owe the seller (remainder of down payment, prepaid taxes, etc.) and then the money the seller owes you (unpaid taxes and prepaid rent, if applicable). The seller will provide proofs of any inspection, warranties, etc.

Once you're sure you understand all the documentation, you'll sign the mortgage, agreeing that if you don't make payments the lender is entitled to sell your property and apply the sale price against the amount you owe plus expenses. You'll also sign a mortgage note, promising to repay the loan. The seller will give you the title to the house in the form of a signed deed.

You'll pay the lender's agent all closing costs and, in turn,he or she will provide you with a settlement statement of all the items for which you have paid. The deed and mortgage will then be recorded in the state Registry of Deeds, and you will be a homeowner.

WHAT DO I GET AT CLOSING?

• Settlement Statement, HUD-1 Form (itemizes services provided and the fees charged;
   it is filled out by the closing agent and must be given to you at or before closing)
• Truth-in-Lending Statement
• Mortgage Note
• Mortgage or Deed of Trust
• Binding Sales Contract (prepared by the seller; your lawyer should review it)
• Keys to your new home

Home Title Insurance


Private Mortgage Insurance (PMI) & How to Avoid PMI

Owning & Managing Your Home

• Routine Home Maintenance

So you've just moved into your new home. You shopped around and did a lot of research to find the home that was just right for you. You signed a big pile of documents at closing, the moving trucks have left, all the boxes are unpacked, and all your belongings are in their proper places. What should you do now?

One of the most important things to remember is that you are responsible for certain routine maintenance items to keep your house functioning properly. These tasks tend to be relatively simple. For instance, many types of heating and air conditioning systems contain filters to remove dirt and dust from the air. A home owner should change these filters when necessary.

Cleanliness is a factor that will make your home last longer and work better. Dust and dirt, if allowed to accumulate, can harm the finishes on blinds, cabinets, countertops, floors, sinks, tubs, toilets, walls, tiles and other items. If dirt does accumulate, make sure to clean it with a substance that does not scratch or damage the finishes.

On the outside of your home, make sure that gutters and downspouts do not get clogged with leaves or other objects. The exterior of your house is built to withstand exposure to the elements, but a periodic cleaning will improve the appearance and, in many instances, prolong the life of siding and other exterior products.

If you bought a brand new home, you probably received a warranty from the builder on workmanship and materials. This warranty applies to problems related to the construction of the home, but it does not apply to problems that arise because of failure to perform routine maintenance. For example, if your roof begins to leak after six months because of faulty workmanship, your warranty would cover that. If you develop a problem because water backed up in clogged gutters that you should have cleaned, the builder is not responsible for repairs. Also, some items, such as appliances, may be covered by manufacturers' warranties and are not the responsibility of the builder.

You should fully familiarize yourself with the terms of your warranty soon after you move into your home. With all the excitement surrounding a move into a new home, most people have little desire to curl up in front of the fireplace and read a legal document. Nonetheless, you should not wait to read your warranty until a problem arises. Set aside an hour to learn what your rights and responsibilities are from the outset.

• Avoiding Foreclosure & Scams (Protecting your Investment)