Buyers' FAQ

What is the first step to buying a home?
Why should I consider paying points?
What is the purpose of an attorney review?
What is title insurance and why do I need it?
What happens if the house I want to purchase does not appraise at the amount expected?
What contingencies should appear in the offer?
Is it possible to buy a home below market price?
How much can I afford?
Is it best to save for the ultimate dream home or begin with a less expensive starter home?
How do you decide whether to add on to an existing home or purchase a new one?
Why do I need an agent if I can find a home by myself on the Internet?
What is the best way to find a real estate agent?
Are buyers protected against housing discrimination?
Why do I need an agent if I can find a home by myself on the Internet?
Can I use an agent to purchase a newly built home?
How many homes should I plan to view and how should I make the final decision?

What is the first step to buying a home?

Make sure you are ready - psychologically and financially. Ask yourself the following questions: Do I have steady income? Is my debt lower than my total income? Do I have enough money to pay for the down payment and closing costs? Am I working hard enough to improve bad credit? A house needs constant care and attention. Also ask yourself if your budget will allow for unexpected repairs and upkeep. Once you can honestly answer "yes" to these questions, you are several steps ahead of the game and that much closer to becoming a homeowner.

Why should I consider paying points?

Buyers often choose to pay a one-time charge called mortgage "points" in exchange for a lower interest rate. Usually paid at closing, each "point" costs 1% of the mortgage amount, or $2,000 on a $200,000 loan. The lower rate reduces the monthly mortgage payment, and points paid in conjunction with the purchase of a home are generally tax-deductible in the year they're paid (see tax advisor). Monthly savings will often exceed what was paid in points in just a few years' time.

What is the purpose of an attorney review?

In states where the real estate agent writes the contract, there may be an attorney review period. This specified period allows the attorney to cancel the contract or request it be altered. Both buyer and seller would then have to agree to the revised contract in writing. During this period, either party may void the contract without penalty.

What is title insurance and why do I need it?

Basically, title insurance assures that you have clear title to the home you're purchasing. A title search is the primary component of "due diligence," a process that will be started either by your attorney, if you are using one, or by the title company you choose. The title search determines whether the seller actually owns the property and if there are any claims against it.

What happens if the house I want to purchase does not appraise at the amount expected?

If the house doesn't appraise at the amount expected, other alternatives are typically found. A second appraisal may be sought, the buyer may be willing to put more money down, the seller may adjust the price or offer other concessions, or the two sides may negotiate to split the difference between them.

What contingencies should appear in the offer?

When you look to purchase a home, anticipate potential problems. But protect against them so that if something does go wrong, you can cancel the contract without penalty. This is what contingencies allow you to do. They should be included in any offer you present to buy a home.
Most offers include two standard contingencies: a financing contingency, which makes the sale dependent on your ability to obtain a loan commitment from a lender, and an inspection contingency, which allows you to have a professional inspect the property.
Without contingencies, a buyer could forfeit his deposit under certain circumstances if he backs out of a deal.
The purchase contract also should include the seller's responsibilities, such as passing clear title, maintaining the property in its present condition until closing, and making any agreed-upon repairs.

Is it possible to buy a home below market price?

Certainly, but do not hold your breath. It takes a lot of determination and time to find a real bargain. But if you are adamant, here are some likely targets to pursue:
? foreclosed property
? a fixer-upper
? hard-to-sell new homes in a housing development
? tenant-in-common partnerships.
With the latter, you may be able to buy a partial interest in this form of title to property owned by two or more individuals because the partners often sell at a discount. However, bargains are easier to come by in a soft real estate market, when the economy is in a recession, and when homeowners, and builders and sponsors of condominium conversions, are desperate to move unsold units.

How much can I afford??

The general rule of thumb is that you can buy a home that costs about two-and-one-half times your annual salary. A good real estate agent or lender can determine how much you can afford and estimate the maximum monthly payment based on the loan amount, taxes, insurance and other expenses. To find out now how your income, debts, and expenses can affect what you can afford, use the Century 21 calculator to figure out how much you may be able to borrow to purchase a home.

Is it best to save for the ultimate dream home or begin with a less expensive starter home?

It can take a long time to save for that perfect dream home. Meanwhile, the market has been flooded with some of the most favorable mortgage interest rates in years. Low rates make housing more affordable, which is why so many buyers have jumped on the home buying bandwagon. Home-price appreciation has also been strong, making very solid gains in communities across the country. In fact, home prices are expected to increase 2.5 percent to 3 percent annually over the next five years. If you purchase a starter home today, you can potentially begin to build value that can lead to the purchase of a larger, or more desirable, trade-up home in the future.

How do you decide whether to add on to an existing home or purchase a new one?

There are a few things to consider, including cost, individual needs, and what will add value down the road. Also important: your emotional attachment to the existing home. As designer and builder Philip S. Wenz, the author of Adding to a House: Planning, Design & Construction, notes, an addition is much cheaper than building a new home and can offer a ?new? home without the heartache of moving. Other considerations:

? Can you finance the home improvement with your own cash or will you need a loan?

? How much equity is in the property? A fair amount will make it that much easier to get a loan for home improvements.

? Is it feasible to expand the current space for an addition?

? What is permissible under local zoning and building laws? Despite your deep yearning for a new sunroom or garage, you will need to know if your town or city will allow such improvements.

? Are there affordable properties for sale that would satisfy your changing housing needs? Explore your options.

Make sure your decision is one you can live with ? either under the same roof or under a different one.

Why do I need an agent if I can find a home by myself on the Internet?

While more buyers now use the Internet to gain access to listings, or available properties for sale, it is still a good idea to use an agent. The agent brings value to the entire process: he or she is available to analyze data, answer questions, share their professional expertise, and handle all the paperwork and legwork that is involved in the real estate transaction.

What is the best way to find a real estate agent?

Begin by asking someone that you know. Friends, relatives, co-workers, or neighbors who have recently purchased a home can give you a firsthand account and attest to the agent?s professional abilities. Sometimes an agent you contact will refer you to another one who works more closely with buyers and sellers in your neighborhood. Once you have a list of names, interview at least three agents and ask questions about their community knowledge, professional experience, and commitment ? some agents work full time; others only work at nights and on the weekends.

Are buyers protected against housing discrimination?

By law, real estate agents may not discriminate on the basis of race, color, religion, sex, disability, familial status, or national origin. They also cannot follow spoken or implied directives from the home seller to discriminate. If you suspect you have been discriminated against, a complaint may be filed with the local Department of Housing and Urban Development (HUD) office nearest you. You may call HUD?s toll-free number, 1-800-669-9777, or visit its web site at www.hud.gov/complaints/housediscrim.cfm.

Why do I need an agent if I can find a home by myself on the Internet?

While more buyers now use the Internet to gain access to listings, or available properties for sale, it is still a good idea to use an agent. The agent brings value to the entire process: he or she is available to analyze data, answer questions, share their professional expertise, and handle all the paperwork and legwork that is involved in the real estate transaction.

Can I use an agent to purchase a newly built home?

Yes. In fact, some builders pay agents to find prospective buyers. But you also can use a buyer?s agent to help negotiate the price and upgrades on a new home. An agent can be particularly valuable directing you to newly built developments that match your needs, as well as helping you select reputable builders who are financially sound and respond promptly to buyers? concerns. Builders normally require an agent to be present on your first visit to the site. This is a sensible procedure that allows the agent to be paid a commission should you decide to buy. Otherwise, if you find a development on your own, make a first visit without the agent, and later make a purchase, the builder may refuse to pay the commission ? even if, at some point, the agent became involved in the process.

How many homes should I plan to view and how should I make the final decision?

While exploring your needs and wants fully is a good idea for focusing your search and saving time, viewing a number of homes will help you become familiar with what you can expect to get for your money. When you find a home you really like, it's a good idea to go back and look at it at a different time of day. This will give you greater insight into what it will be like living in the home full time.