Realty Associates
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commonly referred to as debt or the mortgage.) The good news is that over the years new and innovative loan programs have
evolved which require a 5 percent down payment or less. In fact, a number of programs now allow purchasers to buy real estate with
nothing down.
In addition to a down payment, purchasers also need cash for closing costs (the final costs associated with closing the loan). Several
newly emerging loan programs not only allow the purchase of a home with no money down, but also underwrite closing costs.
Not everyone, however, elects to purchase with little or no money down. Less money down means higher monthly mortgage
payments, so most home buyers choose to buy with some cash up front.

As to closing costs, in markets where buyers have leverage, it may be possible to negotiate an offer for a home that requires the
owner to pay some or all of your settlement expenses.
Is Your Financial House in Order?

Those great loans with little or nothing down are not available to everyone: You need good credit. For at least one year prior to
purchasing a home, you should assure that every credit card bill, rent check, car payment and other debt is paid in full and on time

Step 2: Get a Loan Pre-Approval

Few people can buy a home for cash. According to the National Association of REALTORS® (NAR), nearly nine out of 10 buyers
finance their purchase, which means that virtually all buyers -- especially first-time purchasers -- required a loan.

The real issue with real estate financing is not getting a loan (virtually anyone willing to pay lofty interest rates can find a mortgage).
Instead, the idea is to get the loan that's right for you -- the mortgage with the lowest cost and best terms.
REALTORS® routinely suggest that consumers start the mortgage process well before bidding on a home. Many lenders (the
sources of money) and programs, for example, are available right here in the finance section of as well as through
recommendations from local REALTORS®. By meeting with lenders -- either online or face to face -- and looking at loan options, you
will find which programs best meet your needs and how much you can afford.

REALTORS® also recommend pre approvals for another reason: Purchase forms often require buyers to apply for financing within a
given time period, in many cases, seven to 10 days. By meeting with loan officers in advance and identifying mortgage programs, it
won't be necessary to quickly find a lender, check credit, and rush into a financing decision that may not be the best option.
What is it?

"Pre-approval" means you have met with a loan officer, your credit files have been reviewed and the loan officer believes you can
readily qualify for a given loan amount with one or more specific mortgage programs. Based on this information, the lender will
provide a pre approval letter, which shows your borrowing power. You can visit as many lenders as you like and get several
pre-approvals, but keep in mind that each one carries with it a new credit check, which will show up on future credit reports.
Although not a final loan commitment, the pre approval letter can be shown to listing brokers when bidding on a home. It
demonstrates your financial strength and shows that you have the ability to go through with a purchase. This information is important
to owners since they do not want to accept an offer that is likely to fail because financing cannot be obtained.
How do you get pre-approval?

Real estate financing is available from numerous sources, including lenders here in the finance section of, mortgage
companies that have worked with local REALTORS® and in some cases, individual REALTORS® themselves. Based on his or her
experience, the REALTOR® may suggest one or more lenders with a history of offering competitive programs and delivering
promised rates and terms.

The loan officer will carefully review your financial situation, including your credit report and other information. The lender will then
suggest programs which most-closely meet your needs. For instance, a first-time buyer may qualify for state-backed mortgage
programs with little money down and low interest rates, while a repeat purchaser (someone who has bought a home before) with
more equity (money invested in the home) might want to get a 15-year loan and the lower overall interest costs it represents.
Typically, first-time buyers opt for the traditional 30-year loan, with either a floating interest rate or a fixed rate of interest over the life
of the loan.

Step 3: Start Your Home Search:

Millions of new and existing homes are sold each year. There's no shortage of housing options, but with so many choices the
challenge becomes finding the property which best meets your needs.

The housing market is complicated because the stock of homes for sale is always in flux. If it were possible to have a complete list of
every home for sale at this very moment in a given community, such a list would become obsolete within seconds as new homes
become available and properties now for sale are put under contract.

In effect, buyers are looking at a moving target in a marketplace that is never static. Because of this, it is important to know as much
as possible about the choices in preferred markets, and the way to do that is by working closely with a local REALTOR® who has a
good lay of the land.

What are you looking for?
A home is more than just a collection of bedrooms and bathrooms. Several properties -- each with four bedrooms, three baths, and
the same price -- may well represent radically different designs, commuting distances, lot sizes, tax costs, interior dimensions, and
exterior finishes.

Each of us is different and so it's important to list the features and benefits you want in a home. Consider such things as pricing,
location, size, amenities (extras such as a pool or extra-large kitchen) and design (one floor or two, colonial or modern, etc.).
Next, it's important to consider your priorities. If you can't get a home at your price with all the features you want, then what features
are most important? For instance, would you trade fewer bedrooms for a larger kitchen? A longer commute for a bigger lot and lower

Lastly, consider your needs in several years. If you'll need a larger home, maybe now is the time to buy a bigger house rather than
moving or expanding in the future. If you expect your income to increase, perhaps you should consider a more expensive home
financed with a loan program where monthly payments increase in the future.

Where should you look?
All neighborhoods and communities have a special nature that gives them identity and value. One community may be well known for
historic homes while another offers both suburban living as well as easy access to downtown office areas.® offers millions of homes online. By any standard, it's the largest source for property information, online or off. You
can look at homes to contact listing brokers, and you can also search® to find brokers who offer buyer representation

How do you find a house?
Some buyers like to search online by looking at listings on the basis of location or price; others prefer to have local REALTORS®
suggest properties; and many buyers prefer both approaches.
Regardless of your choice, it's important to target your search. By using basic measures such as general location and affordability,
you can refine your search and focus on homes that offer the most desirable features.
As a guide, you should maintain a file with information on each of the homes you like.

Step 4: Choose A Home:

There's no doubt that choosing a home is a big decision and you want to do it right.
As a buyer, here's what actually happens. A home has been placed on the market for which the seller has established an asking
price as well as other terms. In effect, this is an offer. At this point, you have three choices: accept the seller's offer and create a
contract; reject it and not make an offer; or suggest different terms and make a counter-offer. If you choose this last option, the seller
may accept, reject or make a counter-offer.

No aspect of the home buying process is more complex, personal or variable than bargaining between buyers and sellers. This is the
point where the value of an experienced REALTOR® is clearly evident because he or she knows the community, has seen numerous
homes for sale, knows local values and has spent years negotiating realty transactions.

Is it THE house?
A house is shelter, but a home is far more. It's where you live, relax, entertain friends, raise families, and work. A home is where you
spend much of your life, and so choosing a house is an enormous decision.

How do you know if a house is THE one? Probably the best approach is to look at as many homes as possible, something made easy
by, where you can quickly and easily view huge numbers of homes, check prices, take video tours and view extensive
neighborhood information. Once your choices have been narrowed, you can then contact a local REALTOR® to find specific
information and options.

Can you really afford it?

Remember Step 2 - the pre-approval process? Getting pre-approved means you have a very good idea of how much you can
borrow, what loan programs will most likely work best in your situation and how much home you can afford.
How reliable is a pre-approval? While pre-approval is not a loan commitment, it's still necessary for lenders to check such items as
appraisals and the latest credit reports. Despite fluctuating interest rates, pre-approval nonetheless provides a reasoned, careful
analysis of what you can afford. After all, loan officers are routinely paid only when loans are originated. It doesn't make much sense
for loan officers to suggest high loan limits that later can't be delivered.

Step 5: Get A Mortgage Loan:

Often the cost of real estate financing is routinely greater than the original purchase price of a home (after including interest and
closing costs). Because financing is so important, buyers should have as much information as possible regarding mortgage options
and costs.® provides consumers with extensive mortgage information as well as a variety of loan calculators. Local REALTORS®
can provide mortgage information, discuss financing options and recommend loan sources. In addition, some REALTORS® also
originate loans.

What kind of loan?

There are thousands of loans available out there from a variety of lenders, but in general, the mortgage you choose will likely be
determined by at least several key factors:

How much down? Loans with 5 percent down or less are available -- in fact, loans from major lenders with no money down have
appeared in recent years.

If you place less than 20 percent down, lenders will want the mortgage guaranteed by an outside third party such as the Veterans
Administration (VA), the Federal Housing Administration (FHA) or a private mortgage insurer (PMI, or private mortgage insurance, is
required by lender to protect against any mortgage defaults). Millions of VA, FHA and PMI loans are generated each year.
How's your credit? The best rates and terms are only available to those with solid credit. To get the best loans, make a point of
paying credit cards, installment payments, rent and mortgage bills in full and on time.
Are you a first-time buyer? It might seem that "first-time buyer" means someone who has never owned property before, but under
most state programs, the term refers to those who have not owned property within the past three years. State-backed first-timer
programs often feature smaller down payments and below-market interest rates. For details, speak with your local REALTOR®.
How do you get a loan?

To obtain a loan you must complete a written loan application and provide supporting documentation. Specific documents include
recent pay stubs, rental checks and tax returns for the past two or three years if you are self-employed. During the prequalification
procedure, the loan officer will describe the type of paperwork required.

Where do you get a loan?
Mortgage financing can be obtained from mortgage bankers, mortgage brokers, savings and loan associations, mutual savings
banks, commercial banks, credit unions, and insurance companies.

Step 6: Make An Offer

REALTOR® groups, working with legal counsel, have developed forms that are appropriate for realty transactions in specific
communities. Such documents include numerous sale conditions and their wording should be carefully reviewed to assure that they
reflect the terms you want to offer. REALTORS® can explain the general contracting process in your community as well as his or her

While much attention is spent on offering prices, a proposal to buy includes both the price and terms. In some cases, terms can
represent thousands of dollars in additional value for buyers -- or additional costs. Terms are extremely important and should be
carefully reviewed.

How much?
You sometimes hear that the amount of your offer should be x percent below the seller's asking price or y percent less than you're
really willing to pay. In practice, the offer depends on the basic laws of supply and demand: If many buyers are competing for homes,
then sellers will likely get full-price offers and sometimes even more. If demand is weak, then offers below the asking price may be in

How do you make an offer?
The process of making offers varies around the country. In a typical situation, you will complete an offer that the REALTOR® will
present to the owner and the owner's representative. The owner, in turn, may accept the offer, reject it or make a counter-offer.
Because counter-offers are common (any change in an offer can be considered a "counter-offer"), it's important for buyers to remain
in close contact with REALTORS® during the negotiation process so that any proposed changes can be quickly reviewed.
How many inspections?

A number of inspections are common in residential realty transactions. They include checks for termites, surveys to determine
boundaries, appraisals to determine value for lenders, title reviews and structural inspections.
Structural inspections are particularly important. During these examinations, an inspector comes to the property to determine if there
are material physical defects and whether expensive repairs and replacements are likely to be required in the next few years. Such
inspections for a single-family home often require two or three hours, and buyers should attend. This is an opportunity to examine
the property's mechanics and structure, ask questions and learn far more about the property than is possible with an informal

Step 7:Get Insurance

No one would drive a car without insurance, so it figures that no homeowner should be without insurance.
The essential idea behind various forms of real estate insurance is to protect owners in the event of catastrophe. If something goes
wrong, insurance can be the bargain of a lifetime.

What kind and how much?
There are various forms of insurance associated with home ownership, including these major types:
Title insurance: Purchased with a one-time fee at closing, title insurance protects owners in the event that title to the property is
found to be invalid. Coverage includes "lenders" policies, which protect buyers up to the mortgage value of the property, and
"owners" coverage, which protects owners up to the purchase price. In other words, "owners" coverage protects both the mortgage
amount and the value of the down payment.

Homeowners' insurance: Homeowner's insurance provides fire, theft and liability coverage. Homeowners' policies are required by
lenders and often cover a surprising number of items, including in some cases such property as wedding rings, furniture and home
office equipment.
Flood insurance: Generally required in high-risk flood-prone areas, this insurance is issued by the federal government and provides
as much as $250,000 in coverage for a single-family home plus $100,000 for contents. Local REALTORS® can explain which
locations require such coverage.

Home warranties: With new homes, buyers want assurance that if something goes wrong after completion the builder will be there to
make repairs. But what if the builder refuses to do the work or goes out of business?
Home warranties bought from third parties by home builders are generally designed to provide several forms of protection:
workmanship for the first year, mechanical problems such as plumbing and wiring for the first two years, and structural defects for up
to 10 years.

Home warranties for existing homes are typically one-year service agreements purchased by sellers. In the event of a covered defect
or breakdown, the warranty firm will step in and make the repair or cover its cost.
Insurance policies and warranties have limitations and individual programs have different levels of coverage, deductibles and costs.
For details, speak with REALTORS®, insurance brokers and home builders.

Where to look.
REALTORS® often provide home insurance and such policies are also available from insurance brokers.
How do you get insurance?
The time to obtain insurance and warranty coverage is at closing, so speak with a REALTOR® or insurance broker prior to closing.
Be sure to ask about limitations, costs, deductibles and "endorsements" (additional forms of coverage that may be available).

Step 8: Prepare For Closing:

Go to any local courthouse and you can find property records detailing real estate ownership in your community -- sometimes
records that date back hundreds of years.

These records are important because they provide today's owners with proof that they have good, marketable and insurable title to
the property they are selling. Equally important, such records enable buyers to provide proof of ownership when they sell.
The closing process, which in different parts of the country is also known as "settlement" or "escrow," is increasingly computerized
and automated. In many cases, buyers and sellers don't need to attend a specific event; signed paperwork can be sent to the closing
agent via overnight delivery.

In practice, closings bring together a variety of parties who are part of the "transaction" process. For example, while the history of
property ownership has been checked, it's possible that the records contain errors, unrecorded claims or flaws in the review itself,
thus title insurance is necessary. At closing, transfer taxes must be paid and other claims must also be settled (including closing
costs, legal fees and adjustments). In most transactions, the closing agent also completes the paperwork needed to record the loan.

What to expect

Settlement is a brief process where all of the necessary paperwork needed to complete the transaction is signed. Closing is typically
held in an office setting, sometimes with both buyer and seller at the same table, sometimes with each party completing their papers
Whatever the case, the result is that title to the property is transferred from seller to buyer. The buyer receives the keys and the
seller receives payment for the home. From the amount credited to the seller, the closing agent subtracts money to pay off the
existing mortgage and other transaction costs. Deeds, loan papers, and other documents are prepared, signed and filed with local
property record offices.

What you need to do
One of the best parts of settlement is that buyers and sellers need to do very little.
Before closing, buyers typically have a final opportunity to walk through the property to assure that its condition has not materially
changed since the sale agreement was signed. At closing itself, all papers have been prepared by closing agents, title companies,
lenders and lawyers. This paperwork reflects the sale agreement and allows all parties to the transaction to verify their interests. For
instance, buyers get the title to the property, lenders have their loans recorded in the public records and state governments collect
their transfer taxes.

Enjoy Your New Home!
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