Buying Your First Home?

10 things you need to know before you make the biggest purchase of your life

the rate of an ARM attractive but opted for a 30-year fixed rate mortgage at 6% interest to avoid of the uncertainty of monthly ARM payments. Many homes are currently in foreclosure because the owners took on an ARM at the height of the housing boom in the early 2000s but couldn’t keep up with the higher payments once their rate went up a few years later.
There are so many programs out there, including interest-only loans, fixed- and adjustable-rate mortgages, even 100% financing. To avoid predatory lending, ask lenders and brokers about (1) the interest rate; (2) the length of the loan; (3) the type of mortgage; (4) prepayment penalties (do not agree to these, no matter what); and (5) the total amount of the mortgage and monthly payments. A great place to compare local rates is www.mortgage-calc.com, where you can find current mortgage interest rates and calculate first-time mortgage options.

7. Locate first-time home buyer programs. If you need mortgage help, instead of opting for an ARM, seek assistance from first-time buyer programs or government agencies. Try nonprofit organizations such as the American Dream Down Payment Assistance (www.americandreamdownpaymentas sistance.com), the Nehemiah Program (www.getdownpay ment.com), and American Family Funds (americanfamily funds.com). For more assistance, check out www.GinnieMae.gov and www.FannieMae.gov. Also, look for regional first-time home buyer programs and visit www.hud.gov for a complete list of approved housing counseling agencies.

8. Use a home inspector. Your home will probably be the most expensive purchase you’ll ever make. Don’t take the seller’s word ab
out the quality of the structure and don’t rely simply on an appraisal from your insurance company. Hire your own home inspector, who has no ties to the home. He will be working for you to make sure that you are making a sound decision based on the structural integrity of the home.

9. Be prepared for closing. There are a lot of documents to sign, so have a lawyer who will take the time to explain the forms and the various fees, such as origination fees, attorney’s fees, inspection, survey, etc. Approximately one month prior to the closing date, send a query to everyone on your team confirming the exact closing date and asking if you or anyone on the team needs to submit any additional paperwork. Often, the bank may not inform the closing attorney until the last minute about the closing date, so it’s important that you keep the process moving and get all of your questions answered. Also, do a walk-through of your home before signing on the dotted line. You want to check to make sure everything is in order as agreed.

10. Save. Save. Save. Save at least three months’ worth of payment, interest, taxes, and insurance (PITI) before you buy. It is important to remember, however, that the costs of buying a home include more than just PITI. Figure into your budget cash reserves for moving, emergencies, unforeseen repairs, association dues, maintenance, and upgrades. In addition, closing costs are typically 3% to 5% of the

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