BUYING GUIDE
	Advantages of Buying a Home Affording Your Mortgage Closing Checklist Should I Hire an Attorney? Inspection Selling Your Home Preparing Your House for Sale For Sale by Owner or a Real Estate Professional Home Improvements Glossary of Terms Moving and Relocating Tips
	What are the Advantages of Buying a Home?
	Buying a home, commonly referred to as the American Dream, can bring happiness and serenity to you and your family. Community Involvement - Joining a new community gives you a chance to invest in local merchants, government properties and the shaping of your new neighborhood. Tax Breaks - When you become the owner of your new home there will be tax breaks that can be taken advantage of that renters or non-homeowners can not. When compared to other investments few will generate the healthy tax breaks that home ownership does. The most commonly thought of tax break is that of non-taxable mortgage interest on you homestead. Additionally the deduction of your real estate tax on your federal income tax return is acceptable. Many homeowners also choose to use their home as collateral for home equity loans or equity lines of credit, interest on these loans is also tax deductible. With planning, these tax breaks can give you advantages that will last a lifetime. Equity -A home is an investment that can and usually will increase in value. With proper planning and generous local and federal economic trends, the value of your home may increase on its own. Each and every improvement you undertake will add to the overall value of your home and your way of living.
	Affording Your Mortgage
	When applying for a mortgage one of the first things a lender must compute is the loan to income ratio. Lenders usually use two basic formulas to determine how much of a mortgage you can afford. They may vary slightly depending on the lending institution you're using, but all lenders follow the same guidelines. There are many different programs available, both conventional and governmental. Your lender can work with you to find one that fits your specific financial needs. Conventional loans, with a fixed interest rate, generally require that your mortgage expenses, which include the principle, interest, taxes and insurance (PITI) do not exceed 28 percent of your income. A fixed rate loan has an interest rate which is constant throughout the loan term. An adjustable rate mortgage (ARM) has an interest rate that fluctuates according to current standards. Mortgage expenses for an ARM are not to exceed 26 percent of your income. There is another ratio used with long-term debt. Long-term debt is considered to be any payments extending at least nine months. Your long-term debt must not exceed 36 percent of your gross income to qualify for a fixed rate loan. For an adjustable rate mortgage, your long-term debt must not exceed 33 percent of your gross income. FHA (Federal Housing Administration) Loans, mortgage expenses are not to exceed 29 percent, and your long-term debt to income ratio is to be no more than 41 percent. For example, if your annual income is $60,000, divide that by twelve and you have a gross monthly income of $5,000. For a conventional loan, you multiply that by 28 percent which equals $1,400. You should quality for a conventional loan with payments not in excess of $1,400. The total of your monthly mortgage expense, plus any long-term debt must not exceed $1,800. ($5,000 x 36 percent=$1,800)
	Closing Checklist
	Prepare yourself for closing. Use the closing checklist to help avoid an embarrassing postponement of your closing. Before You Close Check Survey . Purchase agreement signed and accepted by seller . All contingencies met . Home loan approved . Appraisal completed . Title/abstract work completed . Final walk-through What to Have at the Closing . Cashiers check for the balance of your down payment . Homeowners insurance binder . A photo ID . Your addresses for the past 5 years What You Will Sign at the Closing? . A document stating the specifics of the loan: monthly mortgage payments, the amount of the loan, the term of the loan and its interest rate. . A promissory note stating that you will make the monthly mortgage payments . The mortgage papers These are some services that come strongly recommended if you are thinking of buying or selling a home. Most areas will have these services available to you. Homeowners Insurance Homeowners insurance or hazard insurance is required by mortgage lenders. Proof of homeowners insurance is required at closing. Title Insurance Title insurance is purchased to protect the lender and homeowner against claims on the title or property from previous owners or encumbrances.
	Should I Hire an Attorney?
	Real Estate Attorney A real estate attorney can offer you the benefits of his or her experience and education. Some areas that one buying or selling a home may find helpful are: wording of contingency clauses, contracts, negotiating, reviewing closing documents, and explaining legal terms. Real estate brokers may also provide you many of these services. What can an attorney do for a seller? A lawyer protects the seller from unexpected developments in the sale and can: . review the listing contract and offers; . satisfy any conditions to the offer and resolve any problems that arise; . prepare the deed and other required real estate transfer documents; and . before and at the closing, review the final arrangements and assure that both parties' obligations are met. What can an attorney do for a buyer? The buyer's attorney can make sure the buyer receives all necessary documents and gets what the contract provides and can; . review your buyer agency agreement and offer to purchase, including the conditions added for your protection; . examine the seller's title (abstract of title or title insurance commitment) and explain the documents affecting that title; . answer legal questions about the property and its purchase; . explain your options for holding the title; . check the note and mortgage, deed and other documents and explain your legal rights and obligations under them; . help with the closing; and . review the title after closing to make sure all legal requirements have been met. Won't the real estate agent represent me? Real estate agents cannot provide legal advice and representation. Under most state laws, real estate agents act as intermediaries rather than representatives of the parties.
	Inspection
	A proper inspection of your prospective home may help determine your level of interest in that home. If you don't feel comfortable inspecting the following items, professional inspection companies are available in most areas. . Roofing and Siding . Heating System . Insect and Rodent Damage . Kitchen and Appliances . Basement and Foundation . Electric Systems . Cooling Systems If you decide on professional inspection, some areas will provide a guarantee against unexpected repair and expenses.
	Selling Your Home
	The road to selling your home can be very bumpy. Many factors are involved in getting ready to show your home to prospective buyers. These factors can be tedious and very frustrating, especially when a showing does not go as well as you wanted. The best trick is to not get discouraged. Hang in there. With a little hard work and a variable amount of time, your house will sell. The information in this handbook is designed to not only aid you in becoming more familiar with the terminology, steps and procedures, but also help you through the process of marketing your existing home.
	Preparing Your House For Sale
	When preparing your home for sale, a ready to move in condition is most desirable. Buyers may be discouraged if they know that they have a lot of work to do to a home before they can move in. . Professional carpet cleaning . Replace bathroom tiles . Replacing worn floors . Painting . Landscaping Appliances - Buyers don't want to have to replace old or outdated appliances. If at all possible, replace them before showing your home. Title and Survey - You should look at your title and survey to make sure that there are no problems (i.e., liens or other encumbrances) and correct them if there are any. Other Information - You many also want to gather the prior 12 month's utility bills, tax bills, a recent appraisal, and a favorable inspection report. These documents may aid in negotiating price with a potential buyer.
	For Sale by Owner or a Real Estate Professional?
	When you're ready to sell your home, should you try to sell it on your own, or should you list with a professional agent? Consider these factors to help you decide. Exposure . Agents deal with a vast number of "qualified" buyers, and can select those who are interested in your home. . They have contact with many people from out of town who are relocating to your area. Experience . A real estate agent is a trained professional who will spend the necessary amount of time it may take to get your home SOLD. . They understand and can aid in taking care of all the necessary paperwork to complete the buying process, as well as acting as a liaison between attorneys. . Most buyers prefer to deal with a real estate agent because the agent will give them their unbiased professional opinion. . Because agents understand all the different types of loans and financing options, they can provide information to prospective buyers about the right lending institution. . They also will be able to assist in setting the right price to list your home, for the current market conditions. Advertising Real estate companies have many ways to advertise your home, not just a newspaper ad, or a "For Sale" sign in the yard. The following may be available. . All have access to the Multiple Listing Service (MLS) which provides free home-buying magazines. . Many have programs on local or cable television . Open houses for added exposure . On-line services . E-mail addresses . Home Information Centers at local malls and airports Showing Your Home . Agents have trained expertise to help you get your home in tip-top condition before your prospective buyers arrive. . They know how to emphasize and focus on your home's good points. With all the time, effort, and knowledge it takes to sell a home, take some of the fear and frustration out of the process and hire a professional.
	Home Improvements
	Improvements that are made to your home that add value are called capital improvements. In order to figure out the amount of capital gain recognized you must add the expense of these improvements. Here are some improvements that would be recognized as capital improvements: . Air conditioning . Fence . Furnaces . Landscaping . Room addition . Sump pump . Walls . Electric wiring . Flooring . Insulation . Pipes . Storm Windows . Termite-proofing . Windows Home Improvements that will make good first impressions A positive first impression can be the key to selling your home. Curb Appeal Keep your lawn cut; pick up tools and lawn equipment; restore your front door to look like new (e.g., paint, polish, fixtures, clean or replace numbers); new light bulbs; planting flowers or shrubberies. Make it Junk-Proof Get rid of clutter in plain view. A garage sale or a storage unit may facilitate this process. The absence of clutter gives a spacious look. Carpet Carpet absorbs many stains and odors in its life. These can be removed with some hard work or you may wish to hire a professional carpet cleaner. Paint Touch up the smudges and fingerprints. Repaint walls that need to be freshened up or toned down. Neutral colors appeal to the largest group of people. Exterminate Bugs or termites in a house can change a buyers perspective of the house so fast your head will spin. If the problem is great, hire a professional. Windows Cracked windows and screens should be replaced. Painting cracks or peeled paint on the trim is also a good idea. Bathrooms The caulking around the bathtub or shower should be new. Bathrooms should be sparkling clean. The little things that make big impressions Tighten loose doorknobs. Hang freshly laundered drapes. Fix leaky faucets. Oil sticky or squeaky door hinges. Pull up water stains. Tidy your attic.
	Glossary of Terms
	Adjustable Rate Mortgage: Loans with interest rates that can fluctuate during the term, based on an index to which the interest rate is tied. Amortized Table: A chart that breaks out the total annual payment per year, over the entire term. Amortized Loan: A loan that is paid off in equal installments during its term. Annual Percentage Rate: The amount of loan costs, paid yearly and expressed as a rate of costs over the loan itself. Appraisal: An estimate of real estate value. The most important factor in determining its value is comparable neighborhood sales. Arbitration Agreement: An agreement between the seller and buyer to insure that an independent arbitrator will decide, out of court, any disputes over the property. Assessments: A city determined tax on homeowners, used to pay for improvements to the city in which the homeowner lives. Association Dues: Payments made by home owners to pay for the maintenance and management of shared property. Assumable Loan: A type of mortgage that allows the buyer to take over the responsibility of the mortgage on the encumbered real estate. Capital Gains Tax: A tax on the profit obtained from the sale of capital asset Closing Costs: Expenses incurred for the purpose of closing a real estate or mortgage transaction. Examples include: attorneys fee, recording charges, survey fee, title policies, lender fees, discount points, appraisal fee, et cetera. Commitment Letter: A letter which your lender may send you, stating the terms of the loan and its approval Conventional Loans: Non governmental home loans. Contingency: A clause within a purchase agreement that has to be met before the contract can be exercised. Down Payment: The initial payment of a home. There are certain minimums of down payments depending on the type of loan. Most down payments are five to 30 percent of the loan. Earnest Money: Money that accompanies an offer made on a property. The money is then applied to the down payment at closing. If the offer is not excepted the money is returned. Equity: The difference between indebtedness and market value of a property. Escrow: Funds, many times a bond, held by a third party which will not be released to the grantee until conditions of a contract or an agreement are fulfilled. FHA Loan: A Federal Housing Administration loan program that provides a guarantee against default. The borrower may benefit from a smaller down payment. Fair Credit Reporting Act: Information in your credit report that federal law gives citizens the right to challenge. Fixed Rate Mortgage: Loans with interest rates that do not fluctuate. Homeowner's Insurance: Insurance home buyers must have in order to protect the investment of the property. Loan origination Fee: A fee for loan application. Loan Processing: The lenders opinion of your financial and credit past, combined with your income to calculate your ability to qualify for a loan. Loan to Value Ratio: This is the ratio of the amount borrowed to the appraised value of the home. Lock-In Agreement: This agreement allows you to lock in an interest rate at or anytime up to the closing. Mortgage Insurance: This insurance protects the investor from possible loss if the borrower defaults on the loan. Multiple Listing Service (MLS): A service used by real estate agents to obtain information on homes and land for sale. PITI: Principle, interest, taxes, insurance-Many mortgages are setup with monthly loan payments to include these. Purchase Agreement: This is the agreement that legally binds the buyer and seller. All contingencies of the agreement must be listed here. Title: Evidence of a person's legal right to the ownership of a property, usually in the form of a certificate or a signed contract. Title Insurance: Insurance purchased to protect the lender and homeowner against claims of the title from previous owners or encumbrances. Underwriting: An analysis done by the lender to determine if you qualify for a loan. Veteran's Administration Loan (VA Loan): These loans are available to US Veterans and their surviving spouses. The loans require no down payment and you can borrow the entire purchase price of the home.
	Moving and Relocating Tips
	30 Days Before You Move: Select your moving company. Make sure the company is bonded and insured. Ask friends for recommendations. If you're moving to another state, or a long distance: . Make hotel reservations. . Purchase airline tickets. . Make car rental arrangements. . Start packing items you don't use often. . Notify your post office and fill out the change or address forms. . Notify you bank, credit card company, insurance company, magazine subscriptions, physician, friends and family members of your address change. . Notify Uncle Sam-complete Form #8822 14 Days Before You Move: Make arrangements with your utility companies to have your service shut off at your old address the day after you move, and started the day before you move in at your new address: . Local phone company/ Long distance carrier . Heat/Gas company . Electric company . Water . Cable company . Trash removal 7 Days Before You Move: . Finish packing . Pack by room-clearly mark boxes and be specific about what's inside. This makes unpacking much easier. . Reinforce the bottoms of all boxes with strong packing tape. . Breakable items should be well padded and marked "fragile" on all sides of the box. The Day Before You Move: . Make a final walk through to be sure nothing gets left behind. . Have keys for your new home. . Confirm your move by calling your moving company. . Do one last clean up-it's the most important thing you can do to welcome your new buyers.