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Buying a Home: The Missing Manual

Book Description

Home ownership is a cornerstone of the American dream, but it's a complex process that, without the right guidance, can seem like a nightmare. This Missing Manual takes you through the process of buying a home, from start to finish. Along the way, you'll use the book's expert advice and fill-in forms to identify the house you want, figure out what kind of neighborhood you want to live in, determine what a target home is really worth, make an offer, and close the deal. Throughout the process, this book helps you:

  • Realistically determine how much house you can afford
  • Assemble a real estate team that's looking after your interests and not the seller's
  • Understand the different ways to finance your house, and which is best for you
  • Create an attractive offer with the best chance of acceptance
  • Learn what lenders look for so you can get your mortgage approved
  • Inspect your new home to uncover potential problems
  • Prepare all the right paperwork for a smooth closing

Table of Contents

  1. A Note Regarding Supplemental Files
  2. The Missing Credits
    1. About the Author
    2. About the Creative Team
    3. Acknowledgements
  3. Introduction
    1. Should You Rent or Buy?
    2. About This Book
    3. About the Outline
      1. About the Missing CD
      2. About MissingManuals.com
      3. Safari® Books Online
  4. I. Preparing for Home Ownership
    1. 1. The Benefits and Drawbacks of Home Ownership
      1. The Pluses of Owning a Home
        1. A Place of Your Own
        2. Equity
          1. Home equity loans
          2. Home equity line of credit (HELOC)
        3. Tax Advantages
        4. Long-Term Investment
        5. Trading Up
      2. The Minuses of Owning a Home
        1. One-Time Costs
        2. Recurring Payments
        3. Utilities
        4. Maintenance
        5. Repairs
        6. Remodeling
        7. Homeowner’s Fees
        8. Potential for Lost Value
        9. Reduced Flexibility
    2. 2. How Much Home Can You Afford?
      1. How Much Can You Invest in a Home?
        1. Figure Out a Monthly Budget—and Stick to It
          1. Determine your current income and expenses
          2. Analyze how you spend money
          3. Identify long-term goals
          4. Reevaluate current spending
          5. Track your spending
        2. How Much Mortgage Can You Afford?
          1. What’s your monthly gross income?
          2. How much debt do you currently have?
          3. What are your other monthly expenses?
          4. How much can you afford to pay up front?
          5. What’s the property tax rate?
          6. What are current interest rates?
          7. What are your future plans?
      2. Get Prequalified or Preapproved
      3. What Lenders Look For
        1. Income Stability
        2. Your Debt-to-Income Ratio
        3. Your Home’s Loan-to-Value Ratio
        4. Your Credit Score and Credit History
          1. What goes into your FICO score
            1. Your payment history
            2. Money you owe
            3. Length of your credit history
            4. Your new credit
            5. Types of credit you use
          2. What your FICO score doesn’t include
        5. How Lenders Use Your FICO Score
      4. Improve Your Chances of Getting a Loan
  5. II. Finding Your Home
    1. 3. Choose Your Style of Home and Neighborhood
      1. Your Lifestyle—Now and Down the Road
      2. Your Style of Home
        1. Single-Family House
        2. Duplex
        3. Condominium
        4. Townhouse
        5. Co-operative Apartment (Co-op)
        6. Modular and Manufactured Homes
          1. Modular homes
          2. Manufactured homes
      3. The Condition of Your Home
        1. New Construction
          1. Hire a builder
          2. Buy in a development that’s under construction
        2. Preowned Homes
        3. Fixer-Uppers
      4. Find Your Neighborhood
        1. Schools
        2. Services and Shopping
        3. Amenities
        4. Neighbors
        5. Commuting
        6. Economic Stability
        7. Crime Rate
        8. Zoning
      5. Create a Wish List
    2. 4. Assemble Your Real Estate Team
      1. Real Estate Agents
        1. Agents and Brokers and Realtors
        2. What a Real Estate Agent Does
        3. How Real Estate Agents Get Paid
        4. Working with a Buyer’s Agent
        5. Signing with a Buyer’s Agent
        6. Finding an Agent You Can Work With
          1. Interview agents
          2. Check references
          3. Make a decision and make it legal
        7. Helping Your Agent Help You
        8. Firing Your Agent
      2. Your Mortgage Provider
        1. Working with a Mortgage Broker
        2. Working with a Mortgage Lender
      3. Your Real Estate Attorney
        1. What an attorney can do for you
          1. What an attorney can do for you
          2. Choose a real estate attorney
      4. Your Home Inspector
      5. Other Real Estate Professionals
    3. 5. Shop for Your Home
      1. Select Homes to Tour
        1. Working with a Real Estate Agent
        2. Decoding Real Estate Ads
        3. Shopping on the Internet
          1. Realtor.com
          2. Trulia
          3. Yahoo Real Estate
          4. Zillow.com
          5. Agency websites
          6. Online classifieds
        4. Cruising Neighborhoods
        5. Asking Around
        6. Attending Open Houses
      2. Bargain Hunting
        1. For Sale by Owner (FSBO)
          1. Working with a FSBO seller through your agent
          2. Working with a FSBO seller on your own
        2. Short Sales
        3. Foreclosures and Auctions
          1. Finding foreclosures
          2. Disadvantages to buying a foreclosed property
          3. Buying a property at auction
      3. What to Look for on the Tour
        1. Preparing to Visit Houses
        2. Keep an Open Heart and a Critical Eye
        3. Bring a Camera
        4. Use Your Wish List As a Checklist
        5. Ask Questions
        6. Disclosure Statements: What the Seller Must Tell You
      4. Evaluate the Neighborhood
      5. Compare Homes
  6. III. Financing Your Home
    1. 6. Finance Your Down Payment
      1. Why a Down Payment?
      2. Calculate Your Down Payment
        1. Coming Up with a Down Payment
          1. Start saving
          2. Sell stuff
          3. Convince mom and dad to help out
          4. Borrow cash against your 401(k) plan
          5. Tap your individual retirement account
      3. Alternatives to Paying 20 Percent Down
        1. Low Down Payment Loans
        2. 80-10-10 Loans
        3. Seller-Financed Second Mortgages
    2. 7. Compare Mortgages and Other Financing Options
      1. Mortgage Basics
        1. What Is a Mortgage?
        2. Interest Rate vs. APR
        3. Term
        4. Amortization
        5. Points
        6. Escrow
        7. RESPA
      2. The Mortgage Process
        1. Applying for a Loan
        2. Processing Your Application
        3. Analyzing Risk
      3. Types of Mortgages
        1. Fixed Rate Mortgage
        2. Adjustable Rate Mortgage
          1. How your lender determines your rate
          2. Rate caps
          3. Convertible ARMs
          4. Things to watch out for
            1. Negative amortization
            2. Teaser rates
            3. Prepayment penalties
          5. Who’s a good candidate for an ARM?
          6. Questions to ask
        3. Option ARM
        4. Balloon Loan
        5. Two-Step Loan
        6. Interest-Only Loan
        7. Bridge Loan
      4. Choose the Term of Your Mortgage
        1. Shorter Term or Longer Term?
        2. Reducing Your Loan’s Term
      5. Government Financing Programs
        1. FHA-Insured Loans
          1. Buying a fixer-upper
          2. Buying a manufactured home
        2. Veteran’s Administration Loans
        3. HUD Special Home-buying Programs
      6. Creative Financing Options
        1. Getting Help with the Down Payment
          1. 80/20 loan
          2. 80/10/10 loan
        2. Seller Financing
          1. Seller mortgage
          2. Second mortgage from seller
          3. Rent-to-own
        3. Assuming the Seller’s Loan
        4. Paying with Cash
    3. 8. Choose and Apply for a Mortgage
      1. Find the Right Lender
        1. Decide the Kind of Loan Originator You Want
        2. Ask for Referrals
        3. Visit Your Local Bank
        4. Check Out Online Lenders
      2. Get the Best Mortgage
        1. Researching Rates
          1. Comparing fixed-rate loans
          2. Comparing ARMs
        2. Prepaying Interest
        3. Locking In Your Rate
      3. Gather Documents and Information
      4. Do the Paperwork
        1. Uniform Residential Loan Application
          1. Section I: Type of Mortgage and Terms of Loan
          2. Section II: Property Information and Purpose of Loan
          3. Section III: Borrower Information
          4. Section IV: Employment Information
          5. Section V: Monthly Income and Combined Housing Expense Information
          6. Section VI: Assets and Liabilities
          7. Section VII: Details of Transaction
          8. Section VIII: Declarations
          9. Section IX: Acknowledgment and Agreement
          10. Section X: Information for Government Monitoring Purposes
        2. Authorization to Verify Your Information
        3. HUD Settlement Cost Booklet
        4. Truth-in-Lending Disclosure Statement
        5. ARM Disclosure Statement
        6. Good Faith Estimate
          1. Purpose
          2. Shopping for your loan
          3. Important dates
          4. Summary of your loan
          5. Escrow account information
          6. Understanding your estimated settlement charges
          7. Understanding which charges can change at settlement
          8. Using the tradeoff table
          9. Using the shopping chart
          10. If your loan is sold in the future
        7. Mortgage Servicing Disclosure Statement
    4. 9. Know Your Closing Costs
      1. Kinds of Closing Costs
        1. Costs Related to Your Mortgage
        2. Costs Related to Transferring Ownership
        3. Government Taxes and Fees
      2. Add It All Up
      3. How Much Will You Pay?
      4. Reduce Your Closing Costs
  7. IV. Negotiating and Closing the Deal
    1. 10. Make an Offer
      1. Figure Out What the Home Is Worth
        1. Look at Recent Sales of Comparable Homes
        2. Compare Asking Prices to Selling Prices
        3. Use Online Home Appraisal Tools
        4. Get the Home’s Sales History
        5. Take the Market’s Temperature
          1. Neutral market
          2. Seller’s market
          3. Buyer’s market
        6. How Much Should You Offer?
      2. What Goes Into an Offer
        1. Purchase Price
        2. Earnest Money
        3. Contingencies
        4. What’s Staying
        5. Who Pays Which Costs
        6. Access
        7. Closing Date
        8. Possession
        9. Acceptance
      3. Negotiating: The Art of the Deal
    2. 11. Prepare for the Closing
      1. Check Off Contingencies
        1. Removing the Financing Contingency
        2. Removing the Appraisal Contingency
        3. Removing the Home Inspection Contingency
          1. How will the problems get fixed?
          2. Who picks up the tab?
          3. What if the seller insists on selling “as is”?
        4. Removing Other Contingencies
      2. All About Titles and Deeds
        1. Getting Clear Title
          1. The title search
          2. Title insurance
        2. Putting Your Name on the Deed
          1. Sole property
          2. Joint tenants with right of survivorship
          3. Tenancy in common
          4. Tenancy by the entirety
          5. Community property
          6. Living trust
      3. Survey the Property
      4. Homeowner’s Insurance
        1. Hazard Insurance
          1. Flood insurance
          2. Earthquake insurance
        2. Liability Insurance
        3. Types of Homeowner’s Policies
        4. Shopping for Homeowner’s Insurance
      5. Get a Home Warranty
        1. Warranties for Existing Homes
        2. Warranties for New Construction
      6. Prepare to Move
        1. Four to Six Weeks Before You Move
        2. Two Weeks Before You Move
        3. One Week Before You Move
      7. Take the Final Walkthrough
        1. What to Look for on the Final Walkthrough
        2. What to Do If You Find a Problem
    3. 12. Inspect the Property
      1. What a Home Inspector Does
      2. Find a Good Home Inspector
      3. What Happens at an Inspection
        1. Exterior
        2. Structural Components
        3. Roof and Attic
        4. Plumbing
        5. Electrical System
        6. Heating and Air Conditioning Systems
        7. Insulation and Ventilation
        8. Installed Appliances
        9. Other Interior Features
        10. Basement
        11. Garage
        12. What Your Home Inspector Won’t Do
      4. Understand Your Home Inspection Report
      5. Specialized Inspections
        1. Septic System
        2. Wood-Destroying Pests
        3. Health Hazards
          1. Mold
          2. Asbestos
          3. Radon
        4. Other Specialized Inspections
      6. If Problems Turn Up
    4. 13. Close the Deal
      1. Countdown to Closing: 24 Hours to Go
      2. What If the Closing Gets Delayed?
      3. What Happens at a Closing
        1. Closing in an Escrow State
        2. Closing in a Non-Escrow State
      4. A Mountain of Paperwork: What It All Means
      5. Your HUD-1 Form
        1. Basic Information
        2. Summaries of Borrower’s and Seller’s Transactions
        3. Settlement Charges
        4. Comparison of Good Faith Estimate and HUD-1 Charges
        5. Loan Terms
      6. What If Something Goes Wrong?
      7. After the Closing
  8. Index
  9. About the Author
  10. Copyright