How to Buy A Home

HOW TO BUY A HOME FOR SOLD ALE For many, a home is not only the largest and most important purchase of a lifetime, it can also signal the fulfillment of a lifelong dream. However, making this "American dream" a reality can involve a complex series of steps and procedures. Here, we look at the long road to homeownership. Does it make sense for you? Read on to find out. Home prices have dropped dramatically in recent years and mortgage rates are still at historic lows. But does this mean that buying a home is the right move for everyone? In general, if you are certain that you will live in the same place for the next five to seven years, buying can have significant financial and personal advantages to renting. But it's not always that simple. The chart below illustrates the pros and cons of both altenatives. FOR RENT Rent or Buy? FOR SALE FOR RENT ADVANTAGES DISADVANTAGES ADVANTAGES DISADVANTAGES • Property builds equity • Little to no responsibility for maintenance • Responsible for maintenance • No tax benefits • Payments remain the same over time* • Property Taxes •Easier to move • No equity built up • Free to change decor and landscaping • Risk of foreclosure and loss of equity •No control over rent increases •In most cases, lower monthly costs than those of purchasing a home in the same or similar • Sense community, stability and security • Less mobility neighborhood. • Possibility of eviction • Not dependent on landlords • Mortgage-interest tax deduction *Assuming a fixed-rate mortgage. Deciding which option is right for you depends largely on the amount of time you plan to live in the house. = Best Value TOTAL COSTS AFTER 10 YEARS AVERAGE MONTHLY RENT: STARTING HOUSE PRICE: $300,000 $1,335 FOR RENT FOR SALE MORTGAGE AMOUNT: $240,000 $160,200 $104,516 MORTGAGE: Rent estimate based on a starting rent payment of $1,200, factoring in rent increases over the next 10 years. $1,288 PRICE OF HOME AFTER APPRECIATION AVERAGE MONTHLY COST TO OWN $870 $331,386 "The total cost of owning a home is reduced by equity gains and tax savings. This assumes an annual value increase rate of 1%. TOTAL COSTS AFTER 3 YEARS STARTING HOUSE PRICE: AVERAGE MONTHLY RENT: $300,000 $1,228 FOR RENT FOR SALE MORTGAGE AMOUNT: $240,000 $44,208 $47,356 Rent estimate based on a starting rent payment MORTGAGE: $1,288 of $1,200, factoring in rent increases over the next 3 years. PRICE OF HOME AFTER APPRECIATION: AVERAGE MONTHLY COST TO OWN $1,315 $309,090 This assumes an *The total cost of owning a home is reduced by equity annual value increase gains and tax savings, but also factors in homeowners rate of 1%. insurance, closing costs and the costs of selling it. Buying A House Some choose to work with a Realtor, who helps focus and streamlines their search to properties within their price range in various neighborhoods of interest. REALTOR Many potential home buyers begin the process by searching for available properties online. Many buyers conduct the property search on their own. ONLINE Start searching for properties in your price You will also need to choose a mortgage agent. Here, you will determine your budget and get pre-qualified for a mortgage. range in various neighborhoods of interest. Your credit, income and employment history will be checked. W-2 MORTGAGE AGENT You will also determine exactly how much you can afford and review EMPLOYMENT CREDIT SCORE loans and corresponding interest rates. After some hunting and market investigation, you find a property 5.832% 4.031% (6.001% INCOME you want. A POTENTIAL HOME Make an offer Counter Rejected Accepted -offer Accept, reject or counter the seller's counter until a mutual agreement is met. Resume your home search. Now it's time to open escrow and deposit earnest money. You will receive escrow instructions from your realtor or lawyer. Escrow: Money held by a third-party on behalf of transacting parties. ESCROW A title search report is ordered and a property inspection is conducted. Now is the time to request any necessary repairs. LOA LOAN The loan application is completed. Property appraisals are ordered, the loan is approved and appraisal $4 $4 INSURANCE Obtain homeowner's contingencies are lifted. insurance. These loans are sent to escrow for signing. Closing statements and loan documents are signed. Loan After the final walk-through, any remaining funds owed for the balance of your down payment and closing costs are paid funds and titles are recorded. ESCROW into escrow. Finally, you receive your keys and you are officially In preparation for don't forget to: set up utilities, change your address with the Postal service and research and select a final move, a homeowner. moving company. mint.om SOURCES: Realtor.com, Move.com, GinnieMae.com, Investment Tools.com, NYTimes.com, U.S. Census