The Knowledge
Resource
FOR
First-Time Home Buyers
Your Agent Is the Best Guide
Save Time, Money, and Frustration
The Keys to Homeownership
Unlock the American Dream
Is Buying the Right Choice?
Advantages of Owning a Home
Tired of Renting? Need Tax Deductions?
What a Difference a Deduction Makes
Build Equity
Money in Your Pocket
Before You Start Looking for a Home...
Define Your Lifestyle
Home Buying
One Step at a Time
How Much Home Can You Afford?
Your Loan Consultant Can Help You
Your Agent
Is the Best Guide
A good agent knows the
housing market inside and
out and will help you avoid
a wild goose chase. He or
she can help you purchase
a home whether it is his or
her own listing or listed by
another agent or is being
sold by the owner directly.
Your agent may be aware
of homes that are available
through sources that you
wouldn't be able to find on your own. These professionals also know home
prices and can advise you on the value of specific homes.
Most importantly, a real estate professional will guide you through the
complex process of buying a home. The maze of financial options, legal documents,
disclosure requirements, inspections and a host of other details are
simplified by the use of an experienced specialist.
In addition, agents are often your best source for general information
about a community; specific information about schools, churches, stores; and
tips on house inspectors and comparable prices. Perhaps you're wondering
how much an agent is going to charge you for all this help. Well, the good news
is that normally it won't cost you a cent.
Agents receive payment by a commission that the seller pays. However,
that doesn't affect the dedication or the spirit of teamwork that your agent will
put into helping you find and buy the home of your dreams. After all, his or
her success depends on your success.
How to find your new home faster. Be specific.
• Tell your agent what you can afford.
• Let your agent know exactly what you're
looking for in a house.
• Be as specific as possible at all times with your agent so that he or she can
better serve your needs.
Checklist
Here's a list of what you can
expect from your agent:
• Your agent should understand
your price range and type of
house you are interested in
before he or she starts showing
you houses.
• Your agent can provide you
with the facts you need to make
your own purchase decisions.
• Your agent can act as a knowledgeable
representative when
you make an offer and negotiate
the price.
• Your agent should be able to
advise you on obtaining financing
for your home.
Working with a real estate professional can save you endless amounts of time, money and frustration.
The Keys
To Homeownership
Welcome to First-Time Home Buyers - The Most Comprehensive Guide for Beginners.
Inside you'll find the basic information that will help you begin the home-buying
process:
Before you start
looking for a home
• What kind of home do you want? Need?
• What can you afford?
• How do you apply for a home loan
and when?
• Do you have mortgage approval?
• Do you understand mortgage options?
ready to start looking
• How to look for a home
• Home buyer's checklist
• How to find a good agent
Now that you've found
your home
• Making an offer
• The home inspection
• Homeowner's insurance
• What are closing costs?
• The closing
• Keeping your paperwork organized
• Glossary of mortgage terms
• Common real estate terms
Is Buying the Right Choice?
Advantages of Owning a Home
In spite of the risks and responsibilities, millions of
people enjoy the rewards of homeownership. There
are many reasons to take this significant step.
A home is a sound long-term
investment.
When you carefully choose a home you can afford,
the potential payoff is great. Each month when you
pay your mortgage, you're building equity by reducing
the amount that you owe your lender. The longer
you stay in your house, the more equity you will have.
Unlike most things you buy, a home will generally
increase in value as time passes, building more
equity. Remember, however, there is no guarantee
that your home's value will appreciate.
Homeownership offers great tax advantages.
Mortgage interest and real estate taxes are usually tax deductible. This allows you to subtract
part of your housing-related expenses from your income, which could reduce your tax bill
significantly.
A first home often leads to a better second home.
As you build up equity in your current home, it is usually easier to move up to an even nicer
home in the future.
You are better able to plan your housing costs.
Rent increases are unpredictable and usually beyond your control. One thing is certain: over
time, rent will increase, while the cost of homeownership is much more predictable.
You gain the satisfaction and security of ownership.
You can decorate and improve your home according to your own needs and desires. Owning
a home may give you a new sense of pride in your surroundings and encourage you and your
family to plant deeper roots in your community.
Tired of Renting?
Need Tax Deductions?
RENT VS. OWN
How the Mortgage Interest Deduction
Helps Homeowners
John and Jane have a combined income of
$50,000 a year. They purchased a home in
January, 1992, for $150,000, putting 10%
down and financing the remaining $135,000
with a 30-year, 9% mortgage.
Their monthly principal and interest
payments amount to $1,086 a month. Here's
how tax deductions will save them cash in the
first year and in years to come.
(Figures are for illustration only. Your figures may differ.)
As Rentors
As Buyers
Income
$50,000
$50,000
Itemized Deductions
State Income Tax
1,500
700
Other Taxes - DMV
300
300
Contributions & Other
500
500
Interest Payments
0
12,110
Points (2)
0
2,700
Real Estate Taxes
0
1,800
Total Itemized Deductions
2,300
18,110
Deduction Used
(Standard or Itemized)
6,000
18,110
Exemptions (2)
4,600
4,600
Taxable Income
39,400
27,290
Federal Income Taxes
6,378
4,091
Tax Savings:
Federal
2,287
State
800
Total Tax Savings:
First Year
3,087
First Year:
Monthly
250
Annual
After First Year
2,600
What a difference a
deduction makes
Is the federal income tax mortgage
interest deduction really a useful tool
by which the government can promote
homeownership?
Home buyers, particularly those
on the verge of making the transition
from renting to owning, but also
those in the trade-up market, frequently
seek information about how
the mortgage deduction actually
works.
The chart presented above clearly
indicates what a big difference the
deduction makes. The chart is for
general illustration purposes because
individual circumstances vary.
State Income Tax
1,500
700
(Standard or Itemized)
6,000
18,110
The Rent You Pay
Could Build Equity
in Your Own Real Estate
| Per Month | 10 Years | 15 Years | 20 Years | 25 Years | 30 Years |
| $300 | $61,453 | $124,341 | $227,811 | $398,050 | $678,146 |
| 350 | 71,696 | 145,065 | 265,779 | 464,392 | 797,171 |
| 400 | 81,398 | 165,788 | 303,748 | 530,733 | 904,195 |
| 450 | 92,180 | 186,511 | 341,116 | 597,075 | 1,017,220 |
| 500 | 102,422 | 207,235 | 379,684 | 663,417 | 1,130,244 |
| 550 | 112,665 | 227,959 | 417,652 | 729,758 | 1,243,268 |
| 600 | 122,907 | 248,682 | 455,621 | 798,100 | 1,356,293 |
| 650 | 133,149 | 269,405 | 493,590 | 862,442 | 1,469,317 |
| 700 | 143,391 | 290,129 | 531,558 | 928,783 | 1,582,341 |
| 750 | 153,634 | 310,853 | 569,527 | 995,125 | 1,695,366 |
| 800 | 163,576 | 331,576 | 607,495 | 1,061,467 | 1,808,390 |
| 850 | 174,118 | 352,280 | 645,464 | 1,127,808 | 1,921,415 |
| 900 | 184,360 | 373,023 | 683,432 | 1,194,150 | 2,034,439 |
| 1000 | 194,603 | 393,766 | 759,369 | 1,326,833 | 2,260,488 |
Do you realize how much you pay in rent over a period of years? In addition to the monthly payment, you should figure in the amount you would have accumulated had you invested your payments and earned 10 percent interest. This gives you a total picture of what is happening to your money. The rent you pay adds up to a sizeable sum.
Using this chart, find your per month rental payment to discover how much money you are "giving away" in rent and interest over 10, 15, 20 or 30 years ... money which could be used to build equity in your own real estate!
Before you start looking for a home...
What kind of home do you want? Need?
Before you get out there and start looking at houses,
it's a good idea to determine not only what you want
in a house but also, more importantly, what you need.
It focuses your house-hunting and saves valuable
time trudging through houses you wouldn't dream of
living in.
Here are some things
to think about as you set your priorities:
Where do you want to live?
Close to where you
work? Close to your extended family, or as far from
them as possible? Do you need schools? How important
is it to be close to shopping, hospitals, entertainment,
community amenities, and how about traffic? Looking
for a house really starts with looking for a neighborhood.
Deciding where you want to live will save you a
lot of time as well as miles on your odometer, and is
key to narrowing your search.
How long do you expect to live in your
first house?
For instance, if you plan on living in
your first home for only a few years and intend to move
before you have children, proximity to schools may
not be an issue, but resale value probably will be. On
the other hand, if you plan on staying for ten years or
more and having a family, schools and square footage
will be priorities.
What don't you like about where you're
currently living?
Making a list of what you definitely
do not want in a home will help you weed out
houses without having to waste your valuable time
looking at them.
It may seem obvious, but take a good look
at your lifestyle.
Do you entertain a lot? Then you'll
want a home that lends itself to that. Do you work from
home? You'll need a home with a place to create an
office. Are you a gardener? Then lot size is a priority.
Keep these things in mind as you make your list
of wants and needs. Remember, your list should be
flexible in case you can't find a home in your price
range with all the amenities you want. It's a good idea
to put the list in order of importance. For instance,
an eat-in kitchen may be more important to you than
a fireplace.
Home Buying: One Step at a Time
1. Select an agent and establish a relationship
I am a full-time, professional agent with extensive market knowledge. We will work closely together
to find the right home for you.
2. Initial consultation with your agent to evaluate your needs and resources
Once I determine your needs, I will help you evaluate financial institutions and loan programs in
order to make a wise choice. We will meet to discuss your needs and analyze your resources.
3. Identify property to buy
I will show you homes based upon the criteria that we establish. The more precise and direct you
are, the more successful our search will be.
4. Determine Seller's motivation
Once you have found the home that you wish to purchase, I will do the necessary research to help
you structure an effective offer.
5. Write offer to purchase
I will draft the Purchase Agreement for you, advising you on protective contingencies, customary
practices, and local regulations. At this time, you will need to provide an "earnest money" deposit,
usually from 1 to 3% of the purchase price (the deposit is not cashed until your offer has been
accepted by the Seller).
6. Offer Presentation
I will present your offer to the Seller and the Seller's agent. The Seller has three
options: he or she can accept your offer, counter your offer, or reject your offer.
My personal knowledge of your needs and qualifications will enable me to represent
you in the best way possible.
7. Seller's Response
I will review the Seller's response with you. My negotiating skills and knowledge
will benefit you in reaching a final agreement.
8. Open Escrow
When the Purchase Agreement is accepted and signed by all parties, I will open
escrow for you. At this time your earnest money will be deposited. The escrow
company will receive, hold and disburse all funds associated with your transaction.
9. Contingency Period
This is the time allowed per your Purchase Agreement to obtain financing, perform
inspections, and satisfy any other contingencies to which your purchase is
subject. Typical contingencies include:
• Approval of the Seller's Disclosure Statement
• Approval of the Preliminary Report from the Title Company
• Loan approval, including an appraisal of the property
• Pest inspection and certification
10. Homeowner's Insurance
I will coordinate between your Insurance Agent and the Escrow Officer to make
sure your policy is in effect at the close of escrow.
11. Down Payment Funds
You will need a Cashier's Check or money transfer several days prior to the closing
date of escrow.
12. Close Escrow
When all of the conditions of the Purchase Agreement have been met, you will
sign your loan documents and closing papers. You will deposit the balance of
your down payment and closing costs in escrow and your lender will deposit the
balance of the purchase price. The Deed will then be recorded at the County
Recorder's office and you will take ownership of your home.
How much home
can you afford?
Making Few things are more frustrating than falling in love with a house only to discover it's not
affordable. How do you know what you can afford? By knowing how much money you qualify
to borrow. Use the following worksheet and your calculators to determine your price range.
Making Your loan consultant, however, will help determine exactly how much you can qualify for,
but there are two things you'll want to consider before applying with a lender.
How's Your Credit?
Making Check your credit report. It contains your
credit score, which is vital for qualifying for a loan. Order
your credit report from the three major credit bureaus,
check them carefully for discrepancies and
errors and have each bureau clear them
from your report.
Monthly Payment.
Making Calculate how much
of a monthly payment you're comfortable paying.
You may qualify for a loan amount that
would require a higher monthly payment than
you'd like to pay. Sit down and figure out your monthly
expenses in a new home. Remember that with homeownership
you will incur financial responsibilities such as
maintenance, improvements, taxes, insurance and possibly
association fees.
