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Eric Tyson. Home Buying Kit For Dummies
Home Buying Kit For Dummies® To view this book's Cheat Sheet, simply go to www.dummies.com and search for “Home Buying Kit For Dummies Cheat Sheet” in the Search box. Table of Contents
List of Tables
List of Illustrations
Guide
Pages
Introduction
About This Book: The Eric Tyson/Ray Brown Difference
Icons Used in This Book
Beyond the Book
Where to Go from Here
Getting Started with Buying a Home
Deciding Whether to Buy
Weighing the Advantages of Owning versus Renting
Ownership advantages
Owning should be less expensive than renting
USES FOR THE WEALTH YOU BUILD UP IN YOUR HOME
You can make your house your own
You avoid unpleasant landlords
Renting advantages
The Pitfalls of the Rent-versus-Buy Decision
Renting because it seems cheaper
Fretting too much over job security
Buying when you expect to move soon
Succumbing to pushy salespeople
Ignoring logistics
Overbuying
Underbuying
Buying because it’s a grown-up thing to do
Buying because you’re afraid that escalating prices will lock you out
Misunderstanding what you can afford
Getting Your Financial House in Order
Surveying Your Spending
Gathering the data
TRIMMING THE FAT FROM YOUR BUDGET
Analyzing your spending numbers
Reckoning Your Savings Requirements
Setting some goals
THE WISE USE OF CREDIT
Retirement-savings accounts and a dilemma
Other reasons to save
Protecting Yourself, Your Dependents, and Your Assets
Insuring yourself
Disability insurance
Life insurance
Health insurance
Insuring your assets
WILLS, LIVING TRUSTS, AND ESTATE PLANNING
Invest in Yourself
What Can You Afford to Buy?
Lenders Can’t Tell You What You Can Afford
The Cost of Buying and Owning a Home
Mortgage payments
Lender’s limits
STRETCHING MORE THAN LENDERS ALLOW
Figuring the size of your mortgage payments
Property taxes
Insurance
Maintenance and other costs
The tax benefits of homeownership
Closing Costs
Accumulating the Down Payment
The 20 percent solution
Ways to buy with less money down
Where to invest the down payment
BUYING A HOME WITH “NO MONEY DOWN”
Investments for five years or less
GETTING IN TOUCH WITH MUTUAL FUND COMPANIES
Investments for more than five years
SHORT-TERM BONDS AND BOND FUNDS
Why Home Prices Rise and Fall
What Drives Real Estate Markets and Prices?
UNDERSTANDING THE LATE 2000s HOUSING PRICE SLIDE
Jobs, glorious jobs
Available housing
Inventory of homes for sale and actual sales
INTEREST RATES AND HOME PRICES
The rental market
REAL ESTATE GET-RICH-QUICK SCHEMES
Tax rules and changes
How to Get a Good Buy in Any Market
Seek hidden opportunities to add value
Buy when others are scared to buy
Find a motivated seller
Buy during slow periods
Become a great negotiator
Buy in a good neighborhood
Financing 101
Understanding and Improving Your Credit Score
The Record You Can’t Ignore: Your Credit Report
What your credit history comprises
What goes into your credit report
Why you should check your credit report
The Most Popular Kid on the Block: FICO Scores
How scores work — the short version
FICO SCORES CAN DIFFER AMONG BUREAUS
How a FICO score assesses your credit history — the long version
Your payment history
The amount you owe
The length of your credit history
New credit you’ve acquired
Types of credit you have in use
The number of credit inquiries
What FICO scores ignore
Why your score is what it is
Getting Hold of Your Report and Score
FREE CREDIT SCORE OR SCAM?
Selecting a Mortgage
Getting a Grasp on Mortgage Basics
Fixed or Adjustable? That Is the Interest(ing) Question
Distinguishing fixed-rate mortgages from adjustables
SUBPRIME MORTGAGES AND THE LATE 2000s HOUSING SLUMP
Looking at hybrid loans
Starting out risky: Interest-only mortgages
BALLOON LOANS
Making the fixed/adjustable decision
Fixed-rate mortgages
AVOID LOANS WITH PREPAYMENT PENALTIES
Adjustable-rate mortgages
What would rising interest rates do to your finances?
WHEN TO CONSIDER HYBRID LOANS
How long do you expect to stay in the home or hold the mortgage?
Deciding on your loan’s life: 15 years or 30?
NO ONE CAN PREDICT WHERE INTEREST RATES ARE HEADED
Finding a Fixed-Rate Mortgage
The all-important interest rate
The finer points of points
Other lender fees
Application and processing fees
Credit report
Appraisal
Arriving at the Absolute Best Adjustable
Where an ARM’s interest rate comes from
Treasury bills
Certificates of deposit
The 11th District Cost of Funds Index
The London Interbank Offered Rate Index
How often does the interest rate adjust?
Limits on interest-rate adjustments
AVOID ADJUSTABLES WITH NEGATIVE AMORTIZATION
Locating the Best, Lowest-Cost Lenders
Shopping on your own
TRAITS OF GOOD LENDERS
Working with a mortgage broker
LOAN PREQUALIFICATION AND PREAPPROVAL
SHOULD YOU APPLY FOR MORE THAN ONE MORTGAGE?
Mortgage Quandaries, Conundrums, and Forms
Overcoming Common Mortgage Problems
Insufficient income
Debt and credit problems
Credit report boo-boos
CREDIT (FICO) SCORES
Excess debt
Lack of down payment
Dealing with Appraisal Problems
You’ve overpaid
The appraiser doesn’t know your area
The appraiser/lender is sandbagging you
Those Darn Mortgage Forms
The laundry list of required documents
Permissions to inspect your finances
The Uniform Residential Loan Application
I. Borrower information
II. Financial information — Assets and liabilities
III. Financial information — Real estate
IV. Loan and property information
V. Declarations
VI. Acknowledgments and agreements
VII. Demographic information
Other typical documents
Your right to receive a copy of appraisal
Equal Credit Opportunity Act
Property, Players, and Prices
Where and What to Buy
Location, Location, Value
Characteristics of good neighborhoods
Selecting your best neighborhood
Prioritize your needs
Research
Fundamental Principles for Selecting Your Home
The principle of progression: Why to buy one of the cheaper homes on the block
Curable defects
Incurable defects
The benefits of renovating cheaper homes
The principle of regression: Why not to buy the most expensive house on the block
The principle of conformity: Why unusual is usually costly
Defining Home Sweet Home
Detached residences
New homes
Used homes
Attached residences
Condominiums
THE INVESTMENT VALUE OF DETACHED HOMES
WHY A CONDO?
CONDO DRAWBACKS
Cooperative apartments
DEFINITION OF LEGAL OWNERSHIP: DEED VERSUS STOCK
MANAGEMENT: HOMEOWNERS ASSOCIATION VERSUS BOARD OF DIRECTORS
BUYING AND SELLING CO-OPS IS OFTEN CHALLENGING
FINANCING YOUR PURCHASE
Finding a Great Deal
Finding a fixer-upper
STRUCTURAL REPAIRS VERSUS RENOVATIONS
Digging for a diamond among the dumps
Final thoughts on fixer-uppers
Taking over a foreclosure
BACK-ON-THE-MARKET PROPERTIES
Seeking a short sale
Pooling Your Resources: Ad Hoc Partnerships
Types of residential co-ownership
THE CO-OWNERSHIP FROM HELL
Structuring a successful co-ownership
Assembling an All-Star Real Estate Team
The Team Concept
Lining up the players
Avoiding gratuitous advice
Reeling in a Real Estate Agent
Types of agent relationships
DUAL AGENCY AND CONFLICTS OF INTEREST
How agents get paid
Characteristics of good agents
Selecting your agent
AGENTS WHO WORK OUTSIDE THEIR AREAS OF EXPERTISE ARE DANGEROUS
Finding referral sources
Requesting an activity list
Interviewing agents
Checking agents’ references
Making your decision
BUYING WITHOUT AN AGENT
Getting the most from your agent
More isn’t always better
Your agent isn’t the enemy
Bagging a Broker
STREET-SMART VERSUS BOOK-SMART
Landing a Lender
Procuring Property Inspectors
Electing an Escrow Officer
Finding (or Forgoing) Financial and Tax Advisors
SOME EXPERTS GIVE WRONG ADVICE
Looking for Lawyers
Selecting your lawyer
Getting the most out of a lawyer
What’s It Worth?
Preparing to Tour an Endless Parade of Homes
The Three Elusive Components of Worth
Value is a moving target
Cost is yesterday
UNEDUCATED BUYERS ARE INADVERTENT LIARS
Price is what it’s worth today
Fair Market Value
When fair market value isn’t fair — need-based pricing
“CAN’T SELL” VERSUS “WON’T SELL”
Median home prices versus fair market value
Determining Fair Market Value: Comparable Market Analysis
The basics of a helpful CMA
DISTRESSED PROPERTY SALES
The flaws of CMAs
Getting a Second Opinion: Appraisals versus CMAs
Why Buyers and Sellers Often Start Far Apart
BIDDING WARS
Inept agents
Unrealistic sellers
SPOTTING OVERPRICED TURKEYS
Tapping the Internet’s Best Resources
Finding Useful Information
Get your feet wet at Realtor.com
Discover more at these sites
Doing Some Preliminary Shopping
Surveying homes for sale
Watching out for sites promoting foreclosures
Sifting through school information
Perusing “best places” to live
THE INTERNET IS A SELLING TOOL
Familiarizing yourself with financing options
The Drawbacks of Searching for Houses in Cyberspace
Conflicts of interest
Bankruptcies
Misleading home-valuation tools
Untrustworthy mortgage calculators
Making the Deal
Negotiating Your Best Deal
Understanding and Coping with Your Emotions
Examining the violent forces at work
Controlling yourself
FIRST THINGS FIRST
The Art of Negotiating
“GOOD” DEPENDS ON YOUR PERSPECTIVE
Being realistic
The importance of objectivity
The red flags in agent negotiations
Examining your negotiating style
FACT VERSUS OPINION
Negotiating with finesse
BRUTE FORCE VERSUS STYLE
The Negotiating Process
Making an offer to purchase
Leaving an escape hatch: Contingencies
Getting a counteroffer
The Finer Points of Negotiating
Negotiating when the playing field isn’t level
Buyer’s and seller’s markets
Negotiating from a position of weakness
Spotting fake sellers
Are the sellers realistic?
Are the sellers motivated?
Do the sellers have a time frame?
SOMETIMES, HOMES SELL FOR MORE THAN THE ASKING PRICE
Are the sellers forthright?
Are the sellers cooperative?
Lowballing
Why lowballing is usually a bad idea
When low offers are justified
Negotiating credits in escrow
Nonrecurring closing costs
Corrective work
Inspecting and Protecting Your Home
Conducting Thorough Inspections
All properties should be inspected
The two types of defects: Patent and latent
Patent defect red flags
Types of property inspections
Inspecting inspectors
Selecting your inspector
Optimizing your inspection
SEEING AND READING ARE INFINITELY BETTER THAN JUST READING
Insuring Your Home
Homeowners insurance
The cost of rebuilding
Lawsuit protection
Personal property protection
Where to get good coverage inexpensively
Title insurance
Title risks
OTHER CATASTROPHES TO INSURE AGAINST
What title insurance does
ACTUAL EXAMPLES OF TITLE INSURANCE PROBLEMS
Two kinds of title insurance
It Ain’t Over till the Weight-Challenged Escrow Officer Sings
An Escrow Is a Good Thing
Know thy escrow officer
Cover all the bases
Closing costs
BEWARE OF SCAMMERS AND WIRE FRAUD SCHEMES
Preliminary report
Closing Disclosure
’Tis the season: December escrows
Follow through
How You Take Title Is Vital
Joint tenancy
Community property
Tenants-in-common
Getting help drafting an agreement
Getting Possessive
Moving day
Final verification of condition
Coping with Buyer’s Remorse
The Part of Tens
Ten Financial “To Do’s” After You Buy
Stay on Top of Your Spending and Saving
Consider Electronic Mortgage Payments
Rebuild Your Emergency Reserve
Ignore Solicitations for Mortgage Insurance
Ignore Solicitations for Faster Payoff
Consider Protesting Your Tax Assessment
Refinance if Interest Rates Fall
Keep Receipts for All Improvements
Ignore Solicitations to Homestead
Take Time to Smell the Roses
Ten Things to Know When Investing in Real Estate
Real Estate Is a Solid Long-Term Investment
Real Estate Investing Isn’t for Everyone
REITs Are Good if You Loathe Being a Landlord
Don’t Invest in Limited Partnerships
Avoid Timeshare Condos and Vacation Homes
Residential Properties Are Your Best Investment Option
Consider Fixer-Upper Income Property
Consider Converting Small Apartment Buildings to Condos
Consider the Property’s Cash Flow
Your Rental Losses Are Limited for Tax Purposes
Ten Things to Consider When Selling Your House
Why Are You Selling?
Can You Afford to Buy the Next Home?
What’s It Worth?
Have You Done Your Homework to Find a Good Real Estate Agent?
LISTING AGREEMENTS COVER SERVICE, NOT SALE
Do You Have the Skills to Sell the House Yourself?
Have You Properly Prepared the House for Sale?
Do You Understand the House’s Hot Buttons?
What Are the Financial Ramifications of Selling?
Do You Know the Rules for Capital-Gains Taxes on the Sale of a House?
Appendixes
Sample Real Estate Purchase Contract
Sample Short-Sale Addendum plus Short-Sale Information and Advisory
Example of a Good Inspection Report
Glossary
Index. Numbers
A
B
C
D
E
F
G
H
I
J
L
M
N
O
P
Q
R
S
T
U
V
W
Y
About the Authors
Dedication
Authors’ Acknowledgments
WILEY END USER LICENSE AGREEMENT
