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It's tough being a first-time buyer in today's housing market. Don't make it even harder (or more expensive) for yourself by making these common mistakes.
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:
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:
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:
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:
Step 10: Sign papers
These issues and factors were covered in the previous section.