Buying Your Home

Step 1: Figure out how much you can afford

What you can afford depends on your income, credit rating, current monthly expenses, downpayment and the interest rate. A good rule of thumb is that you can buy housing that runs about two-and-one-half times your annual salary. For a more accurate analysis, use the Renewal Mortgage calculators to get a better handle on how your income, debts, and expenses will affect your ability to afford a home.

Step 2: Know your rights

Fair Housing: Equal Opportunity for All

Fair Housing Act - prohibits discrimination in the sale, rental, and financing of dwellings, and in other housing-related transactions, based on race, color, national origin, religion, sex, familial status (including children under the age of 18 living with parents of legal custodians, pregnant women, and people securing custody of children under the age of 18), and handicap (disability).

Real Estate Settlement Procedures Act (RESPA)

Again, 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.

Borrower's rights – You have the RIGHT to:

1. Shop for the best loan for you and compare the charges of different mortgage brokers and lenders;
2. Be informed about the total cost of your loan including the interest rate, points and other fees;
3. Ask for a Good Faith Estimate of all loan and settlement charges before you agree to the loan and pay any fees;
4. Know what fees are not refundable if you decide to cancel the loan agreement;
5. Ask your mortgage broker to explain exactly what the mortgage broker will do for you;
6. Know how much the mortgage broker is getting paid by you and the lender for your loan;
7. Ask questions about charges and loan terms that you do not understand;
8. 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. Know the reason why if your loan request is rejected;
10. Ask for the HUD settlement costs booklet "Buying Your Home."

Predatory lending

Predatory lending strips borrowers of home equity and threatens families with foreclosure. Borrowers are tricked into accepting unfair loan terms, usually through aggressive sales tactics. Often they are taken advantage of because of their lack of understanding of terms and involvement in complicated transactions. Signals of predatory lending practices include, but are not limited to:

• Aggressive and deceptive marketing
• Making loans without ample consideration to the borrower's ability to pay
• Financing excessive fees into loans
• Charging higher interest rates than a borrower's credit allows
• Home improvement scams

Step 3: Start shoring up your credit

Since you most likely will need financing to get a mortgage to buy a house, you must make sure your credit history is as clean as possible. It will take a few months to address whatever deficiencies that may on your credit report. You must take this step well before you start looking for a home. Get copies of your credit report from all three credit bureaus, make sure the facts on your report are yours and that it is correct and address problems that you discover. You can get more information about improving your credit in the Renewal Credit Classroom.

Step 4: Shop for a loan

We will go into more detail about getting a loan in the Renewal Mortgage Conference, but it is important to do your homework. This will help you save a considerable amount of money. Talk to several lenders, compare costs and interest rates and negotiate to get a better deal. Consider getting pre-approved for a loan.

Step 5: Learn about home buying programs

Each state provides resources to help home buyers navigate the home purchase process. These programs are sponsored by your state or local government or other organizations. HUD provides a comprehensive resource for identifying housing programs by state. The following is a link to programs available in your state:

Step 6: Shop for a home

Benefits of retaining a Realtor:

1. Helps you determine your buying power.
2. Provides resources to assist you in your home search.
3. Assists you in the selection process.
4. Helps you negotiate.
5. Provides due diligence during the evaluation of the property.
6. Helps you in understanding different financing options and in identifying qualified lenders.
7. Guides you through the closing process and make sure everything flows together smoothly.
8. Provides up-to-date information on what is happening in the marketplace and the price, financing, terms and condition of competing properties.
9. Markets your property to other real estate agents and the public.
10. Knows when, where and how to advertise your property.
11. Helps you objectively evaluate every buyer's proposal without compromising your marketing position.
12. Helps close the sale of your home.

Step 7: Make an offer

Determine the Market

Check the temperature of the marketplace. Is the market hot, cold or neutral? If you're making an offer in a buyer's market, you will have less competition for the home. Determine whether it is a seller’s or buyer’s market.

Find Out How Much the Seller Paid

It is true that in many cases the price the seller originally paid for the home has little bearing on today's market. However, if the seller purchased a few years ago in a depressed market, with little appreciation since, the asking price should be closer to the seller's purchase price.

Examine Comparable Sales

When looking at comparable sales or comps, a realtor can use the properties that are similar (age, configuration and location) to the home you want to buy. Use the data from the most recently sold sales, and don't look beyond six months because appraisers won't.

Step 8: Get a home inspection

Sure, your lender will require a home appraisal anyway. But that's just the bank's way of determining whether the house is worth the price you've agreed to pay. Separately, you should hire your own home inspector, preferably an engineer with experience in doing home surveys in the area where you are buying. His or her job will be to point out potential problems that could require costly repairs down the road.

Step 9: Shop for homeowners insurance

When it comes to homeowner’s insurance, most people immediately think of protection in case a fire destroys their home. But there is so much more to today's homeowners’ insurance policies. Let's examine what homeowners insurance covers and what it all means to you.

What's Included In A Homeowners Policy?

Homeowner's insurance policy, the complete package policy:

• Covers damages to your home.
• Covers liability for any injuries or property damage that happens to others on your property - this would even include your pet that would happen to bite someone.
• Covers damages from a fire, tornado and most all other natural disasters except floods and earthquakes, which require special coverage.
• Excludes coverage for normal wear and tear.

Step 10: Sign papers

These issues and factors were covered in the previous section.