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Common First-Time Home Buyer Mistakes

1. They don t ask enough questions of their lender and end up missing out on the best deal.

2. They don t act quickly enough to make a decision and someone else buys the house.

3. They don t find the right agent who s willing to help them through the home buying process.

4. They don t do enough to make their offer look appealing to a seller.

5. They don t think about resale before they buy. The average first-time buyer only stays in a home for four years.

Source: Real Estate Checklists and Systems, www.realestatechecklists.com.

Reprinted from REALTOR magazine (REALTOR.org/realtormag) with permission of the NATIONAL ASSOCIATION OF REALTORS .
Copyright 2008. All rights reserved.

But Seriously, What Can I Afford

One of the most important questions you need to ask yourself in the home buying process is:  How much can I pay for a house and still have a life

Ultimately, only you can decide what you can afford to spend monthly on a house payment and still be able to live the lifestyle you wish. However, a calculation provided by your mortgage lender may help you to make your determination.

When applying for a home loan, your mortgage lender will do a calculation that reveals the maximum amount the lender will lend to you. The calculation is based on a simple formula: The proposed house payment plus any fixed monthly debt payments (like credit cards and car payments) divided by your gross monthly income (your total wages before taxes are taken out) equals a percentage. Typically, mortgage lenders want that percentage to be less than 42%.

This equation is illustrated in the example below:
$1,230 (House Payment + Fixed Monthly Debt)
3,000 (Gross Monthly Income)
———
41%

Based upon this equation, after adding up your debts and reviewing your income, you may discover you can afford a pretty big mortgage payment. On the other hand, you may want to look at that number a little closer. If you borrow the maximum amount allowed, you may find that your house payment is more than you can afford based on other monthly expenditures not accounted for in the equation. For instance, the equation doesn t take into consideration money you might spend on recreation activities. If these are important to you and you don t want to give them up, you may need to keep your house payment lower than the maximum allowed in order to pay for these other expenditures.

Your best bet is to develop a budget and consider all of the typical expenses you have.

Use the form below to add up all of your monthly expenses. If there are some expenses  like auto insurance  you only pay every six months or yearly, divide by the number of months to determine your monthly expense. It s best to get everything down on paper.

Take a few minutes now and create your budget by listing the major categories where you think you have or will spend money during a typical month.

My Monthly Budget
Housing
$ ___________ Estimated house payment & association fees
$ ___________ Estimated property taxes, insurance, PMI
$ ___________ Electricity, gas
$ ___________ Phone
$ ___________ Water, sewage, garbage
Food
$ ___________ Groceries
$ ___________ Fast Food
$ ___________ Dining out
$ ___________ Beverages
Other living expenses
$ ___________ Personal care (hair, toiletries)
$ ___________ Laundry and dry cleaning
$ ___________ Clothing/shoes/hats
$ ___________ Gifts
$ ___________ Monthly membership dues/subscriptions
Transportation
$ ___________ Car payments
$ ___________ Gas & oil
$ ___________ Normal car maintenance
$ ___________ License and registration fees
$ ___________ Auto insurance
$ ___________ Parking fees
$ ___________ Bus, taxi, subway, carpool
Educational expenses (if applicable)
$ ___________ Tuition
$ ___________ Books
$ ___________ Lab fees
$ ___________ School supplies
Childcare and pet care (if applicable)
$ ___________ Day care
$ ___________ Baby/pet sitters
$ ___________ Medical/Veterinary
$ ___________ Toys
$ ___________ Special foods
$ ___________ Clothes
Expecting the unexpected
$ ___________ Traffic Tickets
$ ___________ Car Repairs
$ ___________ Medical/Dental care
(Insert other categories unique to you here)
$ ___________ ____________________________
$ ___________ ____________________________

$ ___________ Total Monthly Expenditures

* Taxes, insurance and PMI (private mortgage insurance) costs vary. Your real estate agent can help you estimate these.

Next, determine your monthly income below:

Wages and tips
$ ___________ (less taxes and other deductions)
$ ___________ Investment Income
$ ___________ Other
$ ___________ Total net monthly income

Finally, subtract your total monthly expenditures from your total monthly income. Note: Your net income, used in determining what you can afford, is different than your gross income, used to determine what you qualify to borrow.

$ ________ Total Monthly Income: (transfer $ amount from above)
– $ ________ Total Expenditures: (total of your expenses above)
= $ ________ Ending Balance

Now that you have everything down on paper, borrowing the maximum allowed may not look too good anymore! You may want to consider buying a little less house to keep a little more of your life! You may have heard the term  House rich, cash poor. That phrase was coined by people who didn t budget beforehand!

Finally, once you have a general idea of what type of house payment you can afford each month, you ll want to determine what that monthly payment will buy you in terms of the selling price of a home. Based on your estimated monthly payment, should you be looking at homes selling in the $100,000, 200,000, or $300,000 price range Your real estate agent can estimate this for you, or you can check out a  mortgage calculator on-line, which will ask a few simple questions and then do the calculation for you.

Negotiate Your Best House Buy

By: G. M. Filisko

Keep your emotions in check and your eyes on the goal, and you’ll pay less when purchasing a home.

Buying a home can be emotional, but negotiating the price shouldn’t be. The key to saving money when purchasing a home is sticking to a plan during the turbulence of high-stakes negotiations. A real estate agent who represents you can guide you and offer you advice, but you are the one who must make the final decision during each round of offers and counter offers.

Here are six tips for negotiating the best price on a home.
1. Get prequalified for a mortgage
Getting prequalified for a mortgage proves to sellers that you’re serious about buying and capable of affording their home. That will push you to the head of the pack when sellers choose among offers; they’ll go with buyers who are a sure financial bet, not those whose financing could flop.

2. Ask questions
Ask your agent for information to help you understand the sellers’ financial position and motivation. Are they facing foreclosure or a short sale Have they already purchased a home or relocated, which may make them eager to accept a lower price to avoid paying two mortgages Has the home been on the market for a long time, or was it just listed Have there been other offers If so, why did they fall through The more signs that sellers are eager to sell, the lower your offer can reasonably go.

3. Work back from a final price to determine your initial offer
Know in advance the most you’re willing to pay, and with your agent work back from that number to determine your initial offer, which can set the tone for the entire negotiation. A too-low bid may offend sellers emotionally invested in the sales price; a too-high bid may lead you to spend more than necessary to close the sale.
Work with your agent to evaluate the sellers’ motivation and comparable home sales to arrive at an initial offer that engages the sellers yet keeps money in your wallet.

4. Avoid contingencies
Sellers favor offers that leave little to chance. Keep your bid free of complicated contingencies, such as making the purchase conditional on the sale of your current home. Do keep contingencies for mortgage approval, home inspection, and environmental checks typical in your area, like radon.

5. Remain unemotional
Buying a home is a business transaction, and treating it that way helps you save money. Consider any movement by the sellers, however slight, a sign of interest, and keep negotiating.
Each time you make a concession, ask for one in return. If the sellers ask you to boost your price, ask them to contribute to closing costs or pay for a home warranty. If sellers won’t budge, make it clear you’re willing to walk away; they may get nervous and accept your offer.

6. Don’t let competition change your plan
Great homes and those competitively priced can draw multiple offers in any market. Don’t let competition propel you to go beyond your predetermined price or agree to concessions-such as waiving an inspection-that aren’t in your best interest.

More from HouseLogic
Determine how much mortgage you can afford (http://buyandsell.houselogic.com/articles/4-tips-determine-how-much-mortgage-you-can-afford/)

Keep your home purchase on track (http://buyandsell.houselogic.com/articles/keep-your-home-purchase-track/)

Plan for a stress-free home closing (http://buyandsell.houselogic.com/articles/7-steps-stress-free-home-closing/)

Other web resources
More negotiating tips (http://www.freddiemac.com/corporate/buyown/english/purchasing/offer/negotiate.html)

Develop a homebuying strategy (http://www.nolo.com/legal-encyclopedia/article-29746.html)

G.M. Filisko is an attorney and award-winning writer who has to remind herself to remain unemotional during negotiations. A frequent contributor to many national publications including Bankrate.com, REALTOR® Magazine, and the American Bar Association Journal, she specializes in real estate, business, personal finance, and legal topics.

Visit houselogic.com for more articles like this. Reprinted from HouseLogic with permission of the NATIONAL ASSOCIATION OF REALTORS
Copyright 2010. All rights reserved.

10 Questions to Ask Home Inspectors

Before you make your final buying or selling decision, you should have the home inspected by a professional. An inspection can alert you to potential problems with a property and allow you to make an informed decision. Ask these questions to prospective home inspectors:

1. Will your inspection meet recognized standards Ask whether the inspection and the inspection report will meet all state requirements and comply with a well-recognized standard of practice and code of ethics, such as the one adopted by the American Society of Home Inspectors or the National Association of Home Inspectors. Customers can view each group s standards of practice and code of ethics online at www.ashi.org or www.nahi.org. ASHI s Web site also provides a database of state regulations.

2. Do you belong to a professional home inspector association There are many state and national associations for home inspectors, including the two groups mentioned in No. 1. Unfortunately, some groups confer questionable credentials or certifications in return for nothing more than a fee. Insist on members of reputable, nonprofit trade organizations; request to see a membership ID.

3. How experienced are you Ask how long inspectors have been in the profession and how many inspections they ve completed. They should provide customer referrals on request. New inspectors also may be highly qualified, but they should describe their training and let you know whether they plan to work with a more experienced partner.

4. How do you keep your expertise up to date Inspectors commitment to continuing education is a good measure of their professionalism and service. Advanced knowledge is especially important in cases in which a home is older or includes unique elements requiring additional or updated training.

5. Do you focus on residential inspection Make sure the inspector has training and experience in the unique discipline of home inspection, which is very different from inspecting commercial buildings or a construction site. If your customers are buying a unique property, such as a historic home, they may want to ask whether the inspector has experience with that type of property in particular.

6. Will you offer to do repairs or improvements Some state laws and trade associations allow the inspector to provide repair work on problems uncovered during the inspection. However, other states and associations forbid it as a conflict of interest. Contact your local ASHI chapter to learn about the rules in your state.

7. How long will the inspection take On average, an inspector working alone inspects a typical single-family house in two to three hours; anything significantly less may not be thorough. If your customers are purchasing an especially large property, they may want to ask whether additional inspectors will be brought in.

8. What s the cost Costs can vary dramatically, depending on your region, the size and age of the house, and the scope of services. The national average for single-family homes is about $320, but customers with large homes can expect to pay more. Customers should be wary of deals that seem too good to be true.

9. What type of inspection report do you provide Ask to see samples to determine whether you will understand the inspector’s reporting style. Also, most inspectors provide their full report within 24 hours of the inspection.

10. Will I be able to attend the inspection The answer should be yes. A home inspection is a valuable educational opportunity for the buyer. An inspector’s refusal to let the buyer attend should raise a red flag.

Source: Rob Paterkiewicz, executive director, American Society of Home Inspectors, Des Plaines, Ill., www.ashi.org.

Reprinted from REALTOR magazine (REALTOR.org/realtormag) with permission of the NATIONAL ASSOCIATION OF REALTORS .
Copyright 2008. All rights reserved.

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