1. What information will I need when I meet with a lender? Back to Top

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2. What price home can I afford? Back to Top

    This really depends on six factors:

1. Your income

2. Your credit history

3. Your outstanding debts

4. The amount of cash you have available for the down payment, closing costs and reserves required by the lender

5. Current interest rates

6. The type of loan you select

Lenders will look at your income in relation to the projected cost of the home and outstanding debts. This determines the size loan you can borrow. Your housing expense-to-income ratio is factored by calculating your projected monthly housing expense, which consists of the principal and interest payment, property taxes and hazard insurance. These combined costs are typically referred to as "PITI." If there are other costs such as, monthly homeowner association dues (if you are buying a townhouse or condominium) or private mortgage insurance, they are added to the PITI. Your housing expense-to-income ratio should fall in the 28 to 33 percent range. The 28 percent of your gross monthly income is allotted toward PITI. The 33% of your gross monthly income is allowed for PITI and all long term debt. Your total income-to-debt ratio should not exceed 34 to 38 percent of your gross income. Some lenders and programs will go higher under certain circumstances.

3. Where can I find a Down Payment? Back to Top

There are many ways of finding a down payment.

1. Savings

2. A gift from a relative that does not have to be repaid.

3. Cash value of life insurance

4. Borrow against your 401K

5. Borrow against assets that are paid for such as a car or a mobile home.

6. Owner Financing

7. Qualifying veterans are eligible for a 100% mortgage with no down

payment for their principal residence.

8. For extremely well qualified purchasers, there is an 80% first mortgage

with a separate 20% second mortgage.

 Please remember that withdrawing money from retirement accounts is an option but it can be expensive because it might have a 10% penalty for early withdrawal. Income tax will be owed on the withdrawal because it was probably deposited tax free initially.

4. How do I find out about the condition of the home I'm considering?  Back to Top

You can include a provision in the sales contract that gives you the right to inspect the mechanical, electrical, plumbing and structural portions of the property. It is STRONGLY RECOMMENDED that you hire a professional to inspect the home. There are inspection companies that provide services of this type. You should accompany the inspector during the inspection to ask questions and receive a written report itemizing any areas of concern. If repairs area needed, you can request the seller to make them in accordance with the provisions of the sales contract. Many inspectors belong to the American Society of Home Inspectors (ASHI). They attend seminars and stay abreast of the latest developments. Some examples of common inspections are:

• Structural- Defects caused by poor construction, soil movement, water or drainage conditions, settlement, fire, etc...
• Environmental Hazards- Including asbestos, lead-base paint, radon gas or any other toxic material.
• Roof- Can include framing members, decking and shingle condition
• Termite- Report would show any visible infestation or visible damage caused by a wood destroying organism (termite, power post beetle, water damage, wood rot, etc..)
• Electrical, Mechanical and Plumbing- Electrical and plumbing systems, built-in appliances, heating and cooling systems, septic systems, etc...

The state of Indiana requires that the seller complete a Sellers Residential Real Estate Disclosure Form. It is important to remember that this disclosure is not a warranty, but a disclosure of the condition the seller believes the property to be in. This is why it is important to consider having a Whole House Inspection by a qualified inspector. Always be sure to ask questions about anything that is unclear or that does not seem to be properly addressed by the forms provided to you.

5. What are the benefits to having a Home Protection Plan? Back to Top

You can't predict when problems will arise with a home. They seem to happen at the most inconvenient times. Typically, most buyers are putting almost everything they have into purchasing their dream home, therefore, having an unexpected repair could mean financial stress. There are several Home Warranty Companies available through real estate companies. Most offer a 1 year time period for a cost anywhere from $300-$450. Some sellers offer a Home Warranty to any prospective buyer. If the home you choose does not have a Home Warranty, you can acquire the coverage yourself. Neither the seller or buyer pays this cost until closing.

6. When purchasing a home, how much does my real estate agent need to know?    Back to Top

It is very important to find out who your real estate agent is representing before you tell them to much information. Your real estate agent should explain Agency Relationships according to Indiana Law and their office policy from the beginning. There are three types of agency: Buyer Agency (representation of buyer exclusively), Seller Agency (representation of seller exclusively) or Limited Agency (representation of seller and buyer in a transaction) Here are explanations of the three:

An Agent represents the interests of the Buyer as a Buyer's Agent when showing another company's listing. Such agent owes duties of trust, loyalty, confidentiality, accounting and disclosure to the Buyer. However, the agent must deal honestly with a seller. All representations made by Buyer's Agent about the property are made as the agent of the Buyer.

An Agent represents the interests of the Seller as a Seller's Agent in a real estate transaction. This agency can be established by an exclusive listing contract. Such agent owes duties of trust, loyalty, confidentiality, accounting and disclosure to the Seller. However, the agent must deal honestly with a buyer. All representations made by Seller's Agent about the property are made as the agent of the Seller.

Limited Agency is where a purchaser comes directly to the Listing Company to purchase their listing. Limited Agency must be consented to by the seller and the buyer in writing. If that occurs, the agent has agency duties to both Buyer and Seller which may be different or even adverse. If limited agency arises, agent shall not disclose the following without informed consent, in writing, of both Buyer and Seller.

• Any material or confidential information, except adverse material facts  or risks actually known by agent concerning the physical condition of the property and facts required by statue, rule, or by regulation to be disclosed and that could not be discovered by a reasonable and timely inspection of the Property by the parties.
• That a Buyer will pay more than the offered purchase price for the Property.
• That seller will accept less that the listed price for the Property.
• Other terms that create a contractual advantage for one party over another party.
• What motivates a party to buy or sell the property.

Agency basically comes down to common sense. Treat others the way you want to be treated, and that is FAIRLY!

7. What should I offer?   Back to Top

There are many variables to consider when making an offer on a home. It is very important to investigate how much comparable homes have sold for in the area so that you can determine whether the home is priced right. Some sellers deliberately overprice, others ask for pretty close to what they hope to get and a few (maybe the cleverest) under price their houses in the hope that potential buyers will compete and overbid. Consider that a home is only worth what the Buyer is willing to pay, Seller is willing to accept and the lender is will to loan. Of course, different situations provide for different motivations for buying and selling. You should always consider this.  Some buyers believe in making low-ball offers. While all offers must be presented to the seller, a low-ball offer often sours a prospective sale and discourages the seller from negotiating at all. And unless the house is extremely overpriced, the offer probably will be rejected anyway. In a strong buyer's market, the below-market offer will usually either be accepted or countered. If a seller has seen few offers, typically an outright rejection is unlikely. In a strong seller's market, offers are often higher than full price. While it is true that offers at or above full price are more likely to be accepted by a seller, sometimes there are other considerations:

1. Is the offer made in as-is condition, or does the buyer want the seller to make repairs or a price concession instead?

2. Is the offer contingent upon the sale of another home? If so, even if the offer is above full price, it may not be as attractive as an offer without that contingency.

3. Is it a cash offer, meaning NO financing contingency? If so, a cash offer less than asking price may be more attractive to a seller than a full-price offer with a financing contingency.

8. How much should I put down on the home? Back to Top

There are many different ways of financing your home. Some require a minimum of 3 percent down payment like (FHA Loans) or 5 percent on conventional loans. Veterans can purchase with no money down (VA Loans) Putting down the minimum amount required by a lender allows a buyer to take full advantage of the tax benefits of home ownership. Mortgage interest and property taxes are fully deductible from state and federal income taxes. Also, by putting down a minimum amount, a buyer can have money set aside for making unexpected improvements. Please remember that on loans that have less than 20% down, Private Mortgage Insurance or PMI (required on Conventional Loans) and Mortgage Insurance Premium or MIP (required on FHA Loans) is required. You will pay this insurance monthly and have no tax benefits from it. It may be more prudent to make a larger down payment and thereby reduce the amount of debt that must be financed.

9. What are some questions I should ask when interviewing a Real Estate Agent? Back to Top

1. Do you sell real estate full-time?

2. Is your office in this area?

3. Will you explain Agency to me?

4. Can you provide financial advice to buyers?

5. What are your qualifications?

6. Have you sold any homes recently in this area?

7. Describe how you use technology to sell homes?

10. What are some questions I should ask when interviewing a Mortgage Banker? Back to Top

1. When is the house payment due and the late fee incurred? What is the late fee?

2. How many months of property taxes and insurance are required for the reserve account?

3. If private mortgage insurance is required, at what point will it be unnecessary so that it can be dropped?

4. Will this loan be sold on the secondary market or placed in your portfolio?

5. When does the servicing department pay the property taxes to insure the income tax deduction for that year?

6. What is the up-front charge for private mortgage insurance and the renewal?

7. If obtaining an adjustable rate mortgage, what is the margin, index, and anniversary for adjusting the payments.

 11. What are some questions I should ask when writing an offer to purchase?   Back to Top

1. Has the owner completed a property disclosure statement? If yes: May I have a copy to look at?

2. What type of financing is available on this property at this time?

3. Has there been an appraisal made on this home?

4. Could you run comparable of recent sales in the area?

5. Are you aware of anything that might affect the value presently or in the future?

6. Could you figure what the approximate house payments will be?

7. Would you prepare a comparison of an adjustable rate mortgage and a fixed rate mortgage.

8. What is included in the sale of this home.

12. What tips for negotiating should I remember?  Back to Top