Your Online Guide to Successful Home Buying

• How long do I plan to stay in my current community?
  Homes take time to appreciate in value. If your employer's hinting around at relocation, or the walls of your small town are closing in on you, consider that you might only break even - or even take a loss - if you have to sell your home quickly.
  
  If your job situation seems secure, however, and you enjoy the amenities your community offers, buying is a next logical step.
  
  
• Do I have time to maintain a home?
  Unless you're currently leasing a house and handling all the maintenance yourself, home ownership will generally require more of your time than renting. Of course, for some homeowners, the associated work - raking leaves, mowing the lawn and painting the family room - serves as recreation in itself.
  
  Some buyers will purchase a condominium in order to avoid time-consuming outdoor chores. If you're looking at that option, be sure to factor in property management fees in your housing estimates.
  
  
• Can I afford it?
  Most renters assume that buying costs considerably more than renting, but you may be surprised. First, if you consider the monthly total on your rent, utilities and renter's insurance, you might be paying more for housing than you thought.
  
  Second, even if you don't have tens of thousands saved for the standard 20 percent down, many lenders today offer lower down payment options. Some will even finance your closing costs. Remember though, the more you finance, the more your monthly payments will be.
  
  
• Do I want to personalize my living quarters as I please?
  Maybe you've grown tired of the eggshell white walls of your cookie-cutter apartment, or you can't convince your landlord to replace the brown shag carpeting in your rental. When you own your home, you can mostly do with it as you please - paint the kitchen in Green Bay Packers gold, cover your den in knotty pine paneling or wallpaper your bedroom ceilings in Laura Ashley florals. True, it all costs money - but when you buy your own place, it's a choice you get to make.
  
  

• Is the surrounding neighborhood or the home itself the most important consideration?
• Are both neighborhoods safe?
• Is the quality of the schools an issue?
• Does either area have more families with kids or adult residents?
• Does either house need more home maintenance or improvements than the other?
• Is the area zoned all residential, or does it include commercial or industrial?
• How far is the area from your job -- is commuting an issue?
• For parents, is the area child friendly? (Sidewalks, safe playgrounds, etc.)
  

As for the return on your investment, home-price appreciation is hard to predict. The economy plays a big role in what can happen. Most homes hold their value, but in a recession, the value may stay the same, as opposed to increasing like in strong economic times. Obviously the communities that are the most appealing generally tend to have the best return on investment. The value goes up because everyone wants to live there.

Be sure to find a place that best suits all of your needs, or at least the most important ones. The area and schools may be your priority. Or maybe it's the size of the house, because of kids or live-in relatives. Whatever your situation, you need to make informed decisions that are right for you and your family. Make sure to consider all the facts before you buy.

• Range oven, microwave, dishwasher, garbage disposal, and trash compactor.
• Safety features: burglar and fire alarms, smoke detectors, sprinklers, security gate, window screens and intercom.
• TV antenna, satellite dish, carport or garage, automatic garage door opener, rain gutters, sump pump.
• Amenities such as pool or spa, patio or deck, built in barbecue and fireplaces.
• Type of heating, condition of electrical wiring, gas supply, and presence of any external power source, such as solar panels.
• The type of water heater, water supply, sewer system or septic tank.
  

Sellers are also required to indicate any significant defects or malfunctions existing in the home’s major systems. The checklist specifies interior and exterior walls, ceilings, roof, insulation, windows, fences, driveways, sidewalks, floors, doors, foundation and electrical and plumbing systems.

The disclosure form also requires sellers to note the presence of environmental hazards, walls or fences shared with adjoining landowners, any encroachments or easements, room additions or repairs made without the necessary permits or not in compliance with building codes, zoning violations, citations against the property and any lawsuits against the seller affecting the property. (If you are looking to buy a condominium you should be informed about code and deed restrictions.)

Make sure to look for or ask about settling, sliding or soil problems, flooding or drainage problems and any major damage resulting from earthquakes, floods or landslides.

The amount a seller is required to disclose about defects has broadened significantly over the years. It helps to protect the buyer from buying a cosmetically good-looking house that is a potential money pit. But even with all the forms and laws in place, make sure to ask a lot of questions. Especially if you are unclear about something, or if your concern was not addressed on the forms provided to you.

• Signs of settling or foundation defects
• Improper drainage
• Plumbing leaks
• Roof leaks
• Improper wiring or other safety issues
• Rotted wood in eaves and trim

While home buyers order most inspections as part of their pre-purchase investigation, sellers and homeowners too can benefit from a home inspector's services. A seller, for example, may want to determine what repairs he needs to make before putting a home on the market. And conscientious homeowners may simply want to make sure that needed maintenance on their home isn't being overlooked.

To find a reputable home inspector in your area, ask your local REALTOR® for a recommendation -- or three! Before choosing a home inspector, ask to see a copy of a recent report he or she has prepared on a similar property. Read the fine print carefully to determine what (if any) warrantees are being made and what matters will be excluded from the report.

TIP: The home inspection field is still an "emerging" industry, and certification requirements (if any) vary from state to state. Before hiring an inspector, be sure to ask about their length of experience and credentials. Two of the largest national organizations that certify home inspectors are American Society of Home Inspectors (ASHI) and National Association of Home Inspectors (NAHI).

TIP: If a home inspection discloses structural issues or other specialized concerns, you may wish to obtain additional inspections or professional advice -- a separate roofing inspection if roof leaks are suspected, for example, or an engineering report if slippage or other structural issues are raised. It's important that you understand the exact nature and extent of any serious problem before you buy!

• They are fairly inexpensive. For a few hundred dollars, you can get a year of protection. The seller may be willing to pay for a Home Warranty to seal the deal, particularly if the home is getting up there in years.
• They usually involve a deductible or a service fee. You'll want to know what this amounts to, ahead of time. Of course, keep in mind that you'd pay a service fee plus the repair costs if you didn't have a warranty on your home.
• They vary quite a bit in their coverage. Some plans only cover your heating, plumbing and electrical systems. Some cover everything from your furnace to your doorbell. If the home seems to be in pretty good shape overall, you might want to go with a basic plan. If you want to know you¡¦re completely covered, look for a plan that includes everything from top to bottom.
• They require you to use certain service providers. Ask who this would be in your area, and check out their credentials by contacting the Better Business Bureau or by asking for references. After all, you want your repairs to be done by qualified people.
• They typically allow you to request service 24 hours a day, 7 days a week. This is an important consideration, since major appliances don't necessarily choose convenient times to break down.
  

Your Home Warranty contract should spell out all of the above considerations in great detail. If you're unsure about anything, ask!

A Home Warranty is often a great idea, since your homeowner's insurance won¡¦t cover repair costs for appliances. Particularly for an older home, a complete, head-to-toe warranty gives you a worry-free first year, and you may be able to extend the warranty for additional years after that.

Ask your REALTOR® for advice on a Home Warranty. He or she can probably recommend a plan to fit your needs. Then you can sit back, relax and enjoy your new home!

Mortgage Servicing Disclosure Statement, which discloses to the borrower whether the lender intends to service the loan or transfer it to another lender. This statement also includes information about how to service any complaints you may have.

If the borrowers do not receive these documents at the time of application, the lender must mail them within three business days of receiving the loan application. However, if the loan is denied, RESPA does not require the lender to provide these documents.

Disclosures before closing occurs
Controlled business arrangement are sometimes called an "affiliated" business arrangement. This is when a lender, real estate broker, or a participant in your settlement refers you to an affiliate for a settlement service. This can happen when a real estate agent refers you to a mortgage affiliate. When this occurs, RESPA requires the referring party to provide you with an Affiliated Business Arrangement Disclosure. This form will remind you that you are generally not required, with some exceptions, to use the affiliate and are free to look for another provider.

Disclosures at settlement
The HUD-1 Settlement Statement shows the actual settlement costs of the loan transaction. Separate forms may be prepared for the borrower and the seller. It is not the practice that the borrower and seller attend the settlement, but the HUD-1 should be mailed as soon as possible after settlement.

The Initial Escrow Statement itemizes the estimated taxes, insurance premiums and other charges anticipated to pay from the escrow account in the first twelve months of the loan. It will list for you the escrow payment amount and any "cushion" that they require. Most times this statement is provided at the closing/settlement, and the lender has 45 days from closing to deliver it.

Loan services must provide to borrowers an Annual Escrow Statement once a year. This summarizes the escrow payments for the year, and informs the borrower of any shortages or surpluses in the account and what the lender's course of action is going to be.

Adjustable Rate Mortgage (ARM): This means that your rate will vary from year to year. Adjustable rate mortgages generally start out with a lower rate than fixed-rate mortgages, so if you plan to stay in a home for just a few years, this might be the way to go.

Escrow: These accounts are used to "hold" money. In the case of a homeowner, they're used for tax and insurance payments until the payment is due. Banks and mortgage companies like this arrangement, because they have control over these payments and can make sure they're made on time.

Points: When you're shopping for a mortgage, you'll be quoted different rates depending on how many points you want to pay. One point equals one percent of your mortgage amount. So, if you were mortgaging $100,000, a point would be $1,000. When you pay points you are paying some of the interest on the loan ahead of time, so you'll get a lower interest rate.

Private Mortgage Insurance (PMI): This will be added on to your mortgage payment if you're putting less than 20% down. In the old days, you'd be stuck paying this forever, but new regulations require lenders to cancel it when your mortgage balance drops to 78% of the original purchase price of your home.

What's in it, and why you should care.
Joe and Jenny were very excited about buying their first house. They had saved for a down payment, decided on the perfect neighborhood and found a wonderful REALTOR® to guide them to the home of their dreams. But when they applied for a mortgage the bank turned them down, saying they had too much available credit and too many late payments.

Jim had a stressful experience when he tried to buy a new car. At the last minute, he was told he didn't qualify for a loan because he had declared bankruptcy three years ago. Jim, who is single, was also told that his "wife" had a recent criminal conviction and his mortgage payments were three months in arrears. This was all news to Jim, who had no wife, no mortgage payment - and now, unfortunately, no new car.

How do these things happen? How do financial institutions find out all this information? And what can you do if their information is wrong?

Your financial history is constantly being tracked by at least three major credit bureaus: Equifax, TransUnion and Experian. These companies store all kinds of information, and share it with other companies including financial institutions, insurance companies and employers.

What kind of information is included in my credit report?

• Any credit that has been extended to you in the past seven years, even open lines of credit that you do not currently use;
• Bankruptcy information, which is held for 10 years;
• Your repayment history, including which payments were late and how late they were made;
• Information on arrests and criminal convictions
  

Joe and Jenny ran into trouble because they had several open lines of credit, totaling tens of thousands of dollars. Even though they had not actually borrowed large sums of money, the bank saw this as a potential drain on their budget, especially considering their less-than-perfect payment history, and rejected their mortgage application.

How can I get a copy of my credit report?
You should check your credit history about six weeks before applying for a car loan, mortgage or job. In fact, it’s a good idea to get a copy of your credit report about once a year so you can check it for accuracy. If Jim had done this, he could have straightened out his "identity crisis" before applying for a loan.

To obtain a copy of your credit report, call all three credit bureaus or apply through their web sites:

Equifax
(800) 685-1111

TransUnion
(800) 888-4213

Experian
(888) 397-3742

If you have been denied credit, employment or insurance within the past 60 days, you are entitled to a free report. Otherwise there is a small charge.

What if I find a mistake?
If your credit report contains errors, write a letter to the credit bureau and also to the company or lender that made the mistake. Include copies of documents that support your claim. Send both letters by certified mail, return receipt requested, and keep copies for your records. It may take time, patience and persistence to straighten out mistakes on your credit report. But in the long run, it’s well worth the effort.

• Things you use often;
• Things that you haven't used in a while, but you know you'll use some day soon;
• Things you haven't used in more than a year;
• Things that are seasonal.
  

Sift
If you haven't used something in more than a year, maybe it's time to say goodbye. Sometimes you have to be a bit ruthless. These items are probably a large percentage of your clutter! Here are some options:

• Have a garage sale
• Let a consignment shop sell larger items for you
• Give things away to friends or family members
• Donate items to charity – you'll help a worthy cause, and get a tax deduction! (Be sure to get a receipt.)
  

Store
If you've done a good job of sifting, you'll have more room for storing. If you have a basement or attic, these are two obvious locations for storage, but don't overlook other spots such as closet shelves or under the beds. There are all kinds of nifty containers that will stack on top of each other, provide storage and look good at the same time (and squeeze into tight spots).

Shop for solutions
You can find containers of all shapes and sizes, designed to hold everything from tiny Christmas ornaments to bulky blankets. Depending on your needs, you might want to consider buying:

• A filing cabinet for documents, receipts and other papers
• Dual-duty furniture, such as a coffee table with drawers or a bench with a lift-up top
• Covered plastic bins for blankets or clothing
• Specially designed containers for ornaments and other small items
• Small rolling cabinets with drawers for office supplies and current bills
• Shelves for just about anything – books, games, shoes, whatever!

• A flashlight. Home repairs rarely involve spacious, well-lit areas. A good flashlight will save you lots of aggravation.
• A stud finder. A stud finder uses x-ray vision to locate wall studs for you so you can hang heavy objects. Very cool.
• Spackle. Spackle lets you fix the holes you made before you bought the stud finder.
• A basic tool kit. You'll need a variety of screwdrivers, wrenches, thingies and whatchamacallits. No matter how elaborate a kit you buy, it will have everything except the tool you need. But you have to start somewhere.
• Duct tape. What you use when you discover your toolkit doesn't have the tool you need.
• A toilet plunger. Hey, nobody ever said home ownership was glamorous.
• A level. This will come in handy for hanging pictures, wallpaper or shelves. Buy a big one to impress your friends, and a little one that you'll use all the time.
• An empty coffee can. Put all your extra nails, screws, washers and nuts here. You'll be amazed at how often you'll find exactly the part you need, in your handy little "spare parts" can.
• A wet-dry vacuum. For wet, messy, generally unpleasant situations. You may not need this every day, but when you do you'll be really glad you have one on hand.
• A phone book. It's good to know your limitations. If you're not comfortable with electrical repairs, for instance, call a professional electrician. Your local emergency room will thank you.
  

In addition to these basic tools, every homeowner needs a generous dose of patience and a set of realistic expectations. It helps a lot if you know what you're getting into ahead of time. Have your REALTOR® arrange a professional home inspection before you purchase your next home. A home inspector can tell you what needs immediate attention, and what may be on the verge of breaking down. You can plan your tool kit and your budget accordingly, and spend leisure time enjoying your new home instead of fixing it.

• Exterior landscaping - A local nursery or home improvement store can point you to easy-care plants that thrive in your region.
• Spackling - A little dab does the trick; simply fill those pesky wall holes and sand until smooth.
• Repainting a room - Just choose your color and roll away! But don't skimp on equipment; go for a quality brush and roller cover.
• Changing a door lock - Most door sets require just four simple screws. For older homes, make sure you buy a model that will fit your existing door configuration. When in doubt, bring the old door set along.
• Fixing a squeaky hinge - Choose graphite or another dry lubricant especially made for doors; don't use oils, which will only attract dirt.
• Repairing a broken sprinkler head - Most plastic sprinkler parts are easily interchangeable; just screw off the old head and/or riser, and replace the broken part. If the water line itself is cracked or broken, cut and repair using couplings and PVC glue.
• Patching or replacing a screen - Most hardware or home improvement stores sell replacement screen fabric. For tiny holes, try a simple hook-in-place patch.
• Adding a dimmer switch - Always shut off power to the circuit before you begin! Follow directions on the package carefully. If this is your first time dealing with electricity, ask a knowledgeable friend to help.
• Replacing a cracked tile - Carefully chip out the damaged tile; use mastic or thin set mortar to set a replacement tile and then grout. No exact duplicates on hand? Consider a patterned tile or contrasting color.
• Re-caulking a bath tub - Cut and gently scrape away old caulking; apply new tub-and-tile caulk using a squeeze tube or caulking gun.
  

Before tackling any project, take time to read up on the subject before you begin -- there's a wide selection of helpful home repair books as close as your neighborhood bookstore. Free brochures and even how-to classes are also available at many "big box" home improvement stores.

EXTRA TIP: Allow yourself plenty of time when tackling a home repair project for the first time. Try not to start something big just before relatives arrive, for example.

EXTRA TIP: Nervous about diving in? Ask a handy friend or relative to help you through a new project, or offer to help them with a home improvement job so you can learn how.

• Protect your doors. Statistics show that 80% of all break-ins are through a door.
• Keep your doors visible and well lit.
• Install dead-bolt locks. Simple door locks are easy to get past, and offer virtually no protection.
• Purchase a timer that will turn your lights on and off automatically when you're away.
• Have your mail and paper delivery stopped if you will be out of town for an extended period of time.
• Ask for identification if service people come to your home. Call the company for verification if you have any doubts.
• If you see a strange vehicle on your street, jot down the license plate number.
• Keep important papers and documents in a safe deposit box.
• Mark all your electronic equipment with a permanent etching of your name and driver's license number. This helps identify property and makes it harder for a thief to sell.
  

Don't:

• Hide a spare key in the mailbox, over the doorway or under the mat. These are the first places a thief will look.
• Leave a note on the door, saying that you're gone. You don't want to announce to the world that your house is empty for the weekend.
• Keep a lot of cash in your house.
• Enter the house if you arrive home and see any signs of a break-in. Call the police and let them go inside first.
  

Electronic security systems
For the ultimate in home security, you may want to consider an electronic security system. These systems typically include a combination of door and window censors, motion censors and smoke detectors. You can spend under $100 for a simple do-it-yourself kit, or up to several thousand dollars plus a monthly monitoring fee for more elaborate services. With a monitored system you have the assurance that someone is ''watching'' your home at all times -- as long as you remember to set the alarm when you leave the house. No matter what kind of system you decide to set up, be sure to keep it activated during the day, when most break-ins occur.

Take some of these simple steps to heart and protect the things that matter most. Go a step further and investigate the advantages of an electronic security system. An investment in your home's security may earn you a discount on your homeowner's insurance, and will certainly pay off in peace of mind for you and your family.

• Caulk or weather-strip around the edges of the window to reduce air leakage.
• Add a storm window. These range from inexpensive sheets of plastic to deluxe triple-track glass units with low-e coatings.
• Replace your windows with new, airtight, energy efficient models. Obviously, this is your most expensive option, but it's also the most effective.
  

There is moisture between the panes of glass.
This would indicate that the seal between the two panes of glass has failed. Contact the manufacturer if possible, or call a glass company to inquire about having the glass replaced.

There is moisture on the inside pane of glass.
The humidity in your home is a bit too high. Dehumidify, turn down your humidifier, add bathroom vent fans or open some windows from time to time.

Your drapes and furniture are fading.
Dermatologists have been telling us for years to stay out of the sun. The same holds true for your furniture. Too much sunlight will fade fabrics and dry out wood surfaces. To prevent your furniture's premature aging, add window shades or have your sunny windows coated with a plastic glazing material. Be sure to inquire about warranties, as less expensive glazing materials can crack, flake or even cause your window seals to fail.

You just don't like your windows.
Fair enough. Maybe they stick in their rusty metal tracks. Maybe they're all boring rectangles, and you'd like a nice arch here and there. Today's windows are beautiful, stylish and energy efficient. Replacement windows let you:

• Cut your heating and cooling costs
• Improve your ventilation
• Harmonize your windows with your décor
• Create a better view
• Allow light through while blocking unwanted heat and UV rays
  

Take some time to compare the different materials available: aluminum, wood, vinyl and fiberglass. Get estimates from several companies, and compare maintenance, warranties, costs and energy savings. With a tremendous variety of materials, styles, shapes and sizes to choose from, new windows are bound to give your home a bright outlook on life!

• Electronic door locks
• A home theater system
• Your home phone and intercom system
• Lights and appliances
• Climate and ventilation
• Window blinds
• Your home security system
• Child tracking/monitoring devices

Your home can become a tool to help support and maintain your lifestyle, with unprecedented efficiency and convenience.

Some things to consider
As we all know, technology is a wonderful thing when it works the way we expect it to. Integrated home technology is still a fairly new field, and glitches are certainly possible. What if you returned home at the end of the day to find your television blaring, your lights shining and your furnace heating your home to a toasty 85 degrees?

An integrated system takes research, planning and -- of course -- money. Most components can be added to an existing home, but it's easier and less expensive to install a system as your house is being built. You'll want to carefully check out the credentials of your installer, and once your system is in place, you will need to take the time to educate yourself on how to use it.

If you enjoy fiddling with the latest electronic gadgets and you love the idea of dazzling your friends with your home's amazing intelligence, check out the possibilities of today's home technology. If you're not quite ready to jump on board, keep an eye out for new developments. The possibilities will become even greater and the cost lower in the years to come.

• closing costs
• any significant home improvements
• title insurance
• loan application fees
• credit reports
• appraisal fees
• attorney fees
• document preparation and recording fees
  

As of January 1, 1991, homeowners have been able to deduct points paid by the seller. Previously homeowners could only deduct points paid by the buyer. As a homeowner, when you go to sell your house, you cannot deduct losses on the sale from your tax returns. Make sure to minimize your losses by keeping your house updated and in good repair.

When inheriting a house, the IRS determines the value of the house -- the "fair market value" at the time of the original homeowner's death -- not the amount originally paid. The party who inherited the house is responsible for capitol gains tax on the profit made. (Estate taxes only kick in when the total value of the estate reaches $600,000.)

The interest and property taxes are deductible on a second home, if you itemize. Make sure to check with your accountant or tax advisor for specifics.