What is PMI?

What is PMI?
Sponsored By Move

This insurance policy is a gift to your lender
By Courtney Ronan

If you’re preparing to make the transition from renter to first-time homebuyer, you’ve undoubtedly been told by wide-eyed veterans of the homebuying process (or renters who equate homebuying with certain poverty), “Watch out for that PMI.” PM what? PMI, as in Private Mortgage Insurance. It’s a fact of life for homebuyers who put down less than 20 percent on their homes (and with home prices on the rise, that’s most of us). From the lender’s perspective, PMI is a necessary protection. For homebuyers, it’s not likely to be the deciding factor that causes financial ruin; after all, you’ve got your principal and interest, which can make your PMI look like pocket change.

Nevertheless, first-time buyers often experience trepidation when they see that mortgage payment on paper for the first time, so the addition of a PMI isn’t a welcome sight. In short, the PMI adds a weighty cherry to the top of an already overwhelming sundae.

So how exactly does PMI protect your lender? First, let it be said that PMI was designed strictly for your lender’s protection and not yours. Essentially, there’s nothing in the PMI for you … except a lighter wallet.

The PMI gives lenders incentive to seek out more business—in other words, to find more homebuyers like yourself, many of whom have never bought a home before and, like you, are able to put down the bare minimum 3 percent down payment. In a sense, we can all be grateful for the PMI, because without it, if you didn’t have 20 percent to put down, you’d probably be out of luck.

What lender would take the risk on a 3 percent downer?

A few factors to consider before you jump on the PMI bandwagon: First, it’s not inevitable. Some lenders won’t ask you to pay a PMI, so you’ll want to do some comparison shopping, investigate your alternatives and discuss your options with your Realtor if you’re unsure about the best route to take. If you want to make your PMI premiums tax-deductible, find a lender who will give you the option of including your PMI within the interest rate you’ve agreed to pay for your home loan. But with every pro, of course, there’s a possible con.

If you opt for a conventional loan (versus FHA), such loans will often eliminate your PMI when you’ve achieved 20 percent equity. For first-time buyers, it needs to be stated that it’s going to take you many, many years to reach 20 percent equity. National trends certainly indicate that most of us will move out of our homes long before we reach that mark; five to seven years is the average. But let’s say you remain in your home long enough to reach that 20 percent equity milestone. If you have your PMI premiums included in your loan’s interest rate, your PMI won’t go away once you achieve 20 percent equity.

If you remain consistent with the national trend and either move out of your home within five to seven years or refinance it, including your PMI in your loan interest rate probably makes sense from a tax perspective. One other factor to consider: If you live in a region of the country where property values are skyrocketing and show no signs of slowing down (example: San Francisco or San Jose, Calif.), you’re likely to reach 20 percent equity in a much shorter amount of time than in a market where property values are increasingly more slowly.

Homebuyers who obtained home loans either on or after July 29, 1999, have a loophole: They’re entitled to the immediate cancellation of their PMIs upon their achievement of 22 percent equity. Another safeguard on your side is outlined in the Homeowners’ Protection Act of 1998, which actually enables homeowners to request the cancellation of their PMIs prior to reaching 22 percent equity. Homeowners—with the exception of those with FHA loans, who are not given the opportunity to cancel their PMIs before the entire loan is paid off—may request the cancellation of their PMIs upon reach 20 percent equity.

So while the PMI isn’t a welcome sight each month, you are granted some concessions in exchange for the financial inconvenience. The silver lining of this “necessary evil” is that it allows thousands of renters each year achieve the American Dream of homeownership.

Title Insurance: Who Needs It?

Title Insurance: Who Needs It?
Sponsored By Move

You do, but make sure you know your options
By Courtney Ronan

During the real estate transaction (especially if you’re a first-time buyer), you’re hit with so many foreign terms, fees and requirements your head spins. One of those strange and unfamiliar costs is title insurance. In most cases, borrowers have no option—either you get title insurance (among other requirements) or you don’t get a loan.

The lender says you need it, you want the loan to go though, so you buy title insurance. Great. So what is title insurance?

When you buy a home you want to make sure that the people selling it actually have full and legal title. The party who conducts closing will check this out by going down to the local property records office to research the history of ownership.

But—and here’s the tricky part—those records down at the property office may be official, but they may also be wrong. It’s also possible that the person who does the title search can make a mistake and also that important information may simply not be recorded.

For instance, maybe a bill against the property was not recorded or some taxes were not been paid. Or, suppose that 40 years ago the property you want to purchase was owned by Smith. Let’s also imagine that Smith was a bigamist with an extra spouse. Will this matter show up on the local property records? Not likely. Does the additional Smith spouse have an ownership claim against the property? That may only be clear after a lot of legal wrangling—and if you lose, you could lose the house.

There may be other odd and bizarre claims as well. Was an owner an alcoholic? Insane? A drug user? Is there a contractor with a claim against the property? Such issues can “cloud” titles and neither lenders nor owners want clouds.

One form of title insurance, “lenders” coverage, is designed to protect (who else?) your lender in case of title problems. “Lenders” coverage is required and generally provides protection up to the original mortgage amount—if you buy a home for $300,000 and get a $250,000 mortgage, then $250,000 is as much coverage as you can get with a lender’s policy. If there’s a claim, the title insurer will fight on your behalf and if there’s a claim the policy will pay off the loan if necessary. This is good news for you because you won’t owe the lender a dime if you lose in court.

But there are also some options.

For instance, you can also get “owners” coverage. This will protect your equity—that $50,000 in the example above not covered by the lender’s policy. And you can often get an “inflation rider” with an owner’s policy—as the value of your home goes up, so does the value of your title coverage.

While title insurance is required by virtually all lenders, there is one big exception: Loans made in Iowa. In Iowa, the state says that attorneys and others who do title work must participate in a title guarantee program. If there’s a title error, the state fund provides coverage.

Finding a Good Home Inspector

Finding a Good Home Inspector
Sponsored By Move

Make sure you ask the right questions
By Michele Dawson

You’ve found the house, your offer has been accepted, and funding is in place. But before you start packing, be sure you hire a professional home inspector to make sure your house doesn’t have any major defects that could cost you down the road.

A home inspection typically includes an examination of heating and central air conditioning systems, interior plumbing, electrical systems, the roof, attic, visible insulation, walls, ceilings, floors, windows, foundations, and basements. Inspections may also include appliances and outdoor plumbing.

Once the inspector examines the house, he or she will write up a report with findings. If there are any major problems, you’ll need to negotiate with the seller to either lower the sale price of the home, or determine how the problem will be fixed.

When you make an offer it’s wise to have a contingency clause based on the home inspection. In other words, if the inspector finds $10,000 worth of problems and the seller doesn’t want to provide the fix, you can rescind your offer.

In fact, two in five resale houses will have at least one major defect that could cost you from a few hundred dollars to as much as $15,000 to repair, according to the 2000 HouseMaster Resale Home Deficiencies Study.

Spending a few hundred dollars for a home inspection is well worth the peace of mind.

If you don’t know how or where to find a home inspector, be cautious about asking your real estate agent.
“Be careful, though, of inspectors who are popular with agents—that popularity may stem from not killing too many deals by going easy on their inspections,” says Eric Tyson and Ray Brown in their book Home Buying For Dummies.

Tyson and Brown say the American Society of Home Inspectors is a good place to start.
“Just because an inspector is an ASHI member doesn’t guarantee that you’ll get a good inspection, but it certainly increases the likelihood that you’ll be working with a qualified professional,” Brown and Tyson write.

All certified members have performed at least 250 inspections have passed two written proficiency exams. They must also adhere to standards of practice, continuing education requirements, and code of ethics.

The authors and the ASHI recommend you interview several inspectors before choosing one. Some of the questions you should ask include:

• What does the inspection cover? Make sure the inspection and the inspection report meet all applicable requirements and comply with the ASHI Standards of Practice.
• How long have you been in the profession and how many homes have you inspected? Again, ASHI Members are required to have completed at least 250 paid professional home inspections and passed two written exams that test the inspector’s knowledge.
• Are you specifically experienced in residential inspection? The answer should be yes. If someone says they have specialized training in something like construction or engineering but not in residential inspection, you may want to move on to the next candidate.
• Does the inspector’s company offer to do repairs or improvements based on the inspection? The answer should always be no. This is against the ASHI Code of Ethics because it might cause a conflict of interest.
• How long will the inspection take? The average for a single inspector is two to three hours for a typical single-family house; anything less may not be enough time to do a thorough inspection. Some inspection firms send a team of inspectors and the time frame may be shorter.
• How much will it cost? Costs vary quite a bid depending on the region, size of the house, scope of services and other factors. A typical range might be $300-500, but consider the value of the home inspection in terms of the investment being made.
• Does the inspector prepare a written report? Ask to see samples and determine whether you understand the report.
• Does the inspector encourage the client to attend the inspection? This is a valuable educational opportunity for you to learn about how things work around what could be your house, and the inspector may point out things that don’t quite merit a mention in the report but which you should keep an eye on. An inspector’s refusal to allow you to be present should raise a red flag.

Finally, once you’ve found an inspector you like, ask him for references, then follow up and contact those clients. Two key questions—whether they discovered any major defects after the close of escrow that the inspector missed, and whether they’d use the inspector again.

Sometimes a Smaller Home Is Better

Sometimes a Smaller Home Is Better
Sponsored By Move

Keep buyers needs and wants in balance
By Al Heavens

The trend in residential construction is definitely toward bigger.

“Especially in TEXAS where everything is bigger”

In the last 30 years, the square footage of a typical single-family house has increased by 40 percent. Yet there are some buyers looking for smaller houses. Many empty nesters are looking to downsize from houses that often exceed 4,000 square feet to ones that are 2,000 square feet or smaller.

Another segment is the first-time buyer. Typically just starting out and cash-poor, the first-timer in the new-house market wants an affordable house that will launch him or her on the road to equity.

However, while both segments want smaller, they want to have the appearance of bigger.

There are several things to keep in mind when you market smaller houses to empty nesters. The most important is never skimp in your design of the kitchen, living room and master bedroom. Empty nesters are used to having these big, and if you make them smaller, they won’t even look at the house.

Put yourselves in the empty nesters’ place. If they are downsizing from 4,000 square feet, they don’t want a master bedroom closet that’s half the size of what they are used to. They might even want a nicer kitchen than what they had – for example, better countertops such as granite or Corian instead of laminate or tile.

Real estate agents need to be sensitive to the needs and prejudices of the buyers, and must always consider how both spouses will react to the floor plan.

Surveys show that women want two dining areas – a formal one and a breakfast room. You will need to guarantee both.

Because a lot of the product is designed by men, women often are left out of the equation.

When a woman comes into a plan and can see the toilet from the living room, that’s a negative. To a guy, that’s a positive. He won’t miss any part of the game.

It is easy to generalize about buyers in other ways. The problem is that builders tend to lump all buyer segments together instead of developing housing to fit different niches, and real estate agents have to follow suit.

Market research helps you develop your criteria. You need to know who you are selling to, and come up with designs that reflect the characteristics and needs of your buyers – especially those whose needs are not being met by others.

There are a lot of different niches in the under-2,000-square-foot market as well as different stages in the lives of these buyers – whether young or older – to be accommodated.

The first-time buyer, for example, is barely out of the apartment complex. This buyer’s expectations are very reality-based because of budget constraints. He or she doesn’t have a lot of money to spend.

One of the major challenges being faced in the creation of affordable housing is rising land costs.

Plans have to be designed to fit smaller lots to reduce buyer costs. And that requires a lot of creativity. People buying their first houses today think they should have all the bells and whistles, but have no idea how much these things cost. What they should be buying is shelter, but instead they want to buy things like garage-door openers.

The unrealistic attitude of many first-time buyers is created when they visit new-home developments offering higher-price houses. They’ll visit a model for $350,000 that had everything they might ever want in a house and then go to a development selling $150,000 house and demand the same things.

What some lower-end builders do to keep prices down is make standard items into options. If you save $100 10 times that cuts $1,000 from the price of the house. If buyer then wants to add these things later, when he or she has more money, then they can do it.

For example, the delivery price of oak handrail is about $32 a foot. After installation, it becomes a $750 to $900 item. When the situation is explained in that way, buyers will say, ‘We don’t really need oak handrails,’ and the price drops.

Another example: Some builders don’t offer kitchen cabinet hardware as standard, suggesting that, at $3 each, it would be better if the buyer went to the home center and made installing the hardware a Saturday project.

These things have to be explained carefully to buyers. More than anything else, they want to know that they are spending their money wisely and want to be assure that you are helping them look out for their best interests.

New House or an Old One?

New House or an Old One?
Sponsored By Move

Consider the pros and cons to each
By Michele Dawson

As you embark on your venture to buy a home, one of the first decisions to make is whether to buy new or purchase an existing home. Each choice has its advantages, and there is no single answer that works for everyone.

You may be drawn to the shiny new, energy-efficient appliances, the great room, and the beautiful master suite offered in a new home. But you may also like the charm, the canopy of trees that drape over the sleepy neighborhood streets, and the increasing value of an existing home you’ve been eying.

Here are some things you’ll want to ponder as you decide which route to take.

Existing homes

Existing homes offer many considerations for potential homebuyers, including:

• The neighborhood. Many people are drawn to developed neighborhoods for the sense of community that has been established. The mature landscaping and developed trees are often a considering factor.
• Maintenance and repair. If you’re considering an existing home, be sure you have a good handle on the working status of all major systems. Hire a professional home inspector to check out the house. As appliances and systems age they naturally require repair and replacement, something which may be reflected in a purchase price.
• Home improvement. If you enjoy small repairs and home improvement projects around the house, then an existing home would be your cup of tea.
• Existing features. When you buy an existing home, you typically don’t have to worry about buying the extras, such as blinds for the window, a security system, or a landscaped back yard.
• Land. In most metro centers, new homes may have less land than newer properties. Why? Because of changes in land-use patterns.
• Location. Existing homes are often found in older, more convenient metro core areas rather than outlying suburbs.
• The opportunity to remodel. In some cases buyers may prefer an older home in a particular location which can be modernized or expanded. In effect, use the existing home as a base to build a unique property.
• Price. In general terms, existing homes tend to be less expensive than new properties. As well, existing homes are likely to come complete with items which may represent new home extras—blinds, landscaping, built-ins, etc.
• Track record. When you purchase an existing home, you know how much the property has appreciated over the years — in effect, you have an index of sorts which measures the community’s marketplace appeal. At the same time, like stocks and bonds, you know that past results do not guarantee future marketplace performance.
• Taxes. Depending on your state, you will likely have lower property tax rates. Also, many older households aren’t required to pay for local bonds associated with new development, such as schools, parks, or road or transportation improvements.
• Traditional layout. If you like the formal living and dining rooms, an existing home will likely satisfy you.

How to Negotiate the Best Deal

How to Negotiate the Best Deal
Sponsored By Move

Buyers have the advantage in this shifting market
By Rick Hazeltine

Buyers are finally being able to take advantage of cooling trends in previously hot markets. Multiple offers are no longer being thrown at sellers as soon as the For Sale sign hits the front yard.

Competition has dwindled in many areas as investors disappear and buyers take to the sidelines. Unless a buyer thinks his local market is headed for a big downturn, this could be the pause that allows him to get into the market with a few perks unheard of in recent years as a bonus.

So how do you know what shape your market is in? Economists believe that real estate is closely tied to employment, so if you’re in an area of growing employment, don’t expect to see double-digit depreciation anytime soon. In areas such as the Midwest, where auto manufacturing is king, prices have fallen sharply and will likely continue until the industry rebounds.

Here are 10 things buyers need to know to negotiate the best deal in a market shifting to their favor:

1. Human nature is the biggest problem for sellers and buyers to overcome in a changing market. Prices stagnate or drop a few percentage points and it’s amazing how different buyers and sellers react. Sellers still think their house is “special” and immune to the market. Buyers figure every seller is about to be foreclosed on and make ridiculous low-ball offers. Smart buyers do their homework, know what size home they need, how much they can afford and then search the market for what they want and negotiate fairly.

2. When you make an offer, know the recent comparable sales; it’s the best bargaining tool. “See what’s going on out there,’’ says Beverly Durham of ReMax Gold Coast Realty in Camarillo, Calif., where entry-level single-family homes begin at $500,000. “Make an offer $10,000 to $15,000 under what the last one sold. Even in this market, if you insult your seller, they won’t want to deal with you. Sellers know what the last one sold for. You want them to at least look at your offer.”

3. Find out as much as you can about the seller’s motivation — retirement, job, divorce, wants to move up but only if he gets the right price. Durham says if a buyer knows the seller’s motivation they can negotiate a better deal or move on to the next property.

4. Multiple Listing Service (MLS) properties usually state what the seller owes. If not, your agent should be able to track down the figures. There’s a big difference in negotiating with an owner who owes more than the house is worth and one who has a lot of built-up equity.

5. “After 45 to 60 days the seller is usually absolutely sick of keeping their house spotless and sick of people walking through,’’ said Durham. This is when a seller may be the most anxious about selling their house as traffic to their house has likely fallen sharply.

6. Unless you’re incredibly handy and have time and cash, go after houses that are as updated as you can afford. This is easier to do in a stagnant or falling market and fixers aren’t usually discounted enough to be worthwhile.

7. In a tighter market, it’s not too much to ask the seller to add the closing costs to the price of the house. It’s better to put 20 percent down and add the closing costs to the loan than put 15 percent down and pay the costs upfront.

8. Items to ask for that shouldn’t offend sellers are paying for new kitchen appliances or washer and dryer. Most sellers will be willing to do so to close the deal. Durham also says it’s OK to ask sellers to pay up to the first year of homeowner association dues.

9. Don’t request anything that requires quality workmanship. “Don’t ask them to paint,’’ Durham said. “They won’t do it the way you want. They’ll do a lousy job.’’ Also, don’t get carried away and ask for the entire store. Be reasonable.

10. Make sure to look at the big picture. In changing markets you should be planning to stay for at least five years, so don’t get caught up in a $2,000 price difference. Remember, the goal is to get the house you want to live in for some time, not to impress friends with how you worked the previous owner.

How to Win the Real Estate Bidding Wars

How to Win the Real Estate Bidding Wars
Sponsored By Move

Knowing a few tricks of the trade can make the difference between walking away disappointed and purchasing the home of your dreams at a fair price.
By Marcie Geffner

In many of today’s strong real estate markets, home buyers can expect to face multiple offer situations. Multiple offers are a classic example of economic realities because they appear when the supply of homes for sale is limited and the demand for good-condition homes is strong. Buyers hate multiple offers because they push up home prices and create an extremely stressful home-buying experience. Knowing a few tricks of the trade can make the difference between walking away disappointed and purchasing the home of your dreams at a fair price.

How can I make my offer more attractive to the sellers?

Offer the highest price you can. Get preapproved, not just prequalified, for your mortgage and attach a copy of the preapproval letter to your offer. Make as large a downpayment as you can and provide documentation showing the source of your downpayment (e.g., a bank statement). If your current home is in escrow, provide information about that transaction. Avoid unnecessary contingencies. (Waiving your inspection or financing contingency can make your offer attractive, but it’s foolish.)

Tip: If the equity in your current home is the source of your downpayment, make your offer contingent on obtaining financing, but not on the sale of your home. If your home doesn’t sell, you won’t have the downpayment and you’ll get out under the financing contingency, suggests Bob Stallings, broker/owner of RE/MAX Real Estate Specialists in Long Beach, California. Finally, include a personal note about why you want to buy the home. All else being equal, some sellers are influenced by these communiqués.

My offer didn’t prevail in a multiple offer situation. Can I find out why?

Neither the sellers nor their agent is obligated to reveal any information about the decision. As a courtesy, agents frequently will point out shortcomings of a rejected offer, but without disclosing details of the accepted offer. “Until a transaction is closed, it’s crucial that everything remain unknown in case that property has to come back on the market,” explains Carole Geronsin, a Realtor-associate with Prudential California Realty in Anaheim Hills, California. “I sold a property where [the buyer was making] a relocation transfer. A week and a half later, the company decided they were not going to transfer that executive. What would have happened if I had gone around saying, ‘It sold for this amount?’ You can’t do that.”

Can I submit an offer on a home in escrow?

Yes, but agents say you would be wiser to move on to another home, particularly if there are formal back-up offers. Even if your offer tops the accepted agreement, the sellers would have great difficulty canceling the escrow.

14 Things to Consider Before Buying a Home

14 Things to Consider Before Buying a Home
Sponsored By Move

Don’t let your emotions cloud your judgment
By Diane Benson Harrington

Wait! That house may seem like everything you’ve ever wanted, but before you make an offer, take some time to consider a few things beyond the size, style and price.

When buying a home, it’s easy to let emotions get in the way of reality, or get sudden amnesia about factors that may make a difference.
“Sometimes we want something so badly, we’re not willing to ask all the questions we should,” says Leslie Levine, author of “Will This Place Ever Feel Like Home?”

For instance, she says, you may see a basketball hoop over the garage and assume the neighborhood is great for kids. But a closer inspection may show that it’s rusted and hasn’t seen a ball in a decade, and that other yards in the neighborhood have no jungle gyms or tire swings out back.

1. Visit at various times of day
The windows that let in so much light during the day may be a peeping Tom’s dream at night. That seemingly quiet residential street may be a noisy, highway-feeder street during morning or evening rush hour; or it may be near impossible to get from your quiet street across traffic and onto the feeder street in the morning. The adjacent school may seem like a nice perk if you’re buying in the summer, but during the school year, daily playground noise and extra traffic may be more than you bargained for.

2. Look through recent newspaper archives
“Make sure you’re getting information on what you can’t see,” Levine suggests. Perhaps the municipal water well that feeds your neighborhood has high levels of contaminants or a proposed high-voltage power line may soon be coming through your back yard. You can also check with the city or county to see if there are any proposed projects.

3. Talk to neighbors
How many people in the neighborhood own their homes? Sometimes it’s hard to tell at first if you’re choosing a neighborhood that’s primarily rental houses.

4. Ask if the neighborhood has an association
“Is there a newsletter for it? How often does the neighborhood get together? Do they have a block party every year?” Levine asks. “Even if you don’t plan to attend, the fact that they’re having a gathering says they care about their community, that they want to get to know each other, that they’re willing to socialize that way. People who behave that way are building a community. They’re going to look out for your kids; they’re going to look out for your house. It’s a nice, safe way to celebrate something.”

5. Quiz the sellers
What problems are they aware of that the house had in the past – even if they’ve been fixed? An ice dam five years ago may have caused water damage that has since been repaired. But it’s good to know that the house may be prone to ice dams so you can take preventive measures rather than find out the hard way. Discovering the basement flooding was solved by building up the landscaping in a particular area will prevent you from leveling the ground there in later years.

6. Get a home inspection
Virtually all houses have defects, according to National Association of Exclusive Buyers Agents. Some will be obvious and most will be curable. But knowing what needs fixing can help you negotiate a lower price – or at least prepare you for costs you’re soon to incur. Strongly consider getting inspections, too, for lead paint, radon and wood-eating pests.

7. Get detailed records on past improvements
This isn’t always possible. But if you’re told the house’s exterior was painted two years ago – and then see a receipt noting the whole project cost just $1,000 – then you’ll be forewarned that cheaper materials were used and that you may be looking at repainting sooner than you thought.

8. Don’t just assume remodeling will be a snap
If you voice your ideas to the sellers, you may be able to glean valuable insights. For instance, perhaps that shower is in an odd location because, when remodeling 10 years ago, the previous owners discovered a costly structural impediment to putting a shower where it would seem more appropriate.

9. Consider the view
“So many neighborhoods now have teardowns. So look at the two houses on either side of you. If this neighborhood has had some teardowns, one of those houses might be a candidate. And they may build some behemoth structure that affects your light or the way your house looks or your view,” Levine says.

10. Ask for utility bills
You may adore the Cape Cod architectural style or the high ceilings and walls of glass in a modern home – but those winter heating and summer cooling bills may push your monthly payments beyond affordable. Ditto for the water bills you’ll pay to maintain a pristine landscape.

11. Pay close attention to taxes
Don’t just ask what the seller’s most recent tax bill was; ask what several recent tax bills have been. In some areas, houses are re-appraised – and taxed at higher rates – frequently. That great deal and good investment may not seem quite so grand if the property taxes skyrocket year after year. Again, look at newspaper archives or talk to your Realtor about the way taxes are used in this area. In some cities, schools are substantially funded through property taxes – which means you can count on yours increasing regularly.

12. Check with city hall
NAEBA recommends looking into the property’s and neighborhood’s zoning, as well as any potential easements, liens or other restrictions relating to your property. The seller should disclose these facts, but it’s better to be safe. If you’re using a buyer’s agent, he or she should be able to help you with this.

13. Reconsider the bells and whistles
Are you sure you can live with a one-car garage, or a detached garage, or on-street parking? The pool may be a nice bonus, but can you afford the upkeep?

14. Explore the surrounding area
If you’re not just making a cross-town move, you may not know that only three blocks away, this pretty neighborhood backs up to a dumpy commercial area or a less-than-savory part of town. If the home is near an airport, fire station, police station, hospital or railroad track, expect to hear trains, planes or ambulances throughout the day and night. Make sure you’re not too close to an agricultural area that may generate odors or kick up dust or other airborne problems.

Five Key Areas to Pay Attention to When Buying a Home

Five Key Areas to Pay Attention to When Buying a Home
Sponsored By Move

You may save money in the long run
By Phoebe Chongchua

Looking for a new home can be exciting and frustrating. You can help alleviate the frustration by paying close attention to five key areas of the homes you’re considering buying; it may save you money in the long run.

Don Walker is an inspector and owner of Ace Home Inspections. He says there are five areas in homes that he frequently reports problems with. They are electrical, foundation, plumbing, the attic, and landscaping.

Electrical
Walker says sometimes homeowners assume with newer homes that all will work just fine but that’s often not the case. “I [inspected] a brand new house — four years old but the electrical was all done incorrectly,” says Walker.

Having a complete home inspection will help to rule out any problems and point out any areas of concern. However, even as you’re browsing homes, buyers can start to make note of the key areas that Walker mentioned, such as the foundation.

Foundation
Walker says a four-year-old home he inspected recently was already showing trouble signs which could result in a costly repair project. “It was a model home. What [the homeowners] did was plant trees for shade to make it look really nice, but they planted the wrong trees and they’re going to crack the foundation and it’s going to cut the property value down by $50,000,” says Walker.

Walker says in the case of that home, the trees were causing micro-fractures in the tile in various locations of the home. “As you walk through the house, 21 feet in and 30 feet deep, there’s just too much root invasion and it’s going to ruin their tile,” explains Walker.

He says some tell-tale signs with this home were the minor cracks in the foundation that were causing a lifting and separation of the foundation. Also, the windows were not opening and closing properly, “which means the foundation is moving.”

However, just because you see cracks doesn’t mean there is a foundation problem. “Most people don’t understand that there are natural cracks in a house. That’s why when we do an inspection report we have to look at it and say ‘Okay, this is a typical crack and this one is an untypical crack,’” says Walker. He says some cracks may lead to other problems while others won’t.

Plumbing
Walker says another big area of concern is the plumbing. It’s an area that you can’t always spot as easily but it can create expensive repairs if plumbing issues go either undetected or are not properly fixed. “Mold forms underneath sinks when people have a leak and they fix the pipe but they don’t take care of the mold,” says Walker.

He says things like caulking the sink can help prevent mold. “That’s my number one thing I always find — bad sinks,” says Walker.

He says that when you look at the sink, look behind it and most of the time you will discover a little crack. “What happens is, when you wash dishes or you wash your hands in the bathroom or the kitchen, the water gets in that crack and seeps down. Once the water gets behind the cabinet it’s in a perfect position to create mold,” says Walker. The dampness, humidity, and lack of light can turn that area beneath the sink into a mold-breeding ground.

Attic
“You can tell everything about the house by the attic,” says Walker. He says other areas of the home can be covered up if a repair had occurred. For instance, if there was a leak and it damaged a wall, with the right contractors and repairs it can be made to look like new and, hopefully, function like new. But Walker says the attic is sort of the eyes to the soul of the home. “In the attic you can tell where all the damage has been,” says Walker.

“If you’re in a 20-year-old house and you see that the insulation is brand new, you know that there was a water leak because it had to be replaced,” says Walker. He adds, “You can tell if the roof is good because you can look right at the wood.”

Landscaping
“There should not be moisture or plants next to your house,” says Walker. He says there should be a 12 inch barrier between the landscape and the house. Walker says otherwise you run the risk of having the foundation crack and affect the home. What happens is, as the landscape that is too close to the home is watered, the foundation and soil expand. Then, when no watering occurs, the foundation dries up and shrinks and this can cause it to crack.

Remember, knowledge is power, so learning about the home before you close the deal on it will keep you from making a mistake that may cost you extra out-of-pocket money later.

Purchasing a Home - Getting Started

Purchasing a Home

Getting Started

When you begin to seriously consider purchasing a new home it is important that you follow some simple steps to make sure that the process runs smoothly.

Analyze your debt to income ratio. This will let you know what type of home you can afford based on your monthly income and expenses. The next important step in purchasing a new home is to get pre-approved for a home loan. The peace of mind that comes with knowing that your mortgage loan and credit report have been approved will allow you to shop for your new home with confidence. And when you find a home and are ready to make an offer the fact that you have already been pre-approved for your loan amount will give the seller confidence in you as a buyer.

Ten Steps to Prepare for Home Ownership

Ten Steps to Prepare for Home Ownership

 

1. Decide how much home you can afford. Generally, you can afford a home equal in value to between 2 and 3 times your gross income.

 

2. Develop a wish list of what you’d like your home to have. Then prioritize the features on your list.

 

3. Select three or four neighborhoods you’d like to live in. Consider items such as schools, recreational facilities, area expansion plans, and safety.

 

4. Determine if you have enough saved to cover your downpayment and closing costs. Closing costs, including taxes, attorney’s fee, and transfer fees average between 2 and 7 percent of the home price.

 

5. Get your credit in order. Obtain a copy of your credit report.

 

6. Determine how large a mortgage you can qualify for. Also explore different loans options and decide what’s best for you.

 

7. Organize all the documentation a lender will need to pre-approve you for a loan.

 

8. Do research to determine if you qualify for any special mortgage or downpayment assistance programs.

 

9. Calculate the costs of homeownership, including property taxes, insurance, maintenance, and association fees, if applicable.

 

10. Find an experienced REALTOR® who can help you through the process.

 

Reprinted from REALTOR® Magazine Online by permission of the NATIONAL ASSOCIATION OF REALTORS®. Copyright 2003. All rights reserved.