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frequently
asked questions
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Why should
I buy, instead of rent?
Answer: You'll love the feeling of having something
that's all yours - a home where your own personal style
will tell the world who you are. A thriving vegetable
garden in the backyard, a tiled entryway, a yellow kitchen...when
you own, you can do it all your way! But there's more
to owning a home than personal satisfaction. You can deduct
the cost of your mortgage loan interest from your federal
income taxes, and usually from your state taxes, too.
And interest will compose nearly all of your monthly payment
, for over half the number of years you'll be paying your
mortgage. This adds up to hefty savings at the end of
each year. And you're also allowed to deduct the property
taxes you pay as a homeowner. If you rent, you write your
monthly check and it's gone forever. Another financial
plus in owning a home is the possibility its value will
go up through the years. See our Buying
vs Renting page for more information.
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I've
heard of HUD homes. What are HUD homes, and are they a
good deal?
Answer: HUD homes can be a very good deal.
When someone with a HUD insured mortgage can't meet the
payments, the lender forecloses on the home; HUD pays
the lender what is owed; and HUD takes ownership of the
home. Then we sell it at market value as quickly as possible.
Read all about buying a HUD home - one might be right
for you! And check our listings of HUD homes - as well
as homes being sold by other federal agencies.
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I'm
a single mother. How would I go about buying a home?
Answer: Although you won't have the benefit of
two incomes on which to qualify for a loan, there's no
reason that you can't become a homeowner. Become familiar
with the process, pick a good real estate broker, and
think about getting pre-qualified for a loan. You might
want to contact one of the HUD-funded housing
counseling agencies in your area to talk through your
options. And you also might want to think about buying
a HUD home - they can be very good deals. Also, contact
your local government to see if there are any local
homebuying programs that could help you. Look in the
blue pages of your phone directory for your local office
of housing and community development or, if you can't
find it, contact your mayor's office or your county executive's
office.
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Should
I use a real estate broker? How do I find one?
Answer: Using a real estate broker is a very
good idea. All the details involved in home buying, particularly
the financial ones, can be mind-boggling. A good real
estate professional can guide you through the entire process
and make the experience much easier. A real estate broker
will be well-acquainted with all the important things
you'll want to know
about a neighborhood you may be considering...the
quality of schools, the number of children in the area,
the safety of the neighborhood, traffic volume, and more.
He or she will help you figure
the price range you can afford and search the classified
ads and multiple listing services for homes you'll want
to see. With immediate access to homes as soon as they're
put on the market, the broker can save you hours of wasted
driving-around time. When it's time to make an offer on
a home, the broker can point out ways to structure your
deal to save you money. He or she will explain the advantages
and disadvantages of different types of mortgages, guide
you through the paperwork, and be there to hold your hand
and answer last-minute questions when you sign the final
papers at closing. And you don't have to pay the broker
anything! The payment comes from the home seller - not
from the buyer.
By the way, if you want to buy
a HUD home, you will be required to use a real estate
broker to submit your bid. To find a broker who sells
HUD homes, check your local yellow pages or the classified
section of your local newspaper.
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How
much money will I have to come up with to buy a home?
Answer: Well, that depends on a number of factors,
including the cost of the house and the type of mortgage
you get. In general, you need to come up with enough money
to cover three costs: earnest money - the
deposit you make on the home when you submit your offer,
to prove to the seller that you are serious about wanting
to buy the house; the down payment, a percentage
of the cost of the home that you must pay when you go
to settlement; and closing costs, the costs
associated with processing the paperwork to buy a house.
When you make an offer on a home, your real estate broker
will put your earnest money into an escrow account. If
the offer is accepted, your earnest money will be applied
to the down payment or closing costs. If your offer is
not accepted, your money will be returned to you. The
amount of your earnest money varies. If you buy a HUD
home, for example, your deposit generally will range from
$500 - $2,000.
The more money you can put into your down payment, the
lower your mortgage payments will be. Some types of loans
require 10-20% of the purchase price. That's why many
first-time homebuyers turn to HUD's FHA for help. FHA
loans require only 3% down - and sometimes less.
Closing costs - which you will pay at settlement
- average 3-4% of the price of your home. These costs
cover various fees your lender charges and other processing
expenses. When you apply for your loan, your lender will
give you an estimate of the closing costs, so you won't
be caught by surprise. If you buy
a HUD home, HUD may pay many of your closing costs.
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In
addition to the mortgage payment, what other costs do
I need to consider?
Answer: Well, of course you'll have your monthly
utilities. If your utilities have been covered in your
rent, this may be new for you. Your real estate broker
will be able to help you get information from the seller
on how much utilities normally cost. In addition, you
might have homeowner
association or condo association dues. You'll definitely
have property taxes, and you also may have city or county
taxes. Taxes normally are rolled into your mortgage payment.
Again, your broker will be able to help you anticipate
these costs.
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So
what will my mortgage cover?
Answer: Most loans have 4 parts: principal:
the repayment of the amount you actually borrowed; interest:
payment to the lender for the money you've borrowed; homeowners
insurance: a monthly amount to insure the property against
loss from fire, smoke, theft, and other hazards required
by most lenders; and property taxes: the annual city/county
taxes assessed on your property, divided by the number
of mortgage payments you make in a year. Most loans are
for 30 years, although 15 year loans are available, too.
During the life of the loan, you'll pay far more in interest
than you will in principal - sometimes two or three times
more! Because of the way loans are structured, in the
first years you'll be paying mostly interest in your monthly
payments. In the final years, you'll be paying mostly
principal.
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I
know there are lots of types of mortgages - how do I know
which one is best for me?
Answer: You're right - there are many types
of mortgages. Most people use a fixed-rate mortgage. In
a fixed rate mortgage, your interest rate stays the same
for the term of the mortgage, which normally is 30 years.
The advantage of a fixed-rate mortgage is that you always
know exactly how much your mortgage payment will be, and
you can plan for it. Another kind of mortgage is an Adjustable
Rate Mortgage (ARM). With this kind of mortgage, your
interest rate and monthly payments usually start lower
than a fixed rate mortgage. For more information, talk
to one of our professional loan associates who can help
you decide on the type of mortgage that best suits your
specific needs.
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When I find
the home I want, how much should I offer?
Answer: Your real estate broker can help you
here. But there are several things you should consider:
1) is the asking price in line with prices of similar
homes in the area? 2) Is the home in good condition or
will you have to spend a substantial amount of money making
it the way you want it? You probably want to get a professional
home
inspection before you make your offer. Your real estate
broker can help you arrange one. 3) How long has the home
been on the market? If it's been for sale for awhile,
the seller may be more eager to accept a lower offer.
4) How much mortgage will be required? Make sure you really
can afford whatever offer you make. 5) How much do you
really want the home? The closer you are to the asking
price, the more likely your offer will be accepted. In
some cases, you may even want to offer more than the asking
price, if you know you are competing with others for the
house.
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How
do I prepare my house for sale?
Answer: First and foremost, put it in the best condition
possible, especially if you are in a market with few buyers
and lots of homes for sale. That means taking care of
any major repairs that could deter a buyer (such as replacing
any broken windows or replacing a leaky roof) if you can
afford it. Next, work on your home's curb appeal. Make
sure your landscape is pristine. Mow the grass, clean
up any debris and weed the garden beds. Plant a few annual
flowers near the entrance or in pots to be placed by the
door. There are other quick fixes that don't cost a lot
of money but can help you get top dollar for your home.
See our Mortgage Tools page for
more tips and information on selling.
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