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| Frequently
Asked Questions |
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Why should
I buy, instead of rent?
You'll love the feeling of having something
that's all yours - a home where your own personal
style will tell the world who you are. A thriving
vegetable garden in the backyard, a tiled
entryway, a yellow kitchen...when you own,
you can do it all your way! But there's more
to owning a home than personal satisfaction.
You can deduct the cost of your mortgage loan
interest from your federal income taxes, and
usually from your state taxes, too. And interest
will compose nearly all of your monthly payment
, for over half the number of years you'll
be paying your mortgage. This adds up to hefty
savings at the end of each year. And you're
also allowed to deduct the property taxes
you pay as a homeowner. If you rent, you write
your monthly check and it's gone forever.
Another financial plus in owning a home is
the possibility its value will go up through
the years.
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I've
heard of HUD homes. What are HUD homes, and are they a
good deal?
HUD homes can be a very good deal. When
someone with a HUD insured mortgage can't
meet the payments, the lender forecloses on
the home; HUD pays the lender what is owed;
and HUD takes ownership of the home. Then
we sell it at market value as quickly as possible.
Read all about buying a HUD home - one might
be right for you! And check our listings of
HUD homes - as well as homes being sold by
other federal agencies.
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I'm
a single mother. How would I go about buying a home?
Although you won't have the benefit of two
incomes on which to qualify for a loan, there's
no reason that you can't become a homeowner.
Become familiar with the process, pick a good
real estate broker, and think about getting
pre-qualified for a loan. You might want to
contact one of the HUD-funded housing
counseling agencies in your area to talk
through your options. And you also might want
to think about buying
a HUD home - they can be very good deals.
Also, contact your local government to see
if there are any local
homebuying programs that could help you.
Look in the blue pages of your phone directory
for your local office of housing and community
development or, if you can't find it, contact
your mayor's office or your county executive's
office.
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Should
I use a real estate broker? How do I find one?
Using a real estate broker is a very good
idea. All the details involved in home buying,
particularly the financial ones, can be mind-boggling.
A good real estate professional can guide
you through the entire process and make the
experience much easier. A real estate broker
will be well-acquainted with all the important
things you'll want to know
about a neighborhood you may be considering...the
quality of schools, the number of children
in the area, the safety of the neighborhood,
traffic volume, and more. He or she will help
you figure
the price range you can afford and search
the classified ads and multiple listing services
for homes you'll want to see. With immediate
access to homes as soon as they're put on
the market, the broker can save you hours
of wasted driving-around time. When it's time
to make an offer on a home, the broker can
point out ways to structure your deal to save
you money. He or she will explain the advantages
and disadvantages of different types of mortgages,
guide you through the paperwork, and be there
to hold your hand and answer last-minute questions
when you sign the final papers at closing.
And you don't have to pay the broker anything!
The payment comes from the home seller - not
from the buyer.
By the way, if you want to buy
a HUD home, you will be required to use a real estate
broker to submit your bid. To find a broker who sells
HUD homes, check your local yellow pages or the classified
section of your local newspaper.
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How
much money will I have to come up with to buy a home?
Well, that depends on a number of factors,
including the cost of the house and the type
of mortgage you get. In general, you need
to come up with enough money to cover three
costs: earnest money - the deposit
you make on the home when you submit your
offer, to prove to the seller that you are
serious about wanting to buy the house; the
down payment, a percentage of
the cost of the home that you must pay when
you go to settlement; and closing costs,
the costs associated with processing the paperwork
to buy a house.
When you make an offer on a home, your real estate broker
will put your earnest money into an escrow account. If
the offer is accepted, your earnest money will be applied
to the down payment or closing costs. If your offer is
not accepted, your money will be returned to you. The
amount of your earnest money varies. If you buy a HUD
home, for example, your deposit generally will range from
$500 - $2,000.
The more money you can put into your down payment, the
lower your mortgage payments will be. Some types of loans
require 10-20% of the purchase price. That's why many
first-time homebuyers turn to HUD's FHA for help. FHA
loans require only 3% down - and sometimes less.
Closing costs - which you will pay at settlement
- average 3-4% of the price of your home. These costs
cover various fees your lender charges and other processing
expenses. When you apply for your loan, your lender will
give you an estimate of the closing costs, so you won't
be caught by surprise. If you buy
a HUD home, HUD may pay many of your closing costs.
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In
addition to the mortgage payment, what other costs do
I need to consider?
Well, of course you'll have your monthly
utilities. If your utilities have been covered
in your rent, this may be new for you. Your
real estate broker will be able to help you
get information from the seller on how much
utilities normally cost. In addition, you
might have homeowner
association or condo association dues.
You'll definitely have property taxes, and
you also may have city or county taxes. Taxes
normally are rolled into your mortgage payment.
Again, your broker will be able to help you
anticipate these costs.
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So
what will my mortgage cover?
Most loans have 4 parts: principal: the
repayment of the amount you actually borrowed;
interest: payment to the lender for the money
you've borrowed; homeowners insurance: a monthly
amount to insure the property against loss
from fire, smoke, theft, and other hazards
required by most lenders; and property taxes:
the annual city/county taxes assessed on your
property, divided by the number of mortgage
payments you make in a year. Most loans are
for 30 years, although 15 year loans are available,
too. During the life of the loan, you'll pay
far more in interest than you will in principal
- sometimes two or three times more! Because
of the way loans are structured, in the first
years you'll be paying mostly interest in
your monthly payments. In the final years,
you'll be paying mostly principal.
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I
know there are lots of types of mortgages - how do I know
which one is best for me?
You're right - there are many types of
mortgages. Most people use a fixed-rate mortgage.
In a fixed rate mortgage, your interest rate
stays the same for the term of the mortgage,
which normally is 30 years. The advantage
of a fixed-rate mortgage is that you always
know exactly how much your mortgage payment
will be, and you can plan for it. Another
kind of mortgage is an Adjustable Rate Mortgage
(ARM). With this kind of mortgage, your interest
rate and monthly payments usually start lower
than a fixed rate mortgage. For more information,
talk to one of our professional loan associates
who can help you decide on the type of mortgage
that best suits your specific needs.
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When I find
the home I want, how much should I offer?
Your real estate broker can help you here.
But there are several things you should consider:
1) is the asking price in line with prices
of similar homes in the area? 2) Is the home
in good condition or will you have to spend
a substantial amount of money making it the
way you want it? You probably want to get
a professional home
inspection before you make your offer.
Your real estate broker can help you arrange
one. 3) How long has the home been on the
market? If it's been for sale for awhile,
the seller may be more eager to accept a lower
offer. 4) How much mortgage will be required?
Make sure you really can afford whatever offer
you make. 5) How much do you really want the
home? The closer you are to the asking price,
the more likely your offer will be accepted.
In some cases, you may even want to offer
more than the asking price, if you know you
are competing with others for the house.
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How
do I prepare my house for sale?
First and foremost, put it in the best
condition possible, especially if you are
in a market with few buyers and lots of homes
for sale. That means taking care of any major
repairs that could deter a buyer (such as
replacing any broken windows or replacing
a leaky roof) if you can afford it. Next,
work on your home's curb appeal. Make sure
your landscape is pristine. Mow the grass,
clean up any debris and weed the garden beds.
Plant a few annual flowers near the entrance
or in pots to be placed by the door. There
are other quick fixes that don't cost a lot
of money but can help you get top dollar for
your home.
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