Home Buying

Home Inspection Checklist

Did Your Home Inspector Check the Essentials?

Home buyers have it drilled into their heads that they need to get a home inspection. In California, for example, real estate agents advise home buyers to do a home inspection 15 ways from Sunday. Our purchase contracts contain two pages that talk about doing a home inspection, and those two pages are repeated in the buyer's broker agreement. That's just for starters.

A home buyer does not close escrow without hearing about the need for a home inspection. But what does a home inspection report disclose? Home buyers are often clueless about home construction and its components, and have difficulty deciphering home inspection reports. Many don't know how to figure out which types of defects are serious or whether their home inspector checked all the essentials. But, by George, they got that home inspection!

Home Inspection Checklist Comparisons

All home inspections are different and can vary dramatically from state to state, as well as across counties and cities. Much depends on the home inspector and which association, if any, to which the home inspector belongs. Because I am most familiar with home inspections conducted in accordance with the standards of practice established by the National Association of Certified Home Inspectors, the following information is based on NACHI guidelines.

General Home Inspection Checklist – Items Always Inspected:

Structural Elements.

Construction of walls, ceilings, floors, roof and foundation.

Exterior Evaluation.

Wall covering, landscaping, grading, elevation, drainage, driveways, fences, sidewalks, fascia, trim, doors, windows, lights and exterior receptacles.

Roof and Attic.

Framing, ventilation, type of roof construction, flashing and gutters. It does not include a guarantee of roof condition nor a roof certification.

Plumbing.

Identification of pipe materials used for potable, drain, waste and vent pipes. including condition. Toilets, showers, sinks, faucets and traps. It does not include a sewer inspection.

Systems and Components.

Water heaters, furnaces, air conditioning, duct work, chimney, fireplace and sprinklers.

Electrical.

Main panel, circuit breakers, types of wiring, grounding, exhaust fans, receptacles, ceiling fans and light fixtures.

Appliances.

Dishwasher, range and oven, built-in microwaves, garbage disposal and, yes, even smoke detectors.

Garage.

Slab, walls, ceiling, vents, entry, firewall, garage door, openers, lights, receptacles, exterior, windows and roof.

Home Inspection Checklist of Items NOT Inspected:

• Asbestos
• Radon, Methane, Radiation and Formaldehyde
• Wood-Destroying Organisms
• Mold, Mildew and Fungi
• Rodents
• Lead

Home Inspection Checklist –  Items Needing Service:

Home inspection reports do not describe the condition of every component if it's in excellent shape, but should note every item that is defective or needing service. The serious problems are:

• Health and safety issues
• Roofs with a short life expectancy
• Furnace / A/C malfunctions
• Foundation deficiencies
• Moisture / drainage issues

Home Inspection Checklist – Items Sellers Should Fix:

If you have a choice, it is smarter to hire your own contractors and supervise repairs. Before issuing a formal request to repair, consider the seller's incentive to hire the cheapest contractor and to replace appliances with the least expensive brands.

Although home inspectors are reluctant to and, in many cases, refuse to disclose repair costs, call a contractor to determine the scope and expense to fix minor problems yourself. No home is perfect. Every home will have issues on a home inspection. Even new homes.

A repair issue that will be be a deal breaker for a first-time home buyer, causing the buyer to cancel the contract, will not faze a home buyer versed in home repair. Talk to your agent, family, friends and call a few contractors to discuss which types of defects are minor. Perhaps a simple solution is available such as replacing a $1.99 receptacle, which can resolve many outlet problems.

Pat yourself on the back, too, for getting a home inspection. Some buyers feel a home inspection is unnecessary, especially if they are buying new construction. If a light switch doesn't work or the air conditioner blows out hot air, those are problems you can see and test. The problems that aren't readily identifiable to you such as code violations, a furnace that leaks carbon monoxide or a failing chimney, are the types of defects a home inspector could identify in a new home. Builders' contractors make mistakes, too.

Counter Offers – All About Real Estate Counter Offers

Writing & Accepting Real Estate Counter Offers

What Constitutes a Counter Offer?

Counter offers are generated by a home seller after a buyer has submitted an offer to purchase. Typically, counter offers will state that the seller has accepted the buyer's offer subject to the following particulars. The following particulars can address such items as:

• Total consideration (generally a higher price)
• Increasing the size of the earnest money deposit
• Refusals to pay for certain reports or fees
• Changing service providers
• Altering closing or possession date
• Excluding personal property from the contract
• Modifying contingency time frames

What's a Normal Number of Counters to Expect?

Just as a seller can submit a counter offer to a buyer, a buyer can counter the seller's counter, which will then become a counter-counter offer or Counter Offer #2. There is no limit to the number of counter offers that can be submitted back and forth. Here is a real example of five counters on a property listed at $415,000. The seller had submitted an offer at $400,000. This was the result:

Counter Offer #1 from Seller to Buyer

1. Seller counters sales price to $412,000.

2. Appliances included without warranty.

Counter Offer #2 from Buyer to Seller

1. Buyer counters sales price to $405,000.

2. Appliances included without warranty.

Counter Offer #3 from Seller to Buyer

1. Seller counters sales price to $409,900.

2. Washer & dryer excluded from sale.

Counter Offer #4 from Buyer to Seller

1. Buyer counters sales price to $407,500.

2. Washer & dryer to remain as personal property.

Counter Offer #5 from Seller to Buyer

1. Seller agrees to sales price of $407,500.

2. Refrigerator, washer & dryer excluded from sale.

Finally, the buyer accepted the fifth counter. Phew.

How are Counter Offers Rejected?

The seller is not required to respond to an offer. Does that surprise you? Of course, it doesn't mean that the brokers might not have earned a commission if the seller refuses to respond to a full-price-and-terms offer. The brokers would likely still demand payment. A non-response doesn't alleviate the seller's responsibility to the broker. Here are the most common ways to reject an offer:

• Many purchase contracts provide a spot near the bottom for the seller to initial that the offer has been rejected.
• Sellers can also write "rejected" across the face of the contract, initial and date it.
• Most offers specify a date of expiration of offer in the event the seller elects not to respond.

What About Multiple Counter Offers?

Depending on your specific state laws, sellers may or may not be able to issue multiple counter offers. In California, it's fairly straight-forward. Sellers can counter more than one offer and each counter can be different. Even if one of the buyers accepts the seller's counter under these circumstances, the seller does not have to accept the buyer's acceptance. For more specific advice, consult a real estate lawyer.

How are Counter Offers Accepted?

If the counter offer is issued by the seller, the buyer can simply accept the counter and deliver it back to the party designated to receive it. Time is always of the essence. Counter offers contain expirations just like purchase offers, which means the seller can accept another offer while the buyer is deciding whether to sign the counter offer.

When I've called agents to find out availability of property and whether any offers have been received, it's very common (especially in seller's markets) to hear, "We have a counter out." Some agents would feel discouraged at that news. But I've snatched homes out from under the noses of competing buyers by immediately submitting an offer from my buyer while the counter "was out." What commonly happens in these situations is the seller accepts the second buyer's offer and then simply withdraws her counter offer from consideration, kicking the first buyer out of the game.

Multiple Offers – Competing Home Offers

Competing With Other Home Buyers in Multiple Offer Situations

A seldom discussed phenomenon often occurs when home buyers decide to write a purchase offer. This is how it goes:

Say you've been house hunting for weeks. You notice one home has been for sale almost six months without any offers. You figure the home is overpriced, and you might be right. But you go look at it anyway. You fall in love.

It's the perfect home for you, and you figure you can get a great price because the seller is undoubtedly desperate for an offer. This is your lucky day. So, you whip out the checkbook, write an earnest money deposit and and sign the purchase contract. Your buyer's agent then delivers the offer to the seller's agent.

That night you're dreaming about the home. You toss and turn, thinking about how you will arrange your furniture, which color you might paint the bedroom. The next morning your agent calls to say the house has been sold to somebody else.

How did that happen? You're astonished, then angry, and later, depressed. You wonder if the seller had a buyer in his back pocket all along. How did you get deceived?

You weren't. What typically happens — and I can't explain why — is the minute you want to buy a home, so do three other people. It's extremely common for the seller of a dated and neglected listing to suddenly receive two, three or more offers, all within minutes of each other.

Tip: When you find a home to buy, write your offer immediately. Ask your agent to call the seller's agent to find out if there have been recent showings and whether anybody else might be writing an offer.

Multiple Offers in a Buyer's Market (Today's Market)

In buyer's markets, the winning offer in a multiple offer situation is often less than list price. The number of multiple offers are generally considerably fewer, meaning you might be competing against one buyer in-lieu-of 20. Here are suggestions for competing:

Sell Your Exiting Home First.

If you are moving up and have a home to sell, don't buy before selling. If you're a first-time home buyer, you might already have the advantage over a buyer who needs to sell before buying. If one offer contains a contingency of sale, the seller will gravitate toward the offer without a contingency to sell.

Play Nice.

Don't ask the seller to give you personal items. Don't expect the seller to pay your closing costs. Find out which items are customarily paid for by the seller and offer to pay a few such as title policies, escrow fees, transfer fees. Ask your agent to befriend the seller's agent because sometimes sellers reject offers based on what the seller's agent has to say about your agent.

Find Out What's Important to the Seller.

Ask your agent to find out the hot buttons in the transaction. These could be seller requests or listing agent expectations — ask what will seal the deal and give it to them. Maybe it's a fast closing. Maybe it's a longer than usual escrow period.

Share the Love.

Most sellers have an emotional attachment to their home and want to see it fall into the hands of an acceptable buyer. Be that acceptable buyer. Write the seller a brief letter explaining why you love the home and why you deserve to be chosen as the winning offer. Be sappy but sincere.

Prepare for a Counter Offer.

You can write the best offer, and a competent listing agent is likely to advise the seller to counter all the multiple offers, even in a buyer's market. In California, for example, sellers do not need to make identical counter offers. Each can be different. Also, the seller retains the right to choose or reject accepted multiple counter offers.

Three Major Home Buying Mistakes – How to Avoid Home Buying Mistakes

How You Can Prevent Blunders

Not every mistake in a real estate transaction can be reversed, much less fixed before closing. If buyers goof up and make an innocent mistake, they might very well be stuck with the consequences for a long time or, worse, their deal might not even close. It could fall out of escrow.

Number One Blunder: Refusing to Confide in a Trusted Advisor

This advisor could be your real estate lawyer or real estate agent. Buyers withhold information for a variety of reasons such as:

• Fear of how they will be perceived
• Irrational belief they have all the answers
• Don't feel it is important enough
• Lack confidence in their advisor

Experienced real estate professionals handle such a multitude of transactions and personality mixes, there's little they haven't heard before. Your advisors are representing your best interests and have a fiduciary responsibility to do so. They can't help you if they don't know what you are doing behind their backs. Plus, they will likely have a better idea for you than you can dredge up.

If you have cold feet and have thoughts about backing out of the transaction, talk to your agent about those feelings. She can help walk you through the anxieties. Pros will help you to determine if you really need to cancel and, if so, manage the transaction so you can get your earnest money deposit back.

Number Two Blunder: Altering Financial Pictures Prior to Closing

When I bought my first home, I easily qualified because I had no car payment nor revolving debt. A week before closing, I bought a new car and financed the purchase. New ratios meant I no longer qualified. A frantic phone call to my mother, begging her to lend me the money to pay off my car loan (and threatening to show up on her doorstep with luggage in tow and a cat under each arm), was the only tactic that saved me from losing the house.

Today's home buyers make the same mistake. Do not buy anything on credit and / or with a credit card once you have completed a loan application. Do NOT buy:

• Automobiles
• Washers, dryers, refrigerators
• Lawnmowers or garden equipment
• Expensive electronics or computers
• Furniture for your new home

Slight alterations in your credit ratios could cause an underwriter to throw out your loan and deny it. If your loan contingency has expired or been removed, you could forfeit your earnest money deposit in addition to losing the home.

Number Three Blunder: Buying the Wrong House

The very first thing home buyers should do is make a list of priorities and define home purchase objectives. Figure out what features and benefits are most important and which you can live without. Before you close escrow, review this list. It's easy to overlook a major factor that could come back to haunt you later.

A buyer looking for a home in the midtown neighborhood of Sacramento, California, found herself swept up in the excitement of buying a home that was a bit less than she actually needed. She convinced herself that having one bathroom was suitable, but discovered shortly after closing that sharing a bath with two grown sons was impossible. It caused her so much tension and strain that she sold less than a year later. It cost her money to sell and more money to buy a two-bathroom home in another neighborhood. If the market had been depressed or a buyer's market, she could have lost everything, like this next guy, instead of simply spending a lot more money than was necessary.

Another buyer purchased a home that cost him about $100,000 more than he was comfortable spending. But he fell in love with the Victorian character: the high ceilings, sparkling chandeliers and wide-planked floors. A year later, he could no longer afford to make his mortgage payment. The house was too expensive for him to maintain. He would have been better off buying a smaller home in a more modest neighborhood. But he let his soaring emotions cloud his good judgment. Since his purchase, the market softened and he could not sell. He lost his home to a short sale.

Before You Buy Your First Home – Tips for a First-time Home Buyer

It's not uncommon for a first-time home buyer to say to me, "Gosh, just last week I called you about buying a home and now I'm in escrow! How did this happen so fast?"

The answer is it didn't. First-time home buyers start the search long before most even realize it.

Here's what you can expect from your home shopping experience.

Benefits for a First-Time Home Buyer

You should buy a home. That's what you've been hearing from friends and family, right? So, by now you have likely already weighed the benefits and decided that home ownership was the best decision for you. That's a major hurdle now passed. You are focused and certain. Good.

Defining Search Parameters for a First-Time Home Buyer

Almost 80% of all home searches today begin on the Internet. With just a few clicks of the mouse, home buyers can search through hundreds of online listings, view virtual tours, and sort through dozens of photographs and aerial shots of neighborhoods and homes. You've probably defined your goals and have a pretty good idea of the type of home and neighborhood you want. By the time you reach your real estate agent's office, you are halfway to home ownership.

How Long Should It Take to Buy Your First Home?

In seller's markets, often I show only one home. After all, how many homes does one family need? A few buyers will look for years, but buyers who do that aren't motivated. A motivated buyer will find a home within two weeks. Most of my buyers find a home within two days. 

How Many Homes Will a Home Buyer See?

Studies show that your memory dramatically improves after consumption of carbs and slows upon consuming sugar. So, lay off the soft drinks and have a hearty meal of carbs before venturing out to tour homes. The average number of homes that I show to a buyer in one day is seven. Any more than that, and the brain is on overload. Therefore, don't expect to see 20 or 30 homes; although it's physically possible to do so, you probably will not remember specific details about any of them.

The "Red Shoes" Experience for a Home Buyer

Women will relate to this. Say, you need a new pair of red shoes. You go to the mall. At the first shoe store, you find a fabulous pair of red shoes. You try them on. They fit perfectly. They are glamorous. Priced right, too. Do you buy them? Of course not! You go to every other store in the mall trying on red shoes until you are ready to drop from exhaustion. Then you return to the first store and buy those red shoes. Do not shop for a home this way. When you find the perfect home, buy it.

How a First-Time Home Buyer Can Rate Inventory

• Bring a digital camera and begin each series of photos with a close-up of the house number to identify where each group of home photos start and end.
• Take copious notes of unusual features, colors and design elements.
• Pay attention to the home's surroundings. What is next door? Do 2-story homes tower over your single story?
• Do you like the location? Is it near a park or a power plant?
• Immediately after leaving, rate each home on a scale of 1 to 10, with 10 being the highest.

View Top Choices a Second Time Before Buying That First Home

After touring homes for a few days, you will probably instinctively know which one or two homes you would like to buy. Ask to see them again. You will see them with different eyes and notice elements that were overlooked the first go-around. 

At this point, your agent should call the listing agents to find out more about the sellers' motivation and to double-check that an offer hasn't come in, making sure these homes are still available to purchase.

Making the Selection To Buy a Home

I'll let you in on a little secret. I generally know which home a buyer is going to choose, and I suspect most other agents operate the same way. It's an intuition. But I make it a practice not to steer buyers, and I insist that buyers choose the home without interference from me. It's not my choice to make.

Real estate agents are required, however, to point out defects and should help buyers feel confident that the home selected meets the buyer's search parameters.

Loan Pre-approval – The Advantages of Loan Pre-approval

Preapproval Letters Give Homebuyers an Edge

Real estate experts tell first-time home buyers that it's critical to apply for a loan before shopping for a home, and it's true; this is an essential first step. But do you know that it's far better to be preapproved for a loan than to be prequalified? There are more advantages to gaining preapproval than you would initially surmise. When the lender hands a borrower a preapproval letter, it means the borrower can:

Save Time by Looking at the Right Homes 

If your real estate agent is sending you automatic e-mail listings of available homes, you can ask her to change the parameters to more tightly encompass the selection of homes that you are qualified to buy. If you're not receiving e-mails from your agent, ask her to send them to you. Most MLS systems allow an agent to send clients much of the same data that agents receive. This way, you'll save time by checking out homes you can actually afford to buy instead of falling in love with pie in the sky.

Spend More Time Examining the Right Homes 

By decreasing the inventory of homes to those that fit your parameters, you can allot more time to thinking about all the little nuances each home has to offer. Lots of home buyers never move past the price point when sorting out their preferences, but now you can devote your energies to looking at the little things that matter to you most such as whether your SUV will pass through the overhead space in the garage or smash into the microbeam.

Gain Confidence & Avoid Disillusionment

Now when you find that perfect home, nobody can take it away from you by telling you that you do not qualify to buy it. You can minimize anxiety and remove last-minute loan surprises that could disqualify you. You'll sleep better at night knowing that the home you selected is yours. Moreover, you can tell your relatives and friends that the home you made an offer is definitely going to close and you will not "lose face" with anybody.

Increase Bargaining & Negotiating Power

Sellers will be more likely to immediately accept your offer, even if that offer is for less than list price, because you are giving the seller peace of mind that her home is sold. She can take her home off the market and place it into pending status with confidence.

Enjoy a Faster Closing Period

Because there is no window period while your loan application is processed, the lender can speed up the entire processing procedure. Appraisals can be ordered immediately. It's possible to shorten a 30-day closing to two or three weeks, which comes in handy if a seller needs to quickly move and can't decide which offer to accept. Yours will move to the front if you can accomplish the seller's need to quickly close.

Because mortgage approval is generally the longest contingency to satisfy in a purchase contract, it is to your advantage to obtain a preapproval letter as soon as you're ready to begin your search. Lenders will render a decision based on your complete loan application, employment verification and data from all three credit reports.

FHA Loans – Reasons Home Buyers Love FHA Loans

FHA Loans Carry Many Benefits for Home Buying or Refinancing

FHA loans are fell out of grace for a few years, but since 2005 have rebounded! It's an institution that has been around for a long time, since June 27, 1934. The Department of Housing & Urban Development folded the Federal Housing Administration (FHA) under its umbrella in 1965.

FHA loans began to lose favor in the late 1990s, when home values began to inch upwards, surpassing FHA mortgage limits, and sellers balked at FHA's stringent appraisal guidelines.

How FHA Loans Work

Now, FHA does not make loans or guarantee loans. It insures loans. The insurance removes or minimizes the default risk lenders face when buyers put down less than 20 percent. Without further approval from FHA, its approved lenders are authorized to:

• Take loan applications 
• Process loan applications 
• Underwrite and close the loan

FHA Mortgage Limits

My parents bought our first home in 1955 for $9,000 with an FHA loan. It's almost inconceivable to think of a home costing that today. As a result, FHA periodically changes its mortgage limits. As of January 1, 2009, the maximum mortgage limit in high-cost areas is 115% of local median prices, not to exceed $625,500. The maximum conforming loan limit is $417,000 for single-family residences nationwide. Your area could support a lower mortgage limit. Here is how to find your FHA mortgage limit.

FHA Loans Allow a Blemished Credit History 

If your credit is less than perfect, FHA might be the loan for you. You may qualify for an FHA loan even though you have had financial problems.

• FICO scores can be lower than those for a conventional loan. 
• Bankruptcy. You can obtain an FHA loan two to three years from the date of your bankruptcy discharge, as long as you've maintained good credit since your debts were discharged. 
• Foreclosure. If you keep your credit in excellent shape since a foreclosure, an FHA loan will be available to you two to three years from the final date of your foreclosure.

FHA Loans Boast Competitive Rates & Terms

Today's terms are pretty straightforward. In fact, in many markets the rates and terms are better than those for 80% / 20% piggyback loans. 

• There is little or no adjustment to the interest rate for an FHA loan, as the rates vary within .125 percent of a conventional loan.
• Mortgage insurance is funded into the loan, meaning a premium of 1.5% is added to the loan balance instead of being paid out-of-pocket. In addition, a small portion for the mortgage insurance premium is added to the monthly payment, but it is far less than private mortgage insurance premiums.
• As of January 1, 2009, Borrowers can finance 96.5% of the purchase price and put down 3.5 percent. In some instances, when combined with other types of loans, the down payment can be zero.
• Allowable debt ratios are higher than the debt-ratio limits imposed for conventional loans.

FHA Loans Demand Fewer Repairs

At one point, FHA repair demands were so excessive that sellers would discount the list price to buyers who would agree to obtain conventional loans over FHA loans. Today the requirements appear more reasonable.

• Defective roofs that leak still need to be replaced but an older roof does not necessitate replacement if it doesn't leak.
• Windows that stick upon opening or have cracked panes do not require replacement.
• FHA appraisals do not take the place of a home inspection, never have. Buyers should still obtain a professional home inspection.

FHA loans are available to anybody but are used most often by first-time home buyers and low- to moderate-income buyers. However, there are no income limit qualifications.

How to Find a Down Payment to Buy a Home

12 Ways to Find a Down Payment

Home ownership in America has increased from 25% in the early 1900s to 67% at the end of that century. During all those years, many home buyers struggled to come up with a down payment. In some cases, the banks required as much as 50% down before they would lend on a mortgage.

Today, the desired down payment is typically 20%; however, few people have that much cash available to them. FHA loans, for example, require only 3.5% down. But the fact remains that the more a buyer puts down, the lower the mortgage. Low mortgage balances carry low mortgage payments.

Here are 12 ways to find that down payment.

1.) Save Your Tax Refund

If it's hard for you to save, you can change your withholding exemptions from 1 to zero. This will force your employer to pay more to the I.R.S. and reduce your paycheck by that amount. For some free-spending and undisciplined individuals, this method assures a fat income tax refund. Even a regular tax income refund, however, might be enough to help you buy a home.

2.) Borrow From Parents

It's not unusual to ask your parents for money to help you buy a home. Favorable tax laws will let each parent gift a certain amount without tax consequences (check with your CPA).

If your parents won't give you the money, perhaps you could ask for an unsecured loan and pay it back at a better rate than your parents could get at the bank or in a money-market account? The rate you pay would likely be less than the prevailing rate from your own lending institution, which makes it win-win for everybody.

3.) Sock Away X Amount Periodically

The secret to making a savings account grow is to make identical deposits at the same time every month. For example, if you are paid every two weeks and save $200 from every paycheck, at the end of 12 months, you will have saved more than $5,200, excluding interest.

4.) Sell Stuff on eBay or Hold a Garage Sale

Everybody has too much stuff. I've never met a person who didn't. Some people spend thousands every year on storage units where this stuff is stashed. Look in your attic, your basement, under your bed and in your closets for stuff you no longer use. If you haven't used it in a year, sell it at a garage sale, put it on Craig's List or set up an eBay account and get rid of it.

I thought I was going to have pay somebody to come haul away my 10-year-old treadmill that was collecting dust in my family room. Put that baby on Craig's List and sold it (for a lot of money!) in less than week. You can, too.

5.) Ask Seller to Give it to You

Hey, you never know. If you pay the seller's asking price, you'd be astonished at what some sellers will do for you. Some of them will even give you the down payment as a credit or pay your closing costs or both. Check with your lender before asking for the credit because lenders have strict requirements as to how much you can receive. The Nehemiah program, for example, allows up to 6% as a credit from the seller.

6.) Settle Lawsuits Fast

From personal injury suits to civil litigation, typically delays just make the lawyers more money, apart from the fact that the time-value of money decreases as the clock ticks. We live in a litigious society where even a simple auto accident involving slight bumper damage ends up being filed in court. Settle the case quickly and use that reward to help you buy a house.

7.) Check Out Government Programs

If you've served your country in the armed forces, you may qualify for a loan backed by the Veterans Administration, known as a VA loan. The government also runs a slew of down payment assistance programs for first-time home buyers. Also, check with your county to see if it offers special programs to induce home ownership in certain neighborhoods.

8.) Take a Second Job

Some renters will sacrifice evenings to work part-time at a second job. If it's a short-term situation, it might not be that hard to do. It could also be seasonal work such as from Thanksgiving to Christmas or specialty work around tax time in the spring.

9.) Ask for a Raise

Sit down one evening and write up a list of every thing you have done over the past year that made your company money or somehow increased its bottom line. List every accomplishment. Then take that list to your boss and ask for a raise. Ask for more than you think you will receive. You never know, you might get it.

10.) Get a Better Paying Job

As long as your field of employment remains the same, taking a different job should not affect your mortgage application. Maybe it's time to look for employment elsewhere that will pay more. Check with your local employment office, network with peers and send résumés to companies where you want to work, regardless of whether it advertises a position.

11.) Tap Your Retirement Funds

Certain retirement accounts will let you borrow from them to buy a home. Check with your CPA for current regulations. Some types of requirement accounts will let you take out the principal balance without a penalty.

12.) Consider 100% Financing

If you have excellent credit, you may qualify for a 100% loan, providing your community offers these special first-time home buyer programs. This could be a single mortgage insured through mortgage insurance, or you may qualify for a silent second mortgage, due when you sell. Talk to your mortgage broker to see which programs may be available for you.

Where to Get a Mortgage

Most home buyers finance real estate, which means almost all home buyers will need to get a real estate loan. So what are your lending choices? Where can you get a real estate loan? Which type of real estate lender is best?

Unfortunately, there is no pat answer because the best choice for you depends on your personal situation, the type of property you want to buy and how the lender's rates compare within the lending community. You can get a loan from a variety of sources such as:

Mortgage Brokers

More than half of all the real estate loans made in the United States originate from mortgage brokers. A mortgage broker is a middle-person who brings together lenders and borrowers. Mortgage brokers each work with different lenders, sometimes 200 or more. It's important to ask about the variety of products offered as this will vary from broker to broker. Your choices are dependent on the broker's number of working relationships.

• Fees are paid by the buyer or lender or both.
• Loans at "par" mean the buyer is not paying a fee.
• Yield-spread premiums (YSPs) are typically disclosed at closing and paid by the lender.
• Mortgage brokers can also operate as "up-front" mortgage brokers, meaning they will negotiate a fee directly with the buyer in exchange for shopping for the lowest (wholesale) interest rate & fees.

Mortgage Bankers

Mortgage bankers, as you may have guessed, work for a bank. They may represent more than one bank but the loans they make are bank loans, funded by the bank.

• Fees are generally not negotiable and are set by bank policy.
• Loan products are limited to those the bank offers.
• The banker may not be licensed.

Commercial Banks

Citigroup, Bank of America, and Wells Fargo are good examples of well known commercial banks. Commercial banks offer a wide variety of services. In fact, you probably have a bank like this in your neighborhood.

• Primary source of business is not making mortgage loans.
• Bank rates are competitive.
• Your bank may offer a discount or incentive on your loan if you maintain a checking or savings account at that institution.

Savings & Loan Associations

Savings and loans accept deposits from customers into savings / money market accounts and pay interest on those accounts. To prevent a relapse like the S&L crisis in the 1980s, President Bush in 1989 signed the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA). Many savings and loans are now regulated by the Department of U. S. Treasury, Office of Thrift Supervision.

• Primary source of business is making real estate loans.
• Savings and loans do not make business or commercial loans but lend for construction, purchase or home improvement purposes.
• The process for obtaining a mortgage is a bit easier than going to a commercial bank.

Credit Unions

These institutions are regularly under attack by lending competitors because credit unions do not pay federal taxes and enjoy certain taxable advantages that other lending institutions do not. They are formed by a group of individuals with a common interest such as state government and community education employees or religious groups.

• Customers must meet qualifications to be eligible for membership.
• Interest rates and terms are typically very attractive and competitive.
• Many credit unions do not sell their mortgage loans on the secondary market.

Private Individual

Anybody with money in the bank can make a real estate loan to you as long as they comply with federal and state regulations regarding such items as interest rates, fees and charges, and provide legally required disclosures.

• The seller can carry back common financing instruments such as a mortgage, trust deed or land contract.
• No appraisal or title policy may be required, but you should still obtain an appraisal and title protection.
• Owner financing works best on properties that are free and clear because an existing loan will most likely contain an alienation clause.

Stock Brokerages & Online Lenders

You might be astonished to learn that the company handling your IRAs or mutual funds or online savings also makes mortgage loans. A few easily recognizable names are HFC Home Loans, INGDirect, Charles Schwab, and Ditech.

• If you need to shake hands with your loan officer in person, an online lender might not be for you.
• Internet lenders seem to work best for sophisticated borrowers with great FICO scores who know exactly what they want.
• Contact only reputable and known companies with secure sites, and stay away from fly-by-night operators.

How to Order Free Credit Reports & Get FICO Scores

The first step in any process that involves applying for credit is to obtain a copy of your credit report. Federal laws make it easy for anyone to obtain one free copy of their credit report every 12 months. You can obtain a copy of your credit report online, safely and without risk by pasting this secure site into your browser: http://www.annualcreditreport.com.

Fee-based Credit Report Companies

Do not use suspicious companies that collect a fee from you to obtain your credit report because you might be disclosing your social security number to criminals. Make sure that you have a secure connection, like https, before submitting confidential information, and try to do business with companies you know.

Watch out for companies that pitch free reports and try to snooker you into signing up for additional services you do not want to order. The additional services offered such as notifying you if somebody accesses your credit score are definitely not free.

FICO Scores

FICO scores were developed by Fair Isaac Corporation in the late 1980s and are used today to evaluate provider risk and consumer creditworthiness for everything from borrowing money to buy a house to obtaining automobile insurance.

You can obtain your FICO score online for a small fee, but it is not free. The company will send you a credit report and scores from three credit reporting agencies. Typically lenders will throw out the top and bottom score and keep the middle score. Make sure you are receiving a genuine FICO score or NewGen score. Each credit bureau has a different name for its FICO score. Equifax is Beacon. Experian is Experian / Fair Isaac Risk Model and TransUnion is Empirica. Everything else is an imposter.

The FICO score your lender gets and the FICO score you can order yourself will most likely be two different scores, do don't expect the score you receive to match. FICO scores range from 300, which is very bad, to 850, which is the very best.

« Previous Page — Next Page »