Quick Tips For First Time
Home Buyers
 [Glossary]
Most of us agree that it is part
of the American dream to own a home. While the advantages
of owning your home are quite appealing, your responsibility
grows tremendously when you are an owner versus a renter.
Many people still prefer to rent for many reasons. They can
pick up and leave anytime aside from breaking their lease
agreements. They do not have to worry about the heating
system for example. All repairs are just a phone call away.
Also, some people move from one location to the next quite
often and to those people, renting is better.
In the US, statistics shows that
most new homeowners are couples between the ages of 30 and
up. So if you are thinking about buying your first home and
can identify yourself in that group, know that you are not
alone. It is most likely one of the biggest decision you
have ever made so far in life. The process is not a simple
one. However, if you are informed, it can certainly become
much easier than you could ever imagine. Here, Discover Haiti
will give you some background to help you be more open minded
about the process. For those who have decided to buy their
first home, we wish you good luck. We hope that you can use
whatever information you find here, inquire further and make
that first step towards your dream.
BENEFITS
 As
it was mentioned earlier, the benefits of buying a home are
definitely worth the difficulties one may encounter during
the buying process. When you buy a home you can enjoy a nice
backyard or a vegetable garden , privacy and more space, a
garage or driveway, a pool etc… Asides from those personal
benefits, there are financial benefits as well. First,
you can deduct the entire cost of your mortgage loan interest
from your income taxes. [Note that the first few years of
your monthly mortgage payment will be mostly interest]. You
will benefit greatly from those deductions whereas a renter
cannot deduct anything from their monthly rent payment.
Second, you can also deduct the property tax paid as a home
owner. Third. your equity on the house may increase. One
way that can happen is when the value of your home increase
over the years. Also, the equity will grow as you pay off
your mortgage loan or renovate the house. By the time you
decide to resell your home you may have built up to $100,000
or more in equity. Another benefit is rental income for those
who choose to use their home as investment as well. All those
benefits make owning a house versus renting very appealing.
RESPONSIBILITY
However, let’s also be realistic
and be aware of the amount of responsibility that comes with
the joy of owning. As a homeowner, you are responsible for
shoveling the snow. If you have tenants, you have to address
their concerns relating to the apartments and so on and so
forth. You could loose your home and all the money you have
built in equity if you default on your loan and the bank decides
to put it up for foreclosure. Now that is pretty scary. But
you have to be aware that it happens quite often. Some people
borrow the small down payment from family and are counting
on the rental income to help pay for the mortgage. If you
get yourself in a similar situation and are unable to make
your mortgage payment, the bank might put your house for foreclosure.
If you ever find yourselves into that situation we advise
that you should try to sell your home first. That is not
the only way you can loose your home. You can loose your home
or incur big unexpected expenses due to any kind of accident
such as fire, failing to check the soundness of the house
structure just to name a few. We are not trying to scare
you and conclude that you are not ready to buy a home. We
want you to be realistic. If you can stretch a little to come
up with the down payment and make your mortgage payments,
then you should definitely proceed and be wise about the purchase.
THINK OF THE FOLLOWING
One of the most important things
one must think of when buying a home is LOCATION. Like they
say, “location, location, location” is the most important
factor to look at when buying a house. When you are buying
a house you have to make sure that the neighborhood is a good
one and that your house will not depreciate instead of appreciate
in value. You want the value of your home to go up so that
you do not have a hard time reselling if and when you decide
to do so. Also, you want to choose a location within a good
school district, with recreation areas and parks close by
for your kids. Commuting to work should not be a major trip
either. You should seriously consider all that is important
to you when choosing a location for your house.
You need to know what you can
afford even before you start searching for a home. Know your
budget. You can also decide to get pre-qualified or pre-approved
for a loan. This way you will know exactly what you can afford
and avoid looking at houses that are beyond your budget.
You need to inquire about property taxes in the neighborhood
where you are looking. For example, a house in the suburb
is cheaper than a similar one in the city but the property
tax is higher. The property tax for a house in Queens can
be $1,200 to $1,800 whereas in Nassau County it can be $4,000
to $5,000 annually.
You need to consider the length
of time you might be spending in your new house. This might
help in deciding on the number of bedrooms that is needed
as time goes by. These are just a few things you should think
of. We recommend that you should prepare a list of things
that are important to you. You might want to prepare two lists:
a must have and a wish lists. Both of those lists should
include things that are within your budget. That would help
you get a better idea of what you should be looking for.
Many of you want to buy a house
but either have difficulty to come up with the down payment
or your credit history is bad or less than perfect credit
or your employment history are not too solid. Don’t worry.
You can still make that dream come true. If you are in a
situation where you can only scrap a 3% to 5% down payment,
you might be qualified for the Federal Housing Administration
(FHA) insured mortgages. The FHA is a branch of the US
Department of Housing and Urban Development. The FHA does
not actually lend you money but it guarantees the loan that
the lender is making to you. FHA insured mortgages also have
lower interest rates. Also, the approval process is fairly
rapid laying somewhere between 45-60 days. To qualify for
an FHA backed mortgage you need to have the following:
- Your credit history must be “satisfactory”
- You must be able to pay for the closing costs and the
points that you must pay to the lender,
- You need a steady income to assure the FHA that
you can make the mortgage payments
- The house must meet the objectives of HUD minimum
standards.
There is also the VA program
for veterans, with no down payment. Before you even start
talking to a real estate broker or mortgage banker, you should
get a copy of your credit report. You can contact the following
agencies for that.
As a rule you should know what
is on your credit report, this way you can take care of it.
By getting a copy of your credit report you can settle disputes
if any and have any item that is not yours be removed. Some
brokers are willing to work with you to resolve your credit
problem. Employment history is very important in the home
shopping process. While we understand that people jump from
one job to the next for many reasons it is advisable not to
change jobs until after your approval or closings if you are
planning to buy a house.
Finally, it is recommended
that you talk to as many people who have gone through the
home buying process as possible. Use the internet, your local
library as resources and remember to learn as much as possible
about the neighborhood you are interested in.
Websites:
Realtor.com
Iown.com
Homebuyer.com
GLOSSARY OF
THE REAL ESTATE & MORTGAGE TERMS
Adjustable Rate Mortgage
(ARM):
A loan that allows the interest rate, and usually the payment,
to adjust periodically during the life of the loan.
Amortization:
The continuous regular payment of a set
amount on a loan, which will reduce and pay it off in a given
period of time.
Annual Percentage Rate
(APR):
The total cost of your loan expressed as a percentage of
interest rate. The federal Truth-in-Lending requires it to
be quoted.
Application Fee:
A one time fee charged for
processing your application.
Appraisal:
When an appraiser estimates the value of a
home at a specific point in time.
Broker:
Someone who acts as an intermediary between
the borrower and the lender in mortgage lending for example.
Buy-Down:
A loan that is purchased
below its original interest rate and/or payment.
Buyer Broker:
A buyer broker is a real
estate broker who represents the buyer. He/she has fiduciary
duty to the buyer and the buyer in turn accepts the legal
obligation to pay that broker.
Certificate of Title:
A document issued by a government agency to
the homeowner naming the homeowner as the owner of a specific
piece of property.
Closing:
The day that buyers and sellers actually transfer title of
the property in exchange for money. The closing finalizes
the sales agreement reached.
Closing Costs:
The sum of all the costs incurred during
the purchase of the home excluding the down payment.
Collateral:
Anything of value used to
secure a loan.
Commitment:
A promise to do something. In mortgage lending, Some lenders
require a commitment fee to guarantee the commitment to make
the loan.
Conventional loan:
A loan that is not insured
or guaranteed by the government.
Creditor:
Someone who lend money to
another (debtor)
Credit Report:
A list of all your credit
account, debt and late payment that have been reported to
the credit company. Lenders use your credit history to help
them decide whether or not they should lend you money.
Deed:
Document that shows ownership
in real property.
Default
Anytime the borrower is in not compliance with the terms
of the loan. For example a late payment is a default
Down Payment:
The cash that the borrower
put into a purchase.
Dual Agency:
A situation where the real
estate broker represents both the buyer and the seller. Although
most states requires the broker to disclose to them whom they
are representing it presents a conflict of interest for the
broker in the transaction.
Deposit made on a contract:
It can be in the form of
cash or a note and is part of consideration on a binding contract.
Equity:
The value of the property
that is owned beyond any lien or liability against it.
Fair-market Value:
The value a purchaser is
willing to pay for a property
Federal Housing Administration
(FHA):
A section of the U.S. Department of Housing and Urban Development
that insures loans It sets guidelines for the approval and
insurance of these loans
First Mortgage:
The first lien on real estate, or a loan
that has priority over other mortgages on the same property.
Fixed Rate Mortgage:
A mortgage with an interest
rate that does not change.
Lien:
A debt that is secured by
something of value. A mortgage is a lien on real property.
Mortgagee:
The holder of a mortgage
loan:
Mortgager:
The borrower of a mortgage
loan:
Mortgage Banker:
A mortgage banker originates, closes, services and sells
the loan. It is the lender who deals regularly with the secondary
market.
Mortgage Broker:
A company who deals with
other lenders as an intermediary of the other lender’s loans.
Mortgage Insurance.
Insurance that protects the lender against losses due to
a default or foreclosures.
Note: The legal instrument
that shows the borrower is obligated to pay back the loan.
Origination Fee:
Fee charged by the lender
for originating and closing the loans.
Points:
Points are a percentage of the loan amount.
Principal:
The amount of the loan
Power of Attorney:
The legal authorization given
to an individual to act on behalf of another.
Real Estate:
Land and anything attached
to it such as building and improvements.
Realtor:
A registered name for any
real estate agent who belong to the National Association of
Second Mortgage:
Secondary financing after
a first mortgage
Seller Broker:
A broker who has a fiduciary
responsibility to the seller.
Title:
Holding title to a property show ownership. A deed is evidence
of holding title to property.
Value:
The lesser of the sales price
or appraised value. It is whatever the property is worth.
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