Make a Game Plan

Assess Your Finances

About Mortgages

Choose A REALTOR®

Choose A Neighborhood

Choose a Home

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Make A Game Plan

Buying a home is a time of enormous possibilities and intense preparation. Doing some preliminary planning before you begin your home search will make the entire process more manageable and less overwhelming. As part of your initial game plan, you should:

Fine-tune your credit rating;

Explore mortgage pre-qualification and pre-approval;

Become an educated buyer; and

Make a wish list to learn what you need, want and don’t want in a new home.

Check Your Credit Rating

Even if you're sure you have excellent credit, it's wise to double-check at the outset. Straightening out any errors or disputed items now will avoid troublesome holdups down the road when you’re waiting for mortgage approval.

You may see disputed items, in addition to errors caused by a faulty social security number, a name similar to yours, or a court ordered judgment you paid off that hasn't been cleared from the public records. If such items appear, write a letter to the appropriate credit bureau. Credit bureaus are required to help you straighten things out in a reasonable time (usually 30 days). 

Make sure that any outdated derogatory entries are deleted from your credit file. Adverse credit information is not supposed to be reported or included on your credit report after seven years (except bankruptcy information, which can be reported up to ten years). 

Officially cancel inactive credit cards. If you have an inactive credit card with a $5,000 limit, even though you owe nothing on it, some mortgage lenders will consider that a potential future debt. Too many inactive credit cards with significant credit limits could keep you from obtaining a mortgage loan. Don't just cut up your extra cards; officially cancel them, and do it now so there will be time for the news to reach the credit bureaus. 

Hold off on making any major credit card or car purchases while you're waiting to apply for a mortgage. Monthly payments you're obligated to pay will be counted against you, and reduce the amount of the mortgage loan you'll be offered. Even if you've been pre-approved for a mortgage, that approval is subject to last-minute evaluation of your financial situation, and a spending spree for appliances, furniture and other goodies intended for your new home may wreck your chances for buying it.

Pre-qualification and Pre-approval on a Mortgage

Any reputable real estate broker will "pre-qualify" you for a mortgage before you start house-hunting. This process includes analyzing your income, assets and present debt to estimate what you may be able to afford on a house purchase. Mortgage brokers, or a lender's own mortgage counselors can also calculate the same sort of informal estimate for you.

Obtaining mortgage "pre-approval" is another thing entirely. It means that you have in hand a lender's written commitment to put together a loan for you (subject only to the particular house you want to buy passing the lender's appraisal).

Pre-approval makes you a strong buyer, welcomed by sellers. With most other purchasers, sellers must tie the house up on a contract while waiting to see if the would-be buyer can really obtain financing.

The down side is that you must pay application fees to cover the lender's paperwork in verifying your employment, income, assets, debts and credit rating. If you later decide not to use that particular lender, you'd have to start all over again elsewhere - with no rebate.

Pre-approval will also speed up the entire mortgage procedure once you've found the house you want. The only remaining question will be whether the house will "appraise" for enough to warrant the loan.

Become an Educated Buyer: Research Neighborhoods,

Read Ads and Visit Open Houses

If you were changing cities, the standard advice used to be to subscribe to the local newspaper in the new town and start reading local news and classified ads to get a feeling for different neighborhoods. Although that’s still a good idea, you can simplify and streamline the house-hunting process by using the Internet to Find a Home, Find a REALTOR® , and Find Related Services. This should link to our existing buttons

For local moves, you have the advantage of driving around neighborhoods that interest you and looking at lawn signs. Particularly on weekends, you will see "Open House" postings. Don't hesitate to walk in, even if you're not ready to buy yet. Visiting open houses is an excellent way to familiarize yourself with the market and judge various real estate agents you may meet along the way, and it won't put you under obligation to anyone.

Your Wish List

Making sure you end up with the right home involves figuring out exactly what features you need, want and don’t want in a home. Before starting your search, you should make a "wish list" to decide which features are absolutely essential, which are nice "extras" if you happen to find them, and which are completely undesirable.

The more specific you can be about what you’re looking for from the outset, the more effective your home search will be. Also keep in mind, that in the end, every home purchase is a compromise.

Assess Your Finances

There's no point wasting time and energy house-hunting before you know what you can afford. So your next step is to assess your finances:

Compare buying with renting;

Learn about interest rates;

Research closing costs;

Learn what the lenders consider as income;

Understand the impact of your present debt payments;

Calculate the amount of your down payment; and

Figure out how much you can actually afford.

Does it Pay to Buy a Home or Simply to Rent?

If, like most first-time buyers, you are presently renting, it's easy to calculate your cost - simply, the monthly rent you pay. (Utilities, phone, cable, and other costs can be ignored in this comparison because they'll be approximately the same whether you rent or buy.)

Calculating the cost of homeownership is much more complicated, because income tax considerations affect your bottom line. And there is, in addition, the uncertainty about how much the value of your home will rise (or even fall) in the coming years.

As a tenant, you may be taking a standard deduction on your income tax return. This is the time to judge how that standard deduction stacks up against the amount you'd be able to subtract from income if, like most homeowners, you itemized deductions instead. Once you itemize, you can deduct:

• Home mortgage interest;

• All real estate taxes on any property you own;

• Your state income taxes;

• Charitable contributions;

• Medical and dental expenses that exceed 7.5% of your income;

• Personal property taxes if your state has them; and most important

• Certain moving expenses.

At the start of a mortgage repayment schedule, when the debt hasn't been reduced yet, almost all of your monthly payment goes toward interest. A bit goes toward reducing principal (the amount borrowed), so that the next month you're borrowing a bit less, and owe a little less interest. That allows more of your next payment to go toward reducing principal. However, this process is very slow in the beginning and the interest portion remains high for many years.

Between the mortgage interest and the property tax deductions, you can figure that Uncle Sam is shouldering part of your monthly mortgage payment - 28% of it, in fact, if that's your tax bracket. Your state income tax bracket can also be added to that, before you calculate how much you save on income tax as a homeowner.

Interest Rates and How They Change

As you start shopping for a home loan, your first question of each lender will probably be "What's your interest rate? How much are you charging?"

Interest rates are usually expressed as an annual percentage of the amount borrowed. If you borrowed $120,000 at 10% interest, you'd owe interest of $12,000 for the first year. With most mortgage plans you'd pay it at the rate of $1,000 a month. You would also send in something each month to reduce the principal debt you owe - and the next month you'd owe a bit less interest.

When your grandparents bought their home (putting at least half the purchase price down, by the way), their interest rate was probably around 4 or 5%. Rates stayed the same for years at a time. Then in the years following World War II, things became more turbulent.

As economic changes speeded up, rates began to change several times a year. By the l980s, lenders were setting new rates on mortgage loans as often as once a week - and they still do today. When inflation hit a high in the '80s, some mortgage loans carried interest rates as high as 17% - and those who absolutely needed to buy, paid that much.

Rates dropped gradually through the 1990s, and by 1998 had reached their lowest rates in decades. Heading toward the millenium, home buyers appear to have the most favorable conditions for mortgage borrowing since their grandparents' days - and without 50% down payments either.

Closing Costs

On the day you actually buy your new home, in addition to your down payment and the prepaid property tax and homeowners insurance premiums, you'll need cash for various fees associated with the purchase. These expenses are known as closing costs and are paid by both buyers and sellers.

Some closing costs you pay up-front when you apply for a mortgage loan. That includes money for a credit check on all applicants and an appraisal on the property. Keep in mind that even if you don't eventually receive the loan, that money is not refundable.

Other closing costs are possible and should be considered when evaluating your financial situation. These may include, but are not limited to:

• Title insurance fee;

• Survey charge;

• Loan origination fee;

• Attorney fees or escrow fees;

• Document preparation fee;

• Garbage or trash collection fees; and the big one

• Points - up-front interest paid in return for a lower interest rate. Each point is one percent of the loan amount. Sometimes you can contract for the seller to pay your points.

 Consider closing costs when choosing one mortgage plan over another. The good news is that if your cash is limited, some mortgage plans allow the seller to pay some or all of your closing costs, such as title insurance, escrow fees, and points. Certain closing costs can sometimes be added to the amount of mortgage loan you're receiving.

Figuring Out Your Monthly Income

When you apply for a home loan (and even long before that, when you first speak to a REALTOR®) the first question may likely be "How much is your income?" In making this determination, lenders consider the income of all parties who will be owners of the property. Be prepared to provide a monthly accounting of all sources of income.

Figuring Out Your Monthly Debt

Lenders are interested mainly in your present monthly payments because they want to be sure you can handle the mortgage payment you'll be applying for. Different mortgage plans consider payments on any debt that won't be paid off within, for example, six months, nine months, or a year. Calculate the monthly debt of you and all your co-borrowers (if applicable)

Amount of Your Down Payment

Your down payment is paid in cash and is not included as part of the loan amount. The bigger your initial down payment, the smaller your loan, which reduces the amount of your payments.

How much you'll put down depends on the cash you have available and the amounts you'll need for closing costs and prepaid property taxes and homeowners' insurance.

Mortgage plans have various down payment requirements and they can range from 0% down on a VA (Veterans Administration) loan to between 3 and 5% down on a FHA (Federal Housing Administration) loans to 20% down, the traditional amount for a conventional loan. In addition, special state programs for first-time home buyers may set different sums, which are usually lower than conventional financing.

If you put less than 20% down on most loans, you'll be asked to protect the lender by carrying private mortgage insurance (PMI). Carrying PMI ensures that the debt is repaid if you default on the loan. This adds approximately an extra half a percent onto the loan.

FHA mortgages, in return for their low-down-payment requirements, also charge for mortgage insurance premiums (MIP).

How Much House Can You Afford?

The amount of loan for which you qualify is based on two different calculations. Using what are known as qualification ratios, lenders evaluate your income and long-term debts to determine a "safe" amount for your mortgage payments. A fairly standard ratio is 28/33. Certain mortgage plans sometimes use more liberal ratios - for example, the FHA currently uses 29/41.

Here's how it works: With a 28/33 ratio, you'd be allowed to spend up to 28% of your gross monthly income for mortgage payments.

The lender will then run a different calculation. This one is your loan payment and debt payments combined, which may not exceed 33% of your gross monthly income.

To calculate exactly how much you may borrow, you also need an estimate of current interest rates.

For Example: Suppose you had $1,000 a month for mortgage payment; at 7% that would let you borrow about $160,000 on a 30-year loan. At 6% the loan amount would be nearly $175,000. If your rate were 8%, the loan amount would be a bit less than $150,000.

As part of this calculation, you also need to estimate and include the property taxes, homeowner’s insurance, and Homeowner Association fees (if applicable) you might need to pay, which are considered part of your monthly expense.

Use our Mortgage Calculator to determine how much you can afford.

About Mortgages

Shopping for the right loan is just as important as choosing the right house. Your challenge is to select the loan terms that are most favorable to your situation. In selecting the loan that's right for you, you'll need to understand:

Basic components of a mortgage loan;

Fixed-rate mortgages;

Adjustable-rate mortgages;

Government loans and programs;

Balloon loans; and

Other affordable housing loans.

Basic Components of a Mortgage Loan

A mortgage requires you to pledge your home as the lender's security for repayment of your loan. The lender agrees to hold the title or deed to your property (or in some states, to hold a lien on your title or deed) until you have paid back your loan plus interest.

The following are the basic components of a mortgage loan:

Mortgage Amount and Term

The mortgage amount is the amount of money you borrow from a lender to pay for your house. The term is the number of years over which you can pay back the amount you borrow.

 The length of your mortgage repayment period will directly affect your monthly mortgage payments.

The most popular mortgage term is 30 years. By extending payment over 30 years, you keep your monthly housing costs low. If you can afford higher monthly payments, you can select a mortgage term that is shorter. There are 20-year, 15-year, and even 10-year fixed-rate mortgages available from most mortgage lenders. The longer your repayment period is, the lower your monthly payments will be, but the total interest you pay over the life of the loan will be more.

Amortization

Over time, you will repay your mortgage through regular monthly payments of principal and interest. During the first few years, most of your payments will be applied toward the interest you owe. During the final years of your loan, your payment amounts will be applied primarily to the remaining principal. This type of repayment method is called amortization.

Fixed or Adjustable Interest Rates

Interest rates are usually expressed as an annual percentage of the amount borrowed. You can choose a mortgage with an interest rate that is fixed for the entire term of the loan or one that changes throughout. A fixed-rate loan gives you the security of knowing that your interest rate will never change during the term of the loan. An adjustable-rate mortgage (called an ARM) has an interest rate that will vary during the life of the loan, with the possibility of both increases and decreases to the interest rate and consequently to your mortgage payments.

Down Payment

The down payment is the part of the purchase price the buyer pays in cash and is not financed with a mortgage. Your down payment will reduce the amount you'll need to borrow. So, the more cash you put down, the smaller the size of your loan, and the smaller the amount of your mortgage payments.

Lenders often view mortgages with larger down payments as more secure because more of your own money is invested in the property. However, there are other loans that require as little as 3% to 5% of the purchase price for a down payment.

Closing Costs

The closing (or, in some parts of the country, settlement) is the final step, during which ownership of the home is transferred to you. The purpose of the closing is to make sure the property is ready and able to be transferred from the seller. The closing costs (which vary from state to state) are usually expressed as a percentage of the sales price or loan amount. Typically, costs range from 3% to 6% of the price of your home and can include transfer and recordation taxes, title insurance, the site survey fee, attorney fees, loan discount points, and document preparation fees.

 Sometimes you can negotiate to have the seller pay some of your closing costs.

Discount Points

In the special vocabulary of mortgage lending, "points" are a type of fee that lenders charge. (The full term to describe this fee is "discount points.") Simply put, a point is a unit of measure that means 1% of the loan amount. So, if you take out a $100,000 loan, one point equals $1,000. Discount points represent additional money you can pay at closing to the lender to get a lower interest rate on your loan. Usually, for each point on a 30-year loan, your interest rate is reduced by about 1/8th (or .125) of a percentage point.

 Usually, the longer you plan to stay in your home, the more sense it makes to pay discount points.

Conforming and Nonconforming Loans

The term "conforming," as opposed to "nonconforming," is sometimes used to explain loans that offer terms and conditions that follow the guidelines set forth by Fannie Mae and Freddie Mac. These are the two private, congressionally chartered companies that buy mortgage loans from lenders, thereby ensuring that mortgage funds are available at all times in all locations around the country.

The most important difference between a loan that conforms to Fannie Mae/Freddie Mac guidelines and one that doesn't is its loan limit. Fannie Mae and Freddie Mac will purchase loans only up to a certain loan limit (currently $227,150, but will be $240,000 as of January 1, 1999).

If your loan amount will be for more than the conforming loan limit, the interest rate on your mortgage may be higher or you may have slightly different underwriting requirements, particularly in regard to your required down payment amount. Check with your lender about this if you are taking out a large loan amount.

 Nonconforming loans are sometimes called jumbo loans.

Fixed-Rate Mortgages

The interest rate may be your main consideration if you expect to stay in your house for a long time. With a fixed-rate mortgage, you can be sure that your interest rate will stay the same for the entire life of your loan. Fixed-rate mortgages are available in a variety of repayment terms, with 15, 20, and 30 years the most common.

30-Year Fixed-Rate: The easiest fixed-rate loan to qualify for, the 30-year mortgage, gives you an excellent opportunity to keep mortgage payments reasonable by making monthly payments over a long period of time. This mortgage loan may be ideal if you plan to remain in your home for years and wish to keep your housing expense low and use any extra cash for other purposes. This loan also

provides maximum interest deduction for tax purposes.

20-Year Fixed-Rate: For those who want a lower interest rate and want to own their homes free of debt sooner, this shorter mortgage amortizes principal and interest over just 20 years, saving a considerable amount of total interest paid over the life of the loan.

15-Year Fixed-Rate: This shorter-term mortgage will save you a significant amount of interest over the life of the loan. By paying off the mortgage more quickly, you also build up equity in your home sooner. This may be important if you are approaching retirement or have other large expenses to cover, such as financing your children's education. However, the monthly payments you make on a 15-year mortgage will cost you more than those you would make on a 30- or 20-year loan.

Adjustable-Rate Mortgages (ARMs)

With an adjustable-rate mortgage (ARM), the interest rate you pay is adjusted from time to time to keep it in line with changing market rates. When interest rates go down, so might your mortgage payments; but keep in mind that your payments could go up when interest rates are raised.

ARMs are attractive because they may initially offer a lower interest rate than fixed-rate mortgages. Since the monthly payments on an ARM start out lower than those of a fixed-rate mortgage of the same amount, you can qualify for a larger loan. The chief drawback, of course, is that your monthly payments may increase when interest rates rise.

You may want to consider an ARM if:

• You are confident your income will rise enough in the coming years to comfortably handle any increase in payments;

• You plan to move in a few years and therefore are not so concerned about possible interest rate increases; or

• You need a lower initial rate to afford to buy the home you want.

An ARM has two "caps" or limits on how large an interest rate increase is permitted. One cap sets the most that your interest rate can go up during each adjustment period, and the other cap sets the maximum total amount of all interest adjustments over the life of the loan.

For example, a typical ARM that adjusts annually may have a yearly cap of 2%, meaning that the adjusted interest rate can never be more than 2% higher than the previous year. And such an ARM may have a lifetime rate cap of 6%, meaning that the interest rate on your loan will never be more than 6% over the original rate. So, if you are looking at an ARM with a current introductory rate of 5%, a lifetime cap of 6% tells you that the highest interest rate you could ever pay would be 11%.

 Before applying for an ARM, be sure you know how high your monthly payments could go - the "worst-case scenario." Only you can determine if you would feel comfortable paying this interest rate sometime in the future.

Your lender can tell you which ARMs offer a conversion feature that allows you to convert from an adjustable rate to a fixed rate at certain times during the life of your loan.

One important thing to know when comparing ARMs is that the interest rate changes on an ARM are always tied to a financial index. A financial index is a published number or percentage, such as the average interest rate or yield on Treasury bills.

The following are the most common types of ARMs:

CD-Indexed ARMs (Certificate of Deposit): After an initial six-month period, the initial rate and payments adjust every six months. These ARMs typically come with a per-adjustment cap of 1% and a lifetime rate cap of 6%.

Treasury-Indexed ARMs: These are tied to the weekly average yield of U.S. Treasury Securities adjusted to a constant maturity of six months, one year, or three years. Likewise, the interest rate on your ARM will adjust once every six months, once each year, or once every three years, depending on the schedule you choose. Per-adjustment caps and lifetime rate caps also vary.

Cost of Funds-Indexed ARMs: Indexed to the actual costs that a particular group of institutions pays to borrow money, the most popular of this type is the COFi for the 11th Federal Home Loan Bank District. COFi ARMs can adjust every month, every six months, or every year, and the per-adjustment caps and lifetime rate caps vary.

Initial Fixed-Period ARMs: As protection against rapid interest rate increases in the early years of your loan, interest rates for these ARMs don't adjust until several years after you take out the loan. You can choose from three, five, seven, or 10-year fixed terms. At the end of your chosen fixed-rate period, your interest rate would adjust every year.

Two-Step Mortgage®: This special type of ARM provides the benefit of initial low rates with the stability of longer term financing because it adjusts only once - either at seven years or at five years. After that initial adjustment, the mortgage maintains a fixed rate for the remaining 23 or 25 years of a 30-year mortgage repayment term. For example, if your initial interest rate were 8%, you would pay that rate for the first seven (or five) years. Then, for the remaining 23 (or 25) years, you would pay an interest rate that is indexed to the value of the 10-year U.S. Treasury security on the adjustment date. (At the adjustment date, there is no additional refinancing cost, no forms to complete, and no re-qualification necessary.) This new rate can never be more than 6 percentage points higher than your old rate. There are no limits on how much lower the adjusted interest rate can be.

Government Loans and Programs

The Federal Housing Administration (FHA), the U.S. Department of Veterans Affairs (VA), and the Rural Housing Services (RHS) are three agencies that offer government-insured loans. To obtain these loans, you apply through a lender that is approved to handle them. All require that the properties being purchased meet certain minimum standards.

Various types of government loans include:

FHA Loans: With FHA insurance, you can purchase a home with a very low down payment (from 3% to 5% of the FHA appraisal value or the purchase price, whichever is lower). FHA mortgages have a maximum loan limit that varies depending on the average cost of housing in a given region.

VA Loans: The VA guarantee allows qualified veterans to buy a house costing up to $203,000 with no down payment. Moreover, the qualification guidelines for VA loans are more flexible than those for either FHA or conventional loans. To determine whether you are eligible, check with your nearest regional VA office.

RHS Loans: The Rural Housing Service, a branch of the U.S. Department of Agriculture, offers low-interest-rate homeownership loans with no down payment requirements to low and moderate-income persons who live in rural areas or small towns.

State and Local Loan Programs: A number of states sponsor programs to help first-time home buyers qualify for mortgages. Local housing agencies also offer, in some areas, attractive loan terms, such as low down payments or low interest rates, to home buyers who meet specified income guidelines. Some state and local programs may also offer down payment and closing cost assistance. Check with your state housing authority. You can find the office nearest you online or look in the government "blue pages" of your phone book.

Balloon Loans

Balloon loans offer lower interest rates for shorter term financing, usually five, seven, or 10 years. At the end of this term, they require refinancing or paying off the outstanding balance with a lump-sum payment. Balloon mortgages may be suitable if you plan to sell or refinance your home within a few years and want a fixed, low monthly payment.

The advantage they offer is an interest rate that is lower than that of a fully amortizing fixed-rate mortgage. For example, your initial interest rate may be 7.5%, and you would pay that for the first five, seven, or 10 years (depending on the term of your balloon loan). Then, your entire outstanding loan balance would be due to the lender or you might have to pay a fee to refinance your loan at the prevailing interest rate.

Be sure to ask about all the conditions for a refinance option at the end of the balloon term. With some balloon mortgages, the lender doesn't guarantee to extend the loan past the balloon date. If you don't feel you will be able to meet all the refinance conditions or think the balloon term may be up before you are ready to move, this type of loan may not be appropriate for you.

Other Affordable Housing Loans

Fannie Mae® offers a variety of low and moderate-income households mortgage loan options that help overcome common barriers to homeownership. Fannie Mae loans require less cash at closing and for a down payment, in addition to flexible underwriting ratios, making it easier for qualifying individuals to get into a new home sooner and use more of their monthly income toward housing costs than permitted by other mortgage loans.

Choose a Realtor

Some home buyers work exclusively with a buyer's broker, specifically hired to represent them. Some work with sellers' brokers. In either case, choosing the right REALTOR® is a crucial first step in the home buying process. In making this important decision you should understand:

Who is a REALTOR®;

Using an agent and the obligations that are owed to you

How to evaluate an agent.

Who is a REALTOR®?

The terms agent, broker and REALTOR® are often used interchangeably, but have very different meanings. For example, not all agents (also called salespersons) or brokers are REALTORS®. Learn the reasons why you should use a REALTOR®.

As a prerequisite to selling real estate, a person must be licensed by the state in which they work, either as an agent/salesperson or as a broker. Before a license is issued, minimum standards for education, examinations and experience, which are determined on a state by state basis, must be met.

After receiving a real estate license, most agents go on to join their local board or association of REALTORS® and the NATIONAL ASSOCIATION OF REALTORS®, the world's largest professional trade association. They can then call themselves REALTORS®. The term "REALTOR®" is a registered collective membership mark that identifies a real estate professional who is a member of the NATIONAL ASSOCIATION OF REALTORS® and subscribes to its strict Code of Ethics (which in many cases goes beyond state law).

In the Staten Island area, it is the REALTOR® who shares information on the homes they are marketing, through a Multiple Listing Service (MLS). Working with a REALTOR® who belongs to an MLS will give you access to the greatest number of homes.

Using an Agent and the Obligations That are Owed to You

An agent is bound by certain legal obligations. Traditionally, these common-law obligations are to:

• Put the client's interests above anyone else's;

• Keep the client's information confidential;

• Obey the client's lawful instructions;

• Report to the client anything that would be useful; and

• Account to the client for any money involved.

NOTE: A REALTOR® is held to an even higher standard of conduct under the NAR’s Code of Ethics.

In recent years, state laws have been passed setting up various duties for different types of agents. As you start working with a REALTOR®, ask for a clear explanation of your state's current regulations, so that you will know where you stand on these important matters.

How to Evaluate an Agent

In making your decision to work with an agent, there are certain questions you should ask when evaluating a potential agent.

The first question you should ask is whether the agent is a REALTOR® . You should then ask:

• Does the agent have an active real estate license in good standing? (to find this information, you can check with your state’s governing agency)

• Does the agent belong to the Multiple Listing Service (MLS) and/or a reliable online home buyer’s search service? (Multiple Listing Services are cooperative information networks of REALTORS® that provide descriptions of most of the houses for sale in a particular region.)

• What real estate designations does the agent hold?

• Which party is he or she representing--you or the seller? The discussion is supposed to occur early on, at "first serious contact" with you. The agent should discuss your state's particular definitions of agency, so you'll know where you stand.

• In exchange for your commitment, how will the agent help you accomplish your goals?

• Show you homes that meet your requirements and provide you with a list of the properties he or she is showing you?

Choose a Neighborhood

With so many homes on the market you'll never get anywhere unless you narrow your choices. You can begin this process by first identifying one or a few neighborhoods that are right for you by:

Considering local factors; and

Using neighborhood strategies.

Factors to Consider When Evaluating a Neighborhood

When evaluating a neighborhood, you should investigate local conditions. Depending on your own particular needs and tastes, some of the following factors may be more important considerations than others:

• Quality of schools

• Property values

• Traffic

• Crime rate

• Future construction

• Proximity to: Schools, Employment, Hospitals, Shops, Public transportation, Cultural Activities (museums, concerts, theaters, etc.), Prisons, Freeways, Airports, Beaches, Parks, Stadiums.

Neighborhood Search Strategies

If you’re a first time-buyer with limited financial resources, it’s a wise purchasing strategy to buy a home that meets your primary needs in the best neighborhood that fits within your price range.

You can maximize your home purchase location by incorporating some of the following strategies into your neighborhood search:

• Look for communities that are likely to become "hot neighborhoods" in the coming years. They can often be discovered on the periphery of the most continuously desirable areas.

• Look for a home in a good neighborhood that is a bit farther out of the city. If commuting is a concern, purchase a home that is close to public transportation.

• Look at the neighborhood demand by asking your REALTOR® whether multiple offers are being made, whether the gap between the list price and sale price is decreasing, and whether there is active community involvement. You can also drive around neighborhoods and see how many "sale pending" and "sold" signs there are in a particular area.

• Look into purchasing a condominium or co-op, rather than a house, in a desirable neighborhood. This way you still may be able to purchase in a prime area that you otherwise could not afford.

Choose a Home

Once you've settled on a couple of neighborhoods for your search, it's time to pick out a few homes to view. Refer back to your Wish List and see which features are absolute requirements and those amenities you'd like to have if possible. When narrowing down your home search, consider:

Types of homes

Home purchase considerations

Home comparison chart

What to do when you’ve found the right home for you.

Types of Homes

In addition to single family homes (one home per lot), there are other forms of homeownership:

Multi-Family Homes: Some buyers, particularly first-timers, start with multiple family dwellings, so they'll have rental income to help with their costs. Many mortgage plans, including VA and FHA loans, can be used for buildings with up to four units, if the buyer intends to occupy one of them.

Condominiums: With a condo, you own "from the plaster in" just as you would a single house. You also own a certain percentage of the "common elements"--staircases, sidewalks, roofs and the like. Monthly charges pay your share of taxes and insurance on those elements, as well as repairs and maintenance. A homeowners association administers the development.

Co-ops: In a few cities, cooperative apartments are common. With those, you purchase shares in a corporation that owns the whole building, and you receive a lease to your own apartment. A board of directors supervises management. Monthly charges include your share of an overall mortgage

on the building.

Home Purchase Considerations

Most buyers' first consideration, after neighborhoods are chosen, is the number of bedrooms. As you begin to view homes, keep the following purchase and resale considerations in mind:

• Weigh your needs, purchase and maintenance budgets, and personal tastes in deciding whether you want a home that’s a newly constructed home, an older home or a home that requires some work, or a "fixer-upper."

•  One-bedroom condos are more difficult to resell than two-bedroom ones;

•  Two-bedroom/one-bath single houses generally have less appeal than three or more bedroom houses to many buyers, and therefore less appreciation potential;

•  Homes with "curb appeal" (a well-maintained, attractive, and charming view-from the street appearance) are the easiest to resell;

•  When re-sale is a possibility, don't buy the most expensive house on the street, or anything that is unusual or unique; and

• The biggest, most expensive house on the block is not usually considered to be the best investment. The best investment potential is traditionally found in a lesser expensive, more moderately sized home on the street.

Home Comparison Chart

While house-hunting, it's a good idea to make notes about what you see because viewing several houses at a time can be confusing.

What to do When You’ve Found the Right Home

Before you begin the home buying process, resolve to act promptly when you find the right house.

Every REALTOR® has stories to tell about a couple who looked far and wide for their dream home, finally found it, and then revealed that "we always promised my Dad we'd sleep on it, so we'll make an offer tomorrow." Many times the story has a sad ending--someone else came in that evening with an offer that was accepted.

Resolve at this point that you will act decisively when you find the house that’s clearly right for you. This is particularly important, after a long search or if the house is newly listed and/or under-priced.

(Article Source: SIBOR)

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