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A Guid e To Und erstand ing The Process

2. Part 1 - Getting Started
1. How Do I Know If I Am Ready To Buy A Home?
Begin by asking yourself these questions.
• D o I have a stead y incom e source?
• Have I been em pl oyed for at least 3 years?
• D o I have a good record of paying bill s?
• D o I have long term bill (C ar loan)
s?
• D o I have m oney saved for a d own paym ent?
• C an I afford a m ortgage right now?
Summary
If you answered
yes to these
questions, you are
probably ready to
buy a home. Question 2

3. Part 1 - Getting Started
2. How Do I Begin The Buying Process?
Start by asking yourself these questions.
• How m uch can you afford in a m onthly paym ent?
• How m any bed room s d o you need ?
• What area of town d o you l ike?
• How im portant are school to you?
s
• How cl ose to work?
• D o you want a cond o/ townhom e/ single fam il
y?
Summary
Create a ‘I Want’
list and answer
these questions.
Question 3

4. Part 1 - Getting Started
3. How Does Owning A Home Compare To Renting?
O wning has m any benefits over renting.
• O pportunity to buil equity.
d
• Forced savings.
• Tax ad vantages.
• Personal lifestyle preferences.
• Eventuall l d ebt free with m ortgage payoff.
y ive
• M ore space.
Summary
A home over the
long term offers
many financial
benefits well worth
your investment. Question 4

5. Part 1 - Getting Started
4. How Do I Know How Much A Bank Will Lend To Me?
Your lend er will consid er:
• D ebt-to-incom e ratio.
• C om pares your pre-tax incom e to housing and non-housing
expenses.
• Non-housing is long-term d ebt. (C ars, stud ent loan, child
support, al ony)
im
• FHA: M ortgage shoul not exceed 29% of your gross
d
Summary
incom e.
• FHA: ‘I Can com bined with non-housing; should not exceed
Create a When
Afford% sheet and incom e.
41 ’ of gross
calculate the
• Also consid ers closing costs, d own paym ent, cred it history.
answers to these
questions. Question 5

6. Part 2 - Searching For & Finding Your Home
5. What Should I Look For In A Neighborhood?
Select a com m unity that bests allows you:
• To live your lifestyl
e.
• Easy access to work and schools.
• Easy access to public transportation.
• Easy access to shopping, banking and m ed ical services.
• C om m unities interests and activities.
• Personal interest and activities.
Summary
Choose a
neighborhood that
is most likely to
increase in value!
(People like living Question 6
in.)

7. Part 2 - Searching For & Finding Your Home
6. How Can I Find Out About Schools?
Sim ply contact…
• C ity school board .
• C ounty school board .
• Local schools for inform ation access.
• Your real estate agent.
• Internet search.
• Interview teachers and parents.
Summary
Invest quality time
when searching
out school related
information.
Question 7

8. Part 2 - Searching For & Finding Your Home
7. How Can I Find Out What Homes Are Selling For In My
Preferred Neighborhood?
Ask your real estate professional for…
• Hom es currentl listed for sale.
y
• Hom es recently sold within last 90 d ays.
• Hom es that d id not sell within l 90 d ays.
ast
• Your real estate agent has access to al this d ata.
l
• Your real estate agent will provid e you with a sum m ary.
• Based upon this d ata you will know current m arket value.
Summary
Your real estate
agent can provide
information for any
home on the MLS.
Question 8

9. Part 2 - Searching For & Finding Your Home
8. How Can I Find Out About Property Tax Information?
You have a few options…
C. Your real estate agent has tax inform ation.
D. Your local tax assessor’s office has inform ation.
Note:
1 . Your m ortgage interest and your property taxes are tax
d ed uctibl
e.
2. Your real estate agent m ay be abl to offer ad d itional tax
e
Summary
benefit inform ation.
A home is both a
long term
investment for
equity gain and for
immediate tax Question 9
benefits.

10. Part 2 - Searching For & Finding Your Home
9. Is An Older Home A Better Value As Compared To A
New Home?
C onsid er the foll
owing:
C. O ld er hom es tend to be in established neighborhood .
D. O ld er hom es m ay offer lower property taxes.
E. O ld er hom es m ay required ad d ition m aintenance.
F. Newer hom es have m od ern architecture.
G. Newer hom es are l costly to m aintain.
ess
Summary
H. Newer hom es tend to be m ore energy efficient.
Personal preference
ultimately makes the
final decision
between old and
new. Question 10

11. Part 2 - Searching For & Finding Your Home
10. How Do I View A Home?
C om pare it to your m inim um requirem ents and then consid er…
C. Property l ocation, yard size, garage need s.
D. Num ber of bed room s and bathroom s.
E. Kitchen qual size, and cupboard space.
ity,
F. Features such as air cond itioner, firepl
ace, security.
G. C urrent m aintenance level (Repairs need ed ?)
.
H. C lose to schools, work, shopping, personal & com m unity
Summary
interests.
Remember to review
Internet, cell phone,
TV cable reception,
and availability.
Question 11

12. Part 2 - Searching For & Finding Your Home
11. How Do I Keep A Record Of All Homes I View?
Ask your agent to…
C. Ad d hom es to a listing cart.
D. You wil keep a viewing record .
l
E. Use this record for com m ents on each hom e.
F. Ask if you can take photos of each hom e.
G. Always view hom es you’re m ost interested in at least 2 tim es.
H. Always red uce total l of hom es viewed to top 3 favorites.
ist
Summary
Once you have
reduced your list to 3
favorites you are now
in the ‘buy’ decision
position. Question 12

13. Part 2 - Searching For & Finding Your Home
12. How Many Homes Should I View Before Deciding?
There is no rule of thum b.
C. The average buyer views 1 5 hom es.
D. The average tim e for viewing all 1 5 hom es is 3 d ays
Summary
What is important is
to find a home best
matching your needs,
wants, and
investment level. Question 13

14. Part 3 – After You Have Found Your Perfect Home
13. How Can I Feel Safe & Secure About The Condition of
The Home?
Includ e hom e inspection in your offer.
C. Ask agent to write into offer a cond ition on hom e inspection.
D. The average tim e required for inspection is 3 d ays.
E. Typical cost of inspection is $200 to $500.
F. Inspector gives you d etail report on cond ition of hom e.
ed
G. You m ay negotiate with sel on cost of repairs.
ler
Summary
H. If not satisfied you can term inate your offer to purchase.
A home inspection is
a ‘must include’
condition in all offers
placed on homes.
Question 14

15. Part 3 – After You Have Found Your Perfect Home
14. Are There Any Other Inspections I May Need?
Ad d itional inspections m ay be required for specific issues…
C. Asbestos.
D. Rad on gas.
E. Water and wel l.
F. Septic & run off.
Summary
Never buy a home
without knowing the
current state of each
issue.
Question 15

16. Part 3 – After You Have Found Your Perfect Home
15. Are There Other Issues I Need To Know About Before
Buying?
Yes…
C. You wil need a lawyer.
l
D. You wil need hom eowner insurance.
l
E. Is the hom e in a fl
ood plain?
F. D oes hom e m eet current build ing cod es.
G. Are there any local zoning issues?
Summary
Your real estate agent
will be able to
address these critical
issues before you buy
a home. Question 16

17. Part 4 – Placing An Offer of Purchase On A Home
16. How Do I Make An Offer On A Home?
Your real estate agent wil d raft your offer consisting of:
l
C. The am ount of earnest m oney.
D. D own paym ent & financing d etails.
E. Your initial offer price.
F. Your requested closing d ate.
G. Length of tim e your offer is valid .
H. All cond itions and d isclosures.
Summary
Your real estate agent
will provide whatever
additional offer
inclusions required in
your area. Question 17

18. Part 4 – Placing An Offer of Purchase On A Home
17. How Do I Determine Offer Price?
Ask your agent for the fol lowing…
C. A list of sim ilar hom es ‘recently sol ’ in the area.
d
D. A list of sim ilar hom es ‘now l isted ’ for sale in the area.
E. A list of sim ilar hom es that ‘d id not sel in the area.
l’
F. Ask how long the hom e has been on the m arket.
G. D eterm ine why the sell is sel
er ling.
H. D eterm ine the ‘as is’ repair cond ition of the hom e.
Summary
It is critical for you to
know what similar homes
have recently sold for
before placing an offer.
Question 18

19. Part 4 – Placing An Offer of Purchase On A Home
18. What Is Earnest Money & How Much Do I Require?
It is the am ount you ‘put d own’ with the offer.
• It d em onstrates your seriousness to purchase.
• It ranges between 1 % to 5% of offer price.
• If your offer is accepted , it becom es part of your d own
paym ent.
• If your offer is rej
ected , it is returned to you.
• If accepted and later on you back out of d eal… it is lost.
Summary
Your real estate agent
will advise you on the
amount of earnest
money required with
an offer. Question 19

20. Part 4 – Placing An Offer of Purchase On A Home
19. Are There Any Other Issues I Need To Know?
Yes… here are a few.
• Hom e warranty insurance.
• Hom e insurance.
• C ost of heat & electricity.
• Property taxes.
• Hom e & property upkeep.
Summary
Gathering all the
information before
placing an offer is
prudent advice.
Question 20

21. Part 5 – After Your Offer Is Accepted
20. What Happens When My Offer Is Accepted By The
Seller?
Your real estate agent wil give you d irections… such as:
l
• How to ful l all cond itions of the offer.
fil
• The hand ling of your earnest m oney.
• D irection for legal issues.
• Filing of paperwork.
• Financing issues.
Summary
Your real estate agent
will assist you
between offer
acceptance and
closing date. Question 21

22. Part 6 – Financing Your Home Purchase
21. What Is A Mortgage?
It is a financial l
oan used to purchase a hom e.
• It is a l egal cl lien on a hom e.
aim
• It secures the prom ise to repay the d ebt.
• It has two features…
• Paym ent of interest. (C ost of l
oan)
• Paym ent of principle. (Red uction of d ebt.)
Summary
A mortgage is a long
term debt to finance a
long term investment.
Question 22

23. Part 6 – Financing Your Home Purchase
22. What Is Loan To Value & How Does It Affect A
Mortgage?
It is the am ount you borrow com pared to the price of the hom e.
• Exam pl e…
• $1 00,000 hom e with a 95% LTV m eans…
• You can borrow up to $95,000 for a m ortgage.
• Loans greater than 80% LTV require…
• M ortgage insurance.
Summary
Mortgage insurance
protects the lender if
you default on your
payments.
Question 23

24. Part 6 – Financing Your Home Purchase
23. What Type of Mortgage Should I Apply For When
Financing?
It is up to you… as you have options.
C. Fixed Rate M ortgages
D. Ad j ustable Rate M ortgages
Summary
Ask your financial
advisor which option
is best for you.
Question 24

25. Part 6 – Financing Your Home Purchase
24. What Is A Fixed Rate Mortgage?
Paym ents rem ain the sam e for the life, term , of the loan.
C. You can choose a 1 5 year term or 30 year term
D. Here are the ad vantages…
E. Pred ictable paym ent
F. C ost rem ains sam e throughout the term .
Summary
A fixed rate mortgage
is not affected by
increases in interest
rates or inflation.
Question 25

26. Part 6 – Financing Your Home Purchase
25. What Are The Advantages of Term Options?
You have 30 year and 1 5 year term options.
C. O n a 30 year term …
D. D uring the first 23 years of the loan… m ore interest then
principl is paid .
e
E. This gives you larger tax d ed uctions.
F. O n a 1 5 year term …
G. Lower interest rate.
Summary
H. Equity is built faster as m ore principl is paid .
e
Which is best? Many
enjoy paying off their
mortgages sooner
rather than later.
Question 26

27. Part 6 – Financing Your Home Purchase
26. What Are ARMS Mortgages?
It is an ad j ustable rate m ortgage.
C. Paym ents increase or d ecrease subj to interest rates.
ect
(lim ited increase)
D. You have several options.
E. Balloon m ortgage: low rates for 1 to 7 years: (refinanced )
F. Two Step m ortgage: rates ad j once and then rem ain for
ust
term .
Summary
G. ARM S l inked to a specific ind ex or m argin.
If you’re not concerned with
H. Benefits: Lower initial rates, paym ents, and you m ay qualify
increase in rates, another
for larger m ortgage.
move soon, or increase in
your income… ARMS have
the advantage. Question 27

28. Part 7 – Securing Your Loan
27. How Do I Secure A Mortgage?
Sim ply follow these steps.
C. Pay stubs for last 3 m onths.
D. W-2 form s for l 2 years.
ast
E. Inform ation on long term d ebts.
F. 3 recent bank statem ents.
G. Tax returns for last 3 years.
H. Sales contract with ad d ress of the property.
Summary
Disclose all other
income as it will
help in your loan
approval process.
Question 28

29. Part 7 – Securing Your Loan
28. What Is The Difference Between Pre-Qualified and Pre-
Approved?
The d ifference is significant.
C. Pre-Q ualified m eans you ‘m ay’ qual for a l
ify oan.
D. Pre-Approved is a lend er’s actual com m itm ent to give you a
loan.
Summary
Choose a lender
carefully based upon
financial stability,
reputation, and service.
Question 29

30. Part 7 – Securing Your Loan
29. How Can I Find Out About My Credit Rating?
C ontact these com panies:
C. Equifax (1 -800-685-1 1 1 1 )
D. Trans Union (1 -800-91 6-8800)
E. Experian (1 -888-397-3742)
Summary
If any information on
the report is in error
simply contact each
company for repair
directions. Question 30

31. Part 7 – Securing Your Loan
30. What Is A Credit Bureau Score?
It is a num ber based upon your cred it history.
C. It lets lend ers know of your past paym ent history.
D. It lets lend ers know if you can repay a loan.
E. The higher the score the m ore l ikely you’l receive loan
l
approval.
Summary
There is little you can do
to instantly improve your
score. By paying bills on
time your score naturally
increases. Question 31

32. Part 7 – Securing Your Loan
31. Are There Additional Financing Options I May Need To
Know?
Yes and you can contact:
C. Your financial ad visor
D. Your m ortgage broker
E. Your lend er
F. Your agent
G. RESPA. (Real Estate Settl ent Proced ures Act)
em
Summary
There are also fees
associated with
underwriting the loan
process. The fee is
generally non- Question 32
refundable.

33. Part 8 – Closing Activities
32. What Are Closing Costs?
It is the cost to close the sale and consists of:
C. Attorney fees
D. Property taxes
E. Interests. (From cl d ay to 30 d ays to first paym ent)
ose
F. Loan originator fee. (covers l er ad m in costs)
end
G. First prem ium on m ortgage insurance
H. Record ing, survey, titl escrow tax, insurance policy fee,
e,
Summary fee
d ocum ents
Your real estate agent can
provide to you an estimate
on closing costs.
Question 33

34. Part 8 – Closing Activities
33. Do I Get A Final Walk Through of The Home Before
Closing?
Yes and here is what you wil want to review:
l
C. D eterm ine if sel has repaired al Inspection Report issues
ler l
D. D eterm ine if fixtures in contract have rem ained in hom e.
E. If your offer incl ed appliances… ensure each is in hom e.
ud
F. If your offer incl ed hom e cl
ud eaning… ensure it has been
d one.
Summary
G. C heck for ad d itional d am age.
Your real estate agent is
with you on final home
inspection and will attempt
to resolve all issues that
may arise. Question 34

35. Part 8 – Closing Activities
34. What Happens On Closing Day?
B. You present your paid hom eowners insurance policy.
C. The closing agent then lists the m oney you owe the seller.
D. The closing agent then lists the m oney the seller owes you.
E. The seller provid es proof of any and all inspections,
warranties, etc.
F. You then sign the m ortgage d ocum ent and the m ortgage
note.
Summary
G. The seller gives you the title of the hom e by signed d eed .
The deed and mortgage agent the closing costs.
H. You pay the lend er’s
are recorded in the
Registry of Deeds.
Congratulations you are
now a homeowner. Question 35

36. Part 8 – Closing Activities
35. What Do I Get On Closing?
Here is a brief sum m ary.
C. Settlem ent Statem ent, HUD -1 Form .
D. Truth-in-l ing statem ent.
end
E. M ortgage note.
F. M ortgage or D eed of Trust.
G. Bind ing sales contract.
H. Keys to your new hom e.
Summary
Your real estate agent will
also give you a wonderful
closing gift to celebrate
your home purchase.
Question 36

37. Part 9 – Summary
Summary
The hom e buying process…
C. Looks far m ore com plicated than it real is in experience.
ly
D. Your real estate agent will walk you through the entire
process.
E. It is a thrill experience and one to enj
ing oy.
Summary
Remember to ask your real
estate agent for additional
financing opportunities
with HUD through its FHA
program.