Buying a Home: When is the Right Time? Buying a Home - Is it Time? Right now, interest rates on loans are at a 30 year low. That means that the monthly payment that you would make on a home will be lower than if you bought that same home a year ago. Odds are in the long-run, that interest rates on buying a house will be going up. So if you have thought about buying a home (as opposed to renting), now is the time to go for it. HOW DO YOU KNOW IF YOU'RE READY TO BUY? You can find out by asking yourself some questions: Do I have a steady source of income (usually a job)? Have I been employed on a regular basis for the last 2-3 years? Is my current income reliable? Do I have a good record of paying my bills? Do I have few outstanding long-term debts, like car payments? Do I have money saved for a down payment? Do I have the ability to pay a mortgage every month, plus additional costs? If you can answer "yes" to these questions, you are probably ready to buy your own home. HOW TO BEGIN THE PROCESS OF BUYING A HOME Start by thinking about your situation. Are you ready to buy a home? How much can you afford in a monthly mortgage payment ? How much space do you need? What areas of town do you like? After you answer these questions, make a 'To Do" list and start doing casual research. Talk to friends and family, drive through neighborhoods, and look in the "Homes" section of the newspaper. HOW DOES PURCHASING A HOME COMPARE WITH RENTING? The two don't really compare at all. The one advantage of renting is being generally free of most maintenance responsibilities. But by renting, you lose the chance to build equity, take advantage of tax benefits, and protect yourself against rent increases. Also, you may not be free to decorate without permission and may be at the mercy of the landlord for housing. Owning a home has many benefits. When you make a mortgage payment, you are building equity. And that's an investment. Owning a home also qualifies you for tax breaks that assist you in dealing with your new financial responsibilities- like insurance, real estate taxes, and upkeep- which can be substantial. But given the freedom, stability, and security of owning your own home, they are worth it. Find out How Much Mortgage Can You Afford You can save yourself a lot of wheel-spinning if you take a minute to figure out how much mortgage you can afford. Generally, a lender will want your monthly mortgage payment to total no more than 29% of your monthly gross income (that's your monthly income before taxes and other paycheck deductions are taken out.) You also need to consider current loan interest rates. The lower the interest rate, the more expensive the home you'll be able to afford. Follow our tips and use these simple calculators to see how much you can afford in a mortgage payment. Create Your "Wishlist" Make your wish list. Focus on the features you want in a home: 2 bedrooms or 3? 1 bath or 2? Garage or no garage? Knowing what you're looking for will help you focus your search. And it will help your real estate broker, too. Find a Real Estate Broker You'll want to start searching for a broker as soon as you decide to buy a home. Talk to several and find someone you think you'll be comfortable working closely with. Many of your friends and relatives have probably bought and sold their homes through brokers. Ask them who they used and what their experiences were. You can find out which brokers specialize in the kind of home or the area you want by looking in the Yellow Pages or your local newspaper's classified real estate ads. Or drive through neighborhoods and note the names of brokers on "for sale" signs. When you talk to prospective brokers, ask questions about the areas and types of homes in which you're interested. Do they seem knowledgeable? Most important, is their personal style a good fit with your own? HOW DO I CHOOSE THE BEST LOAN PROGRAM FOR ME? Your personal situation will determine the best kind of loan for you. By asking yourself a few questions, you can help narrow your search among the many options available and discover which loan suits you best. • Do you expect your finances to change over the next few years? • Are you planning to live in this home for a long period of time? • Are you comfortable with the idea of a changing mortgage payment amount? • Do you wish to be free of mortgage debt as your children approach college age or as you prepare for retirement? Your lender can help you use your answers to questions such as these to decide which loan best fits your needs. WHAT IS THE BEST WAY TO COMPARE LOAN TERMS BETWEEN LENDERS? First, devise a checklist for the information from each lending institution. You should include the company's name and basic information, the type of mortgage, minimum down payment required, interest rate and points, closing costs, loan processing time, and whether prepayment is allowed. Speak with companies by phone or in person. Be sure to call every lender on the list the same day, as interest rates can fluctuate daily. In addition to doing your own research, your real estate agent may have access to a database of lender and mortgage options. Though your agent may primarily be affiliated with a particular lending institution, he or she may also be able to suggest a variety of different lender options to you. Mortgages and Homebuying Programs Many different kinds of mortgages are available to you. Read about them, and make sure you understand the pros and cons of each. Your real estate broker can help you. HUD offers some special homebuying programs. Also, many local governments offer special homebuying programs to help low-income homebuyers. Shop around - you may be surprised at all your options! Federal Government Mortgage Insurance Programs Also known as HUD, the U.S. Department of Housing and Urban Development was established in 1965 to develop national policies and programs to address housing needs in the U.S. One of HUD's primary missions is to create a suitable living environment for all Americans by developing and improving the country's communities and enforcing fair housing laws. HUD insures mortgage loans to help people buy or refinance their current homes with a low down payment. HUD doesn't give you the loan directly. You'll need to go to a local HUD-approved lender, who will help you find out if one of HUD's programs is right for you. But, you can learn about HUD's mortgage insurance programs right here! HUD's FHA Loan If you're interested in a buying a home and you meet our credit qualifications, you may be eligible for a low down payment of 3 percent. On a $50,000 home, that's a downpayment of $1,500, compared with $5,000 - $10,000 for most conventional loans. You also can wrap your closing costs and fees into the mortgage. HUD-insured loans are available in urban and rural areas for single family homes and for 2-unit, 3-unit, and 4-unit properties To get a HUD-insured loan, you need to apply to a HUD-approved bank, mortgage company, or savings and loan association for your mortgage. WHAT HAPPENS AFTER I HAVE APPLIED FOR A LOAN? It usually takes a lender between 1-6 weeks to complete the evaluation of your application. It's not unusual for the lender to ask for more information once the application has been submitted. The sooner you can provide the information, the faster your application will be processed. Once all the information has been verified, the lender will call you to let you know the outcome of your application. If the loan is approved, a closing date is set up and the lender will review the closing process with you. And after closing, you'll be able to move into your new home. Shopping for a Home Now you really begin house-hunting. Your real estate broker will be able to find listings for you, based on your wishlist. But don't stop there! You can do your own looking, and then ask your broker to show you the house. Start with the Internet. Pick up real estate flyers at local grocery stores and convenience stores. Read the real estate sections of your local newspaper. Drive around neighborhoods that interest you and write down addresses where there are "for sale" signs. Go to open houses. Try everything! Manufactured Homes Manufactured homes can be a great alternative for first-time homebuyers. Again, it's good to know how the laws protect you. Rehab a Home You may want to consider buying a "fixer-upper." If so, there are federal programs that can help you finance your repairs. Home Inspections When you make an offer on a home, it's a good idea to make your offer contingent on a home inspection, conducted by an independent authorized inspector. You will have to pay for this inspection yourself, but it could keep you from buying a house that will cost you far more in repairs, down the road. If you are satisfied with the results of the inspection, then your offer can proceed. If you aren't you may want to negotiate, asking the seller to pay for certain repairs or asking for a lower price. Appraisals Your lender will require you to get an appraisal of the house you want to buy, to make sure it's worth the money that you're borrowing. You may select your own appraiser, or you may ask your real estate broker to help you take care of that. Homeowner's Insurance Lenders require that you have homeowners insurance, to protect both your interests and theirs. Like everything else, be sure to shop around for insurance that fits your needs. Settlement or Closing Finally, you've gone through the whole process, and you're ready to go to "settlement" or "closing." We know you'll be excited, but be sure to read everything you sign! And before you go, read this important information about your rights. Moving Looks like you're ready to move. There's a lot to consider as you plan your move. The good news is that there's lots of help. Check this out.

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