8 Steps to Getting Your Finances in Order
8 Ways to Improve Your Credit
5 Factors That Decide Your Credit Score
10 Steps to Prepare for Home Ownership
10 Tips for First-Time Homebuyers
The Pros and Cons of Condos
10 Questions to Ask Your Condo Board
10 Questions Buyers Should Ask the Home Inspector
10 Questions to Ask Your Lender
10 Things a Lender Needs From You
5 Things to Understand About Title Insurance
5 Things to Understand About Homeowners Insurance
10 Ways to Lower Your Homeowners Insurance Costs
What Not to Overlook on a Final Walk-through
Common Closing Costs for Buyers

8 Steps to Getting Your Finances in Order 1. Develop a family budget. Instead of budgeting what you’d like to spend, use receipts to create a budget for what you actually spent over the last six months. One advantage of this approach is that it factors in unexpected expenses, such as car repairs, illnesses, etc., as well as predictable costs such as rent. 2. Reduce your debt. Generally speaking, lenders look for a total debt load of no more than 36 percent of income. Since this figure includes your mortgage, which typically ranges between 25 percent and 28 percent of income, you need to get the rest of installment debt—car loans, student loans, revolving balances on credit cards—down to between 8 percent and 10 percent of your total income. 3. Get a handle on expenses. You probably know how much you spend on rent and utilities, but little expenses add up. Try writing down everything you spend for one month. You’ll probably see some great ways to save. 4. Increase your income. It may be necessary to take on a second, part-time job to get your income at a high-enough level to qualify for the home you want. 5. Save for a downpayment. Although it’s possible to get a mortgage with only 5 percent down—or even less in some cases—you can usually get a better rate and a lower overall cost if you put down more. Shoot for saving a 20 percent downpayment. 6. Create a house fund. Don’t just plan on saving whatever’s left toward a downpayment. Instead decide on a certain amount a month you want to save, then put it away as you pay your monthly bills. 7. Keep your job. While you don’t need to be in the same job forever to qualify, having a job for less than two years may mean you have to pay a higher interest rate. 8. Establish a good credit history. Get a credit card and make payments by the due date. Do the same for all your other bills. Pay off the entire balance promptly.

8 Ways to Improve Your Credit Credit scores, along with your overall income and debt, are a big factor in determining if you’ll qualify for a loan and what loan terms you’ll be able to qualify for. 1. Check for and correct errors in your credit report. Mistakes happen, and you could be paying for someone else’s poor financial management. 2. Pay down credit card bills. If possible, pay off the entire balance every month. However, transferring credit card debt from one card to another could lower your score. 3. Don’t charge your credit cards to the maximum limit. 4. Wait 12 months after credit difficulties to apply for a mortgage. You’re penalized less for problems after a year. 5. Don’t purchase big-ticket items for your new home on credit cards until after the loan is approved. The amounts will add to your debt. 6. Don’t open new credit card accounts before applying for a mortgage. Having too much available credit can lower your score. 7. Shop for mortgage rates all at once. Too many credit applications can lower your score, but multiple inquiries from the same type of lender are counted as one inquiry if submitted over a short period of time. 8. Avoid finance companies. Even if you pay the loan on time, the interest is high and it will probably be considered a sign of poor credit management. This information is copyrighted by the Fannie Mae Foundation and is used with permission of the Fannie Mae Foundation. To obtain a complete copy of the publication, “Knowing and Understanding Your Credit,” visit http://www.homebuyingguide.org.

5 Factors That Decide Your Credit Score Credit scores range between 200 and 800. Scores above 620 are considered desirable for obtaining a mortgage. These factors will affect your score. 1. Your payment history. Whether you paid credit card obligations on time. 2. How much you owe. Owing a great deal of money on numerous accounts can indicate that you are overextended. 3. The length of your credit history. In general, the longer the better. 4. How much new credit you have. New credit, either installment payments or new credit cards, are considered more risky, even if you pay promptly. 5. The types of credit you use. Generally, it’s desirable to have more than one type of credit—installment loans, credit cards, and a mortgage, for example. For more on evaluating and understanding your credit score, go to http://www.myfico.com.

10 Steps to Prepare for Home Ownership 1. Decide how much home you can afford. Generally, you can afford a home equal in value to between 2 and 3 times your gross income. 2. Develop a wish list of what you’d like your home to have. Then prioritize the features on your list. 3. Select three or four neighborhoods you’d like to live in. Consider items such as schools, recreational facilities, area expansion plans, and safety. 4. Determine if you have enough saved to cover your downpayment and closing costs. Closing costs, including taxes, attorney’s fee, and transfer fees average between 2 and 7 percent of the home price. 5. Get your credit in order. Obtain a copy of your credit report. 6. Determine how large a mortgage you can qualify for. Also explore different loans options and decide what’s best for you. 7. Organize all the documentation a lender will need to preapprove you for a loan. 8. Do research to determine if you qualify for any special mortgage or downpayment assistance programs. 9. Calculate the costs of homeownership, including property taxes, insurance, maintenance, and association fees, if applicable. 10. Find an experienced REALTOR® who can help you through the process.

10 Tips for First-Time Homebuyers 1. Be picky, but don’t be unrealistic. There is no perfect home. 2. Do your homework before you start looking. Decide specifically what features you want in a home and which are most important to you. 3. Get your finances in order. Review your credit report and be sure you have enough money to cover your downpayment and your closing costs 4. Don’t wait to get a loan. Talk to a lender and get prequalified for a mortgage before you start looking. 5. Don’t ask too many people for opinions. It will drive you crazy. Select one or two people to turn to if you feel you need a second opinion. 6. Decide when you could move. When is your lease up? Are you allowed to sublet? How tight is the rental market in your area? 7. Think long-term. Are you looking for a starter house with the idea of moving up in a few years or do you hope to stay in this home longer? This decision may dictate what type of home you’ll buy as well as type of mortgage terms that suit you best. 8. Don’t let yourself be house poor. If you max yourself out to buy the biggest home you can afford, you’ll have no money left for maintenance or decoration or to save money for other financial goals. 9. Don’t be naïve. Insist on a home inspection and if possible get a warranty from the seller to cover defects within one year. 10. Get help. Consider hiring a REALTOR® as a buyer’s representative. Unlike a listing agent, whose first duty is to the seller, a buyer’s representative is working only for you. And often, buyer’s reps are paid out of the seller’s commission payment.

The Pros and Cons of Condos Condominiums and townhouses offer an affordable option to single-family homes in most areas. But consider these facts before you buy. 1. Storage. Some condos have storage lockers, but usually there are no attics or basements to store belongings. 2. Outdoor space. Yards and outdoor areas are usually smaller in condos, so if you like to garden or entertain outdoors, this may not be a good fit. However, if you hate yard work, this may be the perfect option for you. 3. Amenities. Many condo properties have swimming pools, fitness centers, and other facilities that would be very expensive in a single-family home. 4. Maintenance. Many condos have onsite maintenance personnel to care for common areas, do repairs in your unit, and let in workers when you’re not home. 5. Security. Many condos have keyed entries and or even door attendants. Plus, you’ll be closer to other people in case of an emergency. 6. Reserve funds and association fees. Although fees generally help pay for amenities and provide savings for future repairs, you will have to pay the fees agreed to by the condo board, whether or not you’re interested in the amenity or not. 7. Resale. The ease of selling your unit is more dependent on what else is for sale in your building, since units are usually fairly similar. Single-family homes usually are more individual. 8. Freedom. Although you have a vote, the rules of the condo association can affect your ability to use your property. For example, some condos prohibit home-based businesses. Others prohibit pets. Read the covenants, restrictions, and bylaws of the condo carefully before you make an offer. 9. Proximity. You’re much closer to your neighbors in a condo or townhome. If possible, try to meet your closest prospective neighbors before making a decision.

10 Questions to Ask Your Condo Board Before you buy, contact the condo board with the following questions. In the process, you’ll learn how responsive—and organized—its members are. 1. What percentage of units is owner-occupied? What percentage is tenant-occupied? Generally, the higher the percentage of owner-occupied units, the more marketable the units will be at resale. 2. What covenants, bylaws, and restrictions govern the property? What grandfather clauses are in place? You may find, for instance, that those who buy a property after a certain date can’t rent out their units, but buyers who bought earlier can. Ask for a copy of the bylaws to determine if you can live within them. And have an attorney review property docs, including the master deed, for you. 3. How much does the association keep in reserve? How is that money being invested? 4. Are association assessments keeping pace with the annual rate of inflation? Smart boards raise assessments a certain percentage each year to build reserves to fund future repairs. To determine if the assessment is reasonable, compare the rate to others in the area. 5. What does and doesn’t the assessment cover—common area maintenance, recreational facilities, trash collection, snow removal? 6. What special assessments have been mandated in the past five years? How much was each owner responsible for? Some special assessments are unavoidable. But repeated, expensive assessments could be a red flag about the condition of the building or the board’s fiscal policy. 7. How much turnover occurs in the building? 8. Is the project in litigation? If the builders or homeowners are involved in a lawsuit, reserves can be depleted quickly. 9. Is the developer reputable? Find out what other projects the developer has built and visit one if you can. Ask residents about their perceptions. Request an engineer’s report for developments that have been reconverted from other uses to determine what shape the building is in. If the roof, windows, and bricks aren’t in good repair, they become your problem once you buy. 10. Are multiple associations involved in the property? In very large developments, umbrella associations, as well as the smaller association into which you’re buying, may require separate assessments.

10 Questions Buyers Should Ask the Home Inspector 1. What are your qualifications? Are you a member of the American Association of Home Inspectors 2. Do you have a current license? Inspectors are not required to be licensed in every state. 3. How many inspections of properties such as this do you do each year? 4. Do you have a list of past clients I can contact? 5. Do you carry professional errors and omission insurance? May I have a copy of the policy? 6. Do you provide any guarantees of your work? 7. What specifically will the inspection cover? 8. What type of report will I receive after the inspection? 9. How long will the inspection take and how long will it take to receive the report? 10. How much will the inspection cost? Portions adapted from Real Estate Checklists and Systems and used with permission (www.realestatechecklists.com).

10 Questions to Ask Your Lender Be sure you find a loan that fits your needs with these comprehensive questions 1. What are the most popular mortgage loans you make? Why 2. Which type of mortgage plan do you think would best for us? Why? 3. Are your rates, terms, fees, and closing costs negotiable? 4. Will I have to buy private mortgage insurance? If so how much will it cost and how long will it be required? NOTE: Private mortgage insurance is usually required if you make less than a 20-percent downpayment, but most lenders will let you discontinue the policy when you’ve acquired a certain amount of equity by paying down the loan. 5. Who will service the loan? Your bank or another company? 6. What escrow requirements do you have? 7. How long is your loan lock-in period (the time that the quoted interest rate will be honored)? Will I be able to obtain a lower rate if they drop during this period? 8. How long will the loan approval process take? 9. How long will it take to close the loan? 10. Are there any charges or penalties for prepaying the loan?

10 Things a Lender Needs From You 1. W-2 forms or business tax return forms if you're self-employed for the last two or three years for every person signing the loan. 2. Copies of at least one pay stub for every person signing the loan. 3. Copies of two to four months of bank or credit union statements for both checking and savings accounts. 4. Copies of personal tax forms for the last two to three years. 5. Copies of brokerage account statements for two to four months, as well as a list of any other major assets of value, e.g., a boat, RV, or stocks or bonds not held in a brokerage account. 6. Copies of your most recent 401(k) or other retirement account statement. 7. Documentation to verify additional income, such as child support or a pension. 8. Account numbers of all your credit cards and the amounts of any outstanding balances. 9. Lender, loan number, and amount owed on other installment loans, such as student loans and car loans. 10. Addresses where you have lived for the last five to seven years, with names of landlords if appropriate.

5 Things to Understand About Title Insurance 1. It protects your ownership right to your home both from fraudulent claims against your ownership and from mistakes made in earlier sales, such a mistake in the spelling of a person’s name or an inaccurate description of the property. 2. It’s a one-time cost usually based on the price of the property. 3. It’s usually paid for by the sellers. 4. There are both lender title policies, which protect the lender, and owner title policies, which protect you. The lender will probably require a lender policy. 5. Discounts on premiums are sometimes available if the home has been bought within only a few years since not as much work is required to check the title. Ask the title company if this discount is available.

5 Things to Understand About Homeowners Insurance 1. Look for exclusions to coverage. For example, most insurance policies do not cover flood or earthquake damage as a standard item. These coverages must be bought separately. 2. Look for dollar limitations on claims. Even if you are covered for a risk, there may a limit on how much the insurer will pay. For example, many policies limit the amount paid for stolen jewelry unless items are insured separately. 3. Understand replacement cost. If your home is destroyed you’ll receive money to replace it only to the maximum of your coverage, so be sure your insurance is sufficient. This means that if your home is insured for $150,000 and it costs $180,000 to replace it, you’ll only receive $150,000. 4. Understand actual cash value. If you choose not to replace your home when it’s destroyed, you’ll receive replacement cost, less depreciation. This is called actual cash value. 5. Understand liability. Generally your homeowners insurance covers you for accidents that happen to other people on your property, including medical care, court costs, and awards by the court. However, there is usually an upper limit to the amount of coverage provided. Be sure that it’s sufficient if you have significant assets.

10 Ways to Lower Your Homeowners Insurance Costs 1. Raise your deductible. If you can afford to pay more toward a loss that occurs, your premiums will be lower. 2. Buy your homeowners and auto policies from the same company. You’ll usually qualify for a discount. But make sure that the savings really yields the lowest price. 3. Make your home less susceptible to damage. Keep roofs and drains in good repair. Retrofit your house to protect against natural disasters common to your area. 4. Keep your home safer. Install smoke detectors, burglar alarms, and dead-bolt locks. All of these will usually qualify for a discount. 5. Be sure you insure your house for the correct amount. Remember, you’re covering replacement cost, not market value. 6. Ask about other discounts. For example, retirees who are home more than working people may qualify for a discount on theft insurance. 7. Stay with the same insurer. Especially in today’s tight insurance market, your current vendor is more likely to give you a good price. 8. See if you belong to any groups—associations, alumni groups—that offer lower insurance rates. 9. Review your policy limits and the value of your home and possessions annually. Some items depreciate and may not need as much coverage. 10. See if there’s a government-backed insurance plan. In some high-risk areas, such as the coasts, federal or state governments may back plans to lower rates. Ask your agent.

What Not to Overlook on a Final Walk-through Be sure that: Repairs you've requested have been made. Obtain copies of paid bills and any related warranties. All items that were included in the sale price-draperies, lighting fixtures-are still there. Screens and storm windows are in place or stored. All appliances are operating. Intercom, doorbell, and alarm are operational. Hot water heater is working. HVAC is working. No plants or shrubs have been removed from the yard. Garage door opener and other remotes are available. Instruction books and warranties on appliances and fixtures are there. All personal items of the sellers and all debris have been removed.

Common Closing Costs for Buyers The lender must disclose a good faith estimate of all settlement costs. A check to cover your closing costs will probably have to be a cashier¡¦s check. You should also bring your checkbook to closing in case there are any changes after you obtain the cashiers check. You will also need 2 forms of identification, one being a driver's license or state-issued identification. The title company or other entity conducting the closing will tell you the required amount for: Downpayment Loan origination fees Points, or loan discount fees, you pay to receive a lower interest rate Appraisal fee Credit report Private mortgage insurance premium Insurance escrow for homeowners insurance, if being paid as part of the mortgage Property tax escrow, if being paid as part of the mortgage. Lenders keep funds for taxes and insurance in escrow accounts as they are paid with the mortgage, then pay the insurance or taxes for you. Deed recording fees Title insurance policy premiums Survey Inspection fees¡Xbuilding inspection, termites, etc. Notary fees Prorations for your share of costs, such as utility bills and property taxes A Note About Prorations: Because such costs are usually paid on either a monthly or yearly basis, you might have to pay a bill for services used by the sellers before they moved. Proration is a way for the sellers to pay you back or for you to pay them for bills they may have paid in advance. For example, the gas company usually sends a bill each month for the gas used during the previous month. But assume you buy the home on the 6th of the month. You would owe the gas company for only the days from the 6th to the end for the month. The seller would owe for the first five days. The bill would be prorated for the number of days in the month, and then each person would be responsible for the days of his or her ownership.