The USA Homebuyer's Guide 

Written in everyday language, our Seven Steps give you information you can use while making all-important decisions. 

1. Choose your firm/representative. 
2. Make a wish list. 
3. Determine how much home you can afford. 
4. When you buy, think about selling. 
5. Nail down the price. 
6. Get the right financing. 
7. Close! 

1. Choose your Representative.

Finding an appropriate home is usually time-consuming and it can be complicated; so, you'll be working closely with your real estate professional. That's why a Buyer's Resource - Star Realty agent is important. Here are some things you want to know: 

• Personality - Without good communication, the job of finding the best home for you is going to be tough. With that in mind, seek an agent with whom you are comfortable. 
• Knowledge - How does the representative field your questions? If the agent does not have the answers right away, does he or she know how to get the information you need? 
• Honesty & Integrity - The firm/representative has a legal duty to be truthful in all dealings. 
• Professionalism - Make sure your representative is a professional who will nail down the details in writing to prevent later misunderstandings - leaving nothing to chance. 

2. Make a wish list.

If you plan to take advantage of today's great home buying opportunities, you should assess your housing needs carefully. 
Ask yourself:

• How long do you expect to live in the home? 
• Is your entertaining often of a business nature, or do you simply like to have friends over? Formal or casual? 
• If your current home does not meet your needs, can you say why? Do you need more counter, cabinet, closet or floor space? How much more? Are the living areas large enough? (i.e. living room, family room, bedrooms, kitchen, bathrooms, dens) 
• Do you work at home or require a room for hobbies? 
• Is there a need for special storage space, such as that needed for a boat, RV, etc.? 

3. Determine how much home you can afford.

Several factors are key to determining affordability. Obviously, your income is one of them. Your total current debts are another. Also, because it can dramatically affect the amount you can afford to use as a down payment, the equity you have acquired in your present home is very important. Finally, current interest rates and the loan term play key roles in determining the amount you can afford to spend. 

There are several basic rule-of-thumb formulas which lenders use to determine how much home they feel you can afford: 
 
 

• The price of your home should not exceed 2.5 times your gross annual income. 
• Your total monthly payments for the mortgage, including principal, interest, insurance and taxes should not exceed 28% of your gross monthly income. 
• Your mortgage payments, total long term debts, revolving credit expenses, department stores, and car payments should not exceed 41 % of your gross monthly income.

4. When you buy, think about selling.

Chances are, the home you're buying now won't be your last, so it is important to consider future marketability. How will areas under consideration appeal to a potential buyer five years from now? 

• Age group of potential buyers - Does the area appeal to all age groups, or will you find a limited market at selling time?
• Houses of worship - To attract the largest numbers of potential buyers, look to see if there is a diverse mixture of churches, temples, and other places to worship. 
• Recreational facilities - Some neighborhoods have an amenity section featuring a swimming pool, tennis courts, perhaps even a clubhouse. Nearby golf courses, theaters and entertainment sources also may add to future marketability. 
• Schools - Even if you do not have children, good, nearby schools are important to you because they can affect the salability of your home. Check them out. 
• Shopping - Consider both food and clothing 
• Size and price range of homes in the area - In many cases, it is not to your advantage to own the largest and most expensive home in the neighborhood. 
• Taxes - Try to predict the changes in taxes down the road. For example, taxes may start low, then escalate rapidly as an area is built up. 
• The Homeowners Association - How are fees regulated? Are they optional? Included in your mortgage payment? What is the procedure in raising fees?
• Transportation - What happens to traffic during peak periods? If mass transit is available, is it easily accessible and efficient? Are new roads or improvements planned to ease the crunch (and improve the value of the property)? 

Call your Buyer's Resource representative to discuss areas under consideration. We have information to help buyers like you to find the right area - at the right price. 

5. Nail down the price.

In considering price, do not rely solely on a "price per square foot." Buyer's Resource has the expertise to help you judge value and nail down the best price, incentives, points and upgrades, especially on new construction. Prices may vary greatly. Take a close look. 

• Points - A "point" is one percent of the total loan amount, payable at closing, and regardless of what you may hear, the buyer pays any points, either up - front or as part of the monthly mortgage payment. If the points are paid as part of the sales price, the seller then pays the points from the proceeds and takes out any tax deduction. The advantage to the buyer is that less up - front cash is required to complete the transaction. However, if the buyer pays the points out -of-pocket, he takes any deduction and the amount of the home financed is smaller, resulting in lower monthly payments. 
• Comps - How are comparable homes in the same neighborhood priced? Obviously, you don't want to pay as much as your neighbor for a similar home, but you might also be wary of a price that is significantly lower than the norm - Is the home simply a great value, or is the problem yet to be uncovered?

6. Get the right financing.

You may be surprised at the vast array of financing options available today. Because interest rates fluctuate and personal needs change, it is a good idea to have a clear picture of your choices so you will be ready to pick the mortgage loan that is best for you. 

• 30 year, Fixed Rate - The old standard, and the most popular way to finance, these loans provide stable payments - ideal to be more able to predict with certainty future housing expenses. 
• Biweekly, and 15 year, Fixed Rate Mortgages - A biweekly loan can help you pay off you home faster with minimal shock to your finances. Instead of making one large payment every month, you make two half payments every two weeks. Because there are 26, 2 week periods in each year, you make the equivalent of 13 monthly payments. Biweekly weekly loans can save thousands in interest over the loan term. 15 year fixed rate mortgages build equity quickly, but require higher monthly payments than the 30 year variety. On the plus side, they usually are offered at interest rates lower than other fixed rate choices. Like the biweeklies, 15 year loans save thousands in interest. 
• Adjustable Rate Mortgages - Because the payments can be changed to reflect interest rate movements, adjustable rate mortgages, or ARM's, are somewhat less risky than fixed rate mortgages (FRM's) for lenders. Because of this, they are usually offered at an initial interest rate lower than that for a conventional, fixed rate loan. The ARM's lower rate can make it possible for a buyer to obtain a slightly more expensive home than might be possible with a FRM. However, even if the interest rate remains unchanged, payments are likely to increase in the second year, so using an ARM to increase affordability should be done cautiously.

 

 

Interest rates on ARM's are tied to "indexes" which can cause payments to increase or decrease each time the loan is adjusted. Rates on most ARM's cannot be raised more than 2 percentage points each year, though, easing the shock -- should the economy enter a period of rapid inflation and high interest rates. 

• Convertible ARM's - In many cases, you may have an opportunity to lock in a fixed rate during the early years of your ARM, usually for a fee. If you expect interest rates to drop in the next couple of years, this might be a good choice for you. 

To help buyers of all income brackets or with tight ratios, Buyer's Resource keeps up to date with all special and sophisticated financing.

7. Close!

Closing on your purchase is relatively straightforward. There will be a title search, a few decisions for you to make, and a lot of paper to read. Some buyers choose an attorney to represent them at this stage. It is not usually necessary, but, if it gives you peace of mind, it may be worth the money.