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The New Home-Buying Rules
By Linda Stern, Parents Magazine


You check the real-estate ads every week "just for fun." You fantasize about watching your kids running around the backyard and having a family room big enough for all their toys. Admit it: You've even picked out the perfect paint colors for the nursery and curtains for the kitchen. But when will you finally be able to afford a new home?
This just might be your moment. The mortgage crisis and recession during the past two years have led to a 31 percent decline on average in housing prices from their 2006 peak, according to the S&P/Case-Shiller National Home Price Indices. Plus, sales remain sluggish (leaving greater room for negotiation), and mortgage-interest rates are still very low. These factors combine to make it a great time for bargain-hunting.
But before you start attending any open houses, keep in mind that the rules for buying a house have changed substantially. Fear not, though: Follow these steps, and you'll find your dream home.
1. Figure Out What You Can Afford
As alluring as home ownership may be, you need to be on solid financial footing first. Don't begin your search until: 1) You have enough stable income to handle the expected monthly mortgage payments; and 2) You have ample cash on hand to cover the down payment and closing costs. Use this family-specific worksheet to see whether you're there.
How Much Home Can You Afford? >>

Cash on Hand
To determine how much cash you need to close on a house, multiply the figure from K (How Much Home Can You Afford Worksheet, above) by .23. Why? Most on a house. Add roughly 2 percent for closing costs lenders

2. Get Preapproved for a Loan

Shopping for a mortgage is simpler now that many of the "too good to be true" loans have disappeared. Take a look at press-time rates for the three most popular loan types, based on the median mortgage of $170,000).
30-year fixed mortgage for $170,000Rate: 5.125 percentMonthly payment: $926Principal paid in 5 years: $13,616Best if: You want to lock in a rate and minimize your monthly cost.
15-year fixed mortgage for $170,000Rate: 4.5 percentMonthly payment: $1,300Principal paid in 5 years: $44,517Best if: You can handle the higher payments so you can own your home outright before your kids start college.
5/1 ARM mortgage for $170,000Rate: 4 percent (it's set for 5 years, then changes annually based on market rates)Monthly payment: $812Principal paid in 5 years: $16,239Best if: You're confident you'll be selling and moving within 5 years (since costs could rise sharply after that).
Start your search by getting rate quotes at mortgagemarvel.com or hsh.com. Then compare these figures with those you get from a local bank, a large national lender, and a credit union, suggests Keith T. Gumbinger, of HSH Associates Financial Publishers. You can also contact a mortgage broker -- especially if your financial picture is complicated -- but be aware that these middlemen are paid a commission by lenders (who then pass the cost on to you). Once you choose a lender, ask to be preapproved for a mortgage loan. This lets home sellers know how much money you'll be able to borrow. Wait to lock in the rate until you've chosen the house you want.require a 20 percent minimum down payment and 1 percent for incidental extras (such as inspections, title searches, and the like). So that means you'll need about 23 percent, or $46,000, up front to purchase a $200,000 home. You should also set aside additional funds to pay for moving expenses, furnishings, and setting up an emergency fund equal to six to nine months worth of living expenses.


3. Find a Reliable Real-Estate Agent
Home sellers almost always have an agent; you should too. A good broker serves as your advocate by scouting out listings, negotiating a fair price, spotting flaws that you might miss (like a badly situated driveway or soon-to-break appliances), and helping you prepare the paperwork. And there's no reason not to have one, since the seller covers both his and your agents' fees.
Finding the right broker can be tricky, though. Some promise to hunt for the house you want but then show you only properties listed by their company. Others push you to spend beyond your budget -- to increase their commission -- or simply don't search listings very thoroughly.
Interview several buying agents and avoid signing an exclusive agreement so you can keep your options open. Ask how much each one knows about the area, her typical price range, and how long she's been a broker. See whether she's willing to show you homes listed as "for sale by owner" (the answer should be yes -- even if such properties limit what she makes on the sale). Feel free to ask for a reference. In the end, it comes down to trust and personality: You want someone who understands your needs and who will work hard to find the property you want at a price you can afford.

4. Make the Right Offer (on the Right House)
If you've ever watched House Hunters or Property Virgins on HGTV, you know that home buyers often make decisions based on the silliest things. They'll pass on one property because they don't like the color of the kitchen and fall in love with another because it has a snazzy fridge. Don't make a similar mistake. Forget about the worn (but easily replaceable) carpeting, and ignore the smell of cookies baking in the oven -- an old seller's trick. Limit your focus to the fundamentals of the home. Make a list of the things that truly matter to you and your family: How many bedrooms and bathrooms does it have? Is it zoned for a high-performing school? (You can visit greatschools.org for details about your area.) How long is your commute? Is there quality child care nearby?
When you've found what you want, visit ziprealty.com and look up the average price per square foot for homes sold in the neighborhood. Then use this formula: Number of square feet in your desired home x average cost per square foot = your target price. If a house you're considering has been on the market for more than a month, think about a lower opening offer. But you may need to nudge your bid up a bit if you're buying in a hot area and your prospective home has it all.

5. Keep Closing Costs Down

Buying a house is a lot like planning a wedding or having a baby: You can easily get nickel-and-dimed at every turn. Inspectors, appraisers, lawyers, lenders -- they all tend to pile on the charges once they see that you've got your checkbook out.
Happily, you have more power to rein in these costs than in the past. New federal regulations require lenders to provide a detailed Good Faith Estimate of closing expenses when you apply for a loan -- and stick to it. Inquire about "junk" fees (such as copying and processing charges) and get them removed from Day 1. And if you think your bill is being padded, log on to closing.com to find comparable closing costs in your area. Then go back and renegotiate line by line.

Preparing your home to be shown

There was in article in the Omaha World Herald on Sunday February 21, 2010 titled, "Looking Good" by Barbara Ballinger. In this article she gave a list of ways to make your home shine before the prospective buyer comes through. Here they are:

1. Curb appeal - make sure your lawn is mowed, porch is clean, and flowers are planted.

2. Impress them at night - many buyers drive around and look at homes in the evening after they are off work. Be sure that your outdoor lights are working and on in the evenings.

3. Clutter free - This one is a hard one. Floor and all surfaces, like counter tops and tables, will look larger and clean. There is a rule of 3 - leave only three things on your counters or tables.

4. Repaint - if needed, touch up walls. If you have vibrant colors in your home, it may be a good idea to paint a more neutral color to accommodate more buyers. Some people can not see past a bright color.

5. Freshen Up - be sure rooms smell fresh and clean. You have to be careful with this one, you don't want a buyer to think you are covering up a smell. Do not leave candles burning if you are not home. A good carpet freshener may be a good idea.

6. Clean the Carpets - if you have a pet or your carpets are dirty in any way, it is recommended to professionally clean your carpets. This is a way to keep your carpets looking good for longer too.

7. Clean out your refrigerator and closets - not a fun task, but it is almost guaranteed that a prospective buyer will open your closets, drawers, and any other clutter hiding place. Buyers expect to see organized places. One important thing to do while cleaning out cabinets is to put away any medicines.

8. Make small repairs - if a light buld needs replaced or a cabinet door needs tightened, these are minor repairs that you can make that may just make a difference.

9. Dress it up - if you are willing to put a little money into your home to make it shine, think about adding a new faucet in the kitchen or baths. Another cheap and quick way to make the important places in your home stand out is new hardware on your cabinets. Try a chrome color or even a rustic bronze.

10. Remove anything too personal - another hard one for people. Put away your personal pictures, you want the buyer to look at your house, not your family. Also, if you have anything that is too religious or overly political, it can taint a buyers views on your home. It is just easier to put them away until you are in your next home.

11. Bring in a professional cleaning crew - you may think that you do a great job cleaning your home and you probably do, but cleaning above the cabinets and in little cranny's that you don't know about is perfect for a professional team to do and just make sure it is all done right. You will then be able to keep up the cleaning while the property is on the market.


I hope these items have helped you out in preparing your home to be put on the market. If it seems impossible to get rid of all of your things prior to listing, think about renting a storage unit. This is cheap and may get you more money for your property.

Good Luck!

Great News

Tax Incentive for first time buyers and second time buyers:

http://www.federalhousingtaxcredit.com/


Good news for home builders, increase in January 2010 new homes

http://www.foxnews.com/politics/2010/02/17/housing-construction-rises-percent-january/