1. HOW DO I KNOW IF I'M READY TO BUY A HOME?

You can find out by asking yourself some questions

If you can answer "yes" to these questions, you are probably ready to buy your own home.

2. HOW DO I BEGIN THE PROCESS OF BUYING A HOME?

Start by thinking about your situation. Are you ready to buy a home? How much can you afford in a monthly mortgage payment (see Question 4 for help)? How much space do you need? What areas of town do you like? After you answer these questions, make a "To Do" list and start doing casual research. Talk to friends and family, drive through neighborhoods, and look in the "Homes" section of the newspaper.

3. HOW DOES PURCHASING A HOME COMPARE WITH RENTING?

The two don't really compare at all. The one advantage of renting is being generally free of most maintenance responsibilities. But by renting, you lose the chance to build equity, take advantage of tax benefits, and protect yourself against rent increases. Also, you may not be free to decorate without permission and may be at the mercy of the landlord for housing.

Owning a home has many benefits. When you make a mortgage payment, you are building equity. And that's an investment. Owning a home also
qualifies you for tax breaks that assist you in dealing with your new financial responsibilities- like insurance, real estate taxes, and upkeep- which can be substantial. But given the freedom, stability, and security of owning your own home, they are worth it.

4. HOW DOES THE LENDER DECIDE THE MAXIMUM LOAN AMOUNT THAT YOU CAN AFFORD?

The lender considers your debt-to-income ratio, which is a comparison of your
gross (pre-tax) income to housing and non-housing expenses. Non-housing
expenses include such long-term debts as car or student loan payments,
alimony, or child support. According to the FHA, monthly mortgage payments
should be no more than 29% of gross income, while the mortgage payment,
combined with non-housing expenses, 4 should total no more than 41% of
income. The lender also considers cash available for down payment and
closing costs, credit history, etc. when determining your maximum loan
amount.

5. HOW DO I SELECT THE RIGHT REAL ESTATE AGENT?
Start by asking family and friends if they can recommend an agent. Compile a
list of several agents and talk to each before choosing one. Look for an agent
who listens well and understands your needs, and whose judgment you trust.
The ideal agent knows the local area well and has resources and contacts to
help you in your search. Overall, you want to choose an agent that makes you
feel comfortable and can provide all the knowledge and services you need.

6. HOW CAN I DETERMINE MY HOUSING NEEDS BEFORE I BEGIN THE
SEARCH?
Your home should fit way you live, with spaces and features that appeal to
the whole family. Before you begin looking at homes, make a list of your
priorities - things like location and size. Should the house be close to certain
schools? your job? to public transportation? How large should the house be?
What type of lot do you prefer? What kinds of amenities are you looking for?
Establish a set of minimum requirements and a 'wish list." Minimum
requirements are things that a house must have for you to consider it, while a
"wish list" covers things that you'd like to have but aren't essential.

FINDING YOUR HOME
7. WHAT SHOULD I LOOK FOR WHEN DECIDING ON A COMMUNITY?
Select a community that will allow you to best live your daily life. Many people
choose communities based on schools. Do you want access to shopping and
public transportation? Is access to local facilities like libraries and museums
important to you? Or do you prefer the peace and quiet of a rural community?
When you find places that you like, talk to people that live there. They know
the most about the area and will be your future neighbors. More than
anything, you want a neighborhood where you feel comfortable in.

8. WHAT SHOULD I DO IF I'M FEELING EXCLUDED FROM CERTAIN
NEIGHBORHOODS?
Immediately contact the U.S. Department of Housing and Urban Development
(HUD) if you ever feel excluded from a neighborhood or particular house.
Also, contact HUD if you believe you are being discriminated against on the
basis of race, color, religion, sex, nationality, familial status, or disability.
HUD's Office of Fair Housing has a hotline for reporting incidents of
discrimination: 1-800-669-9777 (and 1-800-927-9275 for the hearing
impaired).

9. HOW CAN I FIND OUT ABOUT LOCAL SCHOOLS?
You can get information about school systems by contacting the city or county
school board or the local schools. Your real estate agent may also be
knowledgeable about schools in the area.

10. HOW CAN I FIND OUT ABOUT COMMUNITY RESOURCES?
Contact the local chamber of commerce for promotional literature or talk to
your real estate agent about welcome kits, maps, and other information. You
may also want to visit the local library. It can be an excellent source for
information on local events and resources, and the librarians will probably be
able to answer many of the questions you have.

11. HOW CAN I FIND OUT HOW MUCH HOMES ARE SELLING FOR IN CERTAIN
COMMUNITIES AND NEIGHBORHOODS?
Your real estate agent can give you a ballpark figure by showing you
comparable listings. If you are working with a REALTOR, they may have
access to comparable sales maintained on a database.

12. HOW CAN I FIND INFORMATION ON THE PROPERTY TAX LIABILITY?
The total amount of the previous year's property taxes is usually included in
the listing information. If it's not, ask the seller for a tax receipt or contact
the local assessor's off ice. Tax rates can change from year to year, so these
figures may be approximate.

13. WHAT OTHER TAX ISSUES SHOULD I TAKE INTO CONSIDERATION?
Keep in mind that your mortgage interest and real estate taxes will be
deductible. A qualified real estate professional can give you more details on
other tax benefits and liabilities.

14. IS AN OLDER HOME A BETTER VALUE THAN A NEW ONE?
There isn't a definitive answer to this question. You should look at each home
for its individual characteristics. Generally, older homes may be in more
established neighborhoods, offer more ambiance, and have lower property tax
rates. People who buy older homes, however, shouldn't mind maintaining
their home and making some repairs. Newer homes tend to use more modern
architecture and systems, are usually easier to maintain, and may be more
energy-efficient. People who buy new homes often don't want to worry
initially about upkeep and repairs.

15. WHAT SHOULD I LOOK FOR WHEN WALKING THROUGH A HOME?
In addition to comparing the home to your minimum requirement and wish
lists, use the HUD Home Scorecard and consider the following:

Take your time and think carefully about each house you see. Ask your real
estate agent to point out the pros and cons of each home from a professional
standpoint.

16. WHAT QUESTIONS SHOULD I ASK WHEN LOOKING AT HOMES?
Many of your questions should focus on potential problems and maintenance
issues. Does anything need to be replaced? What things require ongoing
maintenance (e.g., paint, roof, HVAC, appliances, carpet)? Also ask about the
house and neighborhood, focusing on quality of life issues. Be sure the seller's
or real estate agent's answers are clear and complete. Ask questions until you
understand all of the information they've given. Making a list of questions
ahead of time will help you organize your thoughts and arrange all of the
information you receive. The HUD Home Scorecard can help you develop your
question list.

17. HOW CAN I KEEP TRACK OF ALL THE HOMES I SEE?
If possible, take photographs of each house: the outside, the major rooms,
the yard, and extra features that you like or ones you see as potential
problems. And don't hesitate to return for a second look. Use the HUD Home
Scorecard to organize your photos and notes for each house.

18. HOW MANY HOMES SHOULD I CONSIDER BEFORE CHOOSING ONE?
There isn't a set number of houses you should see before you decide. Visit as
many as it takes to find the one you want. On average, homebuyers see 15
houses before choosing one. Just be sure to communicate often with your real
estate agent about everything you're looking for. It will help avoid wasting
your time.

YOU'VE FOUND IT
19. WHAT DOES A HOME INSPECTOR DO, AND HOW DOES AN INSPECTION
FIGURE IN THE PURCHASE OF A HOME?
An inspector checks the safety of your potential new home. Home Inspectors
focus especially on the structure, construction, and mechanical systems of the
house and will make you aware of only repairs that are needed.
The Inspector does not evaluate whether or not you're getting good value for
your money. Generally, an inspector checks (and gives prices for repairs on):
the electrical system, plumbing and waste disposal, the water heater,
insulation and Ventilation, the HVAC system, water source and quality, the
potential presence of pests, the foundation, doors, windows, ceilings, walls,
floors, and roof. Be sure to hire a home inspector that is qualified and
experienced.

It's a good idea to have an inspection before you sign a written offer since,
once the deal is closed, you've bought the house as is." Or, you may want to
include an inspection clause in the offer when negotiating for a home. An
inspection t clause gives you an 'out" on buying the house if serious problems
are found, or gives you the ability to renegotiate the purchase price if repairs
are needed. An inspection clause can also specify that the seller must fix the
problem(s) before you purchase the house.

20. DO I NEED TO BE THERE FOR THE INSPECTION?
It's not required, but it's a good idea. Following the inspection, the home
inspector will be able to answer questions about the report and any problem
areas. This is also an opportunity to hear an objective opinion on the home
you'd I like to purchase and it is a good time to ask general, maintenance
questions.

21. ARE OTHER TYPES OF INSPECTIONS REQUIRED?
If your home inspector discovers a serious problem a more specific Inspection
may be recommended. It's a good idea to consider having your home
inspected for the presence of a variety of health-related risks like radon gas
asbestos, or possible problems with the water or waste disposal system.

22. HOW CAN I PROTECT MY FAMILY FROM LEAD IN THE HOME?
If the house you're considering was built before 1978 and you have children
under the age of seven, you will want to have an inspection for lead-based
point. It's important to know that lead flakes from paint can be present in
both the home and in the soil surrounding the house. The problem can be
fixed temporarily by repairing damaged paint surfaces or planting grass over
effected soil. Hiring a lead abatement contractor to remove paint chips and
seal damaged areas will fix the problem permanently.

23. ARE POWER LINES A HEALTH HAZARD?
There are no definitive research findings that indicate exposure to power lines
results in greater instances of disease or illness.

24. DO I NEED A LAWYER TO BUY A HOME?
Laws vary by state. Some states require a lawyer to assist in several aspects
of the home buying process while other states do not, as long as a qualified
real estate professional is involved. Even if your state doesn't require one,
you may want to hire a lawyer to help with the complex paperwork and legal
contracts. A lawyer can review contracts, make you aware of special
considerations, and assist you with the closing process. Your real estate agent
may be able to recommend a lawyer. If not, shop around. Find out what
services are provided for what fee, and whether the attorney is experienced
at representing homebuyers.

25. DO I REALLY NEED HOMEOWNER'S INSURANCE?
Yes. A paid homeowner's insurance policy (or a paid receipt for one) is
required at closing, so arrangements will have to be made prior to that day.
Plus, involving the insurance agent early in the home buying process can save
you money. Insurance agents are a great resource for information on home
safety and they can give tips on how to keep insurance premiums low.

26. WHAT STEPS COULD I TAKE TO LOWER MY HOMEOWNER'S INSURANCE
COSTS?
Be sure to shop around among several insurance companies. Also, consider
the cost of insurance when you look at homes. Newer homes and homes
constructed with materials like brick tend to have lower premiums. Think
about avoiding areas prone to natural disasters, like flooding. Choose a home
with a fire hydrant or a fire department nearby.

27. IS THE HOME LOCATED IN A FLOOD PLAIN?
Your real estate agent or lender can help you answer this question. If you live
in a flood plain, the lender will require that you have flood insurance before
lending any money to you. But if you live near a flood plain, you may choose
whether or not to get flood insurance coverage for your home. Work with an
insurance agent to construct a policy that fits your needs.

28. WHAT OTHER ISSUES SHOULD I CONSIDER BEFORE I BUY MY HOME?
Always check to see if the house is in a low-lying area, in a high-risk area for
natural disasters (like earthquakes, hurricanes, tornadoes, etc.), or in a
hazardous materials area. Be sure the house meets building codes. Also
consider local zoning laws, which could affect remodeling or making an
addition in the future. Your real estate agent should be able to help you with
these questions.

29. HOW DO I MAKE AN OFFER?
Your real estate agent will assist you in making an offer, which will include the
following information:

Remember that a sale commitment depends on negotiating a satisfactory
contract with the seller, not just making an offer.
Other ways to lower ins-insurance costs include insuring your home and
car(s) with the same company, increasing home security, and seeking group
coverage through alumni or business associations. Insurance costs are always
lowered by raising your deductibles, but this exposes you to a higher out-ofpocket
cost if you have to file a claim.

30. HOW DO I DETERMINE THE INITIAL OFFER?
Unless you have a buyer's agent, remember that the agent works for the
seller. Make a point of asking him or her to keep your discussions and
information confidential. Listen to your real estate agent's advice, but follow
your own instincts on deciding a fair price. Calculating your offer should
involve several factors: what homes sell for in the area, the home's condition,
how long it's been on the market, financing terms, and the seller's situation.
By the time you're ready to make an offer, you should have a good idea of
what the home is worth and what you can afford. And, be prepared for giveand-
take negotiation, which is very common when buying a home. The buyer
and seller may often go back and forth until they can agree on a price.

31. WHAT IS EARNEST MONEY? HOW MUCH SHOULD I SET ASIDE?
Earnest money is money put down to demonstrate your seriousness about
buying a home. It must be substantial enough to demonstrate good faith and
is usually between 1-5% of the purchase price (though the amount can vary
with local customs and conditions). If your offer is accepted, the earnest
money becomes part of your down payment or closing costs. If the offer is
rejected, your money is returned to you. If you back out of a deal, you may
forfeit the entire amount.

32. WHAT ARE "HOME WARRANTIES", AND SHOULD I CONSIDER THEM?
Home warranties offer you protection for a specific period of time (e.g., one
year) against potentially costly problems, like unexpected repairs on
appliances or home systems, which are not covered by homeowner's
insurance. Warranties are becoming more popular because they offer
protection during the time immediately following the purchase of a home, a
time when many people find themselves cash-strapped.

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