Information For the Home Buyer
Table of contents
Homebuyers often follow their hearts, and they should. Sometimes just going
with a gut feeling is the best indicator. But when it's house-touring time, it's
important to set those emotions aside and replace them with clear-headed
thinking and a critical eye. Otherwise, your potential dream house might just
turn into a money pit.
Although you should always hire a professional inspection before you complete ttle sale, you can spot the more obvious trouble signs early in the process simply by knowing what to look for. You can quickly check five key
areas to determine if the home has serious problems.
- Roof. A new roof can cost between $5,000 and $15,000 depending on the type. A quick method to determine if the roof is leaking ;s to look in the attic. WARNING: Don't climb into the attic yourself, unless you know how to walk on joists; you might step through the ceiling and injure yourself. Simply open the attic access panel and look inside.
- With a flashlight, check the rafters. They should not show water stains, which indicate leaking.
- With the flashlight off, look up at the roof. Any pinpoints of light shining through indicate a worn roof.
Foundation. A cracked foundation is a serious matter. It can cost tens of
thousands of dollars to fix, and, in severe cases, may not be fixable. Keep an
eye out for these potential warning signs:
- V-shaped cracks (larger at the top than at the bottom) around the perimeter of the house.
- Cracks in interior walls near corners of doors or windows. Look at all the
corners of windows and doors, and at joints where walls meet walls,
ceilings, or doors for signs that they are pulling away from each other.
Doors that stick and squeak.
- Leaks and cracks in and around the fireplace.
- Obvious cracks in brick and mortar.
Piping. Copper piping rarely corrodes and is the plumbing of choice these days, but many older homes have galvanized steel plumbing. After 30 years or so it tends to rust out and leak. Replacing it can cost $5,000 or more, so it's something you'll want to watch out for. Call a plumber if you have specific questions.
Flooding. If a house is poorly situated on its lot, flooding can occur under the
house, which can seriously damage the home. In the basement, check for water stains on the foundation indicating flooding
during rainy periods. If you find these, call in a soils engineer to confirm the
problem and suggest solutions.
Unapproved work. All improvements to the property should have been done with permits from the local building department. Work done without permit may be substandard and, if discovered later, may need to be ripped out.
Go down to your local building department and request copies of permits for all work that was done at the property address. Compare these with any additions or replacements done by the seller. If work was not done by permit, you may ask the seller to obtain permits for the work and bring it up to building-code standards before you purchase.
When buying a home, how do you know what you're getting?
Most people probably only think of one or two questions to ask a home
inspector: "How much is your fee?" and "When can you be there?" But these
only scratch the surface.
Here's a list of suggested questions you might ask:
- What types of licenses do you hold?
- What kind of training do you have?
- Do you belong to a professional inspectors' association?
- How long have you been licensed in Texas?
- Are you a full-time home inspector?
- How much do you charge?
- Do you also perform repairs? (If the answer is yes, that may indicate a conflict of interest)
- What will the inspection include? (Get specifics. It should include the electrical, heating, and central air-conditioning systems; interior plumbing; visible insulation; roof; walls; ceilings; floors; windows; doors; foundation; basement; and the visible structure of the house.)
- Do you inspect gas lines, swimming pools, spas, septic systems, and wells? (You can identify other atypical systems or items.) Do you charge extra for these?
- Do you charge extra based on the size of the home? Multiple AC units? Other items?
- How much would you charge if I ask for a reinspection after repairs are completed?
- Will you supply a written report? (The inspector should.)
- Can I attend the inspection? (The home inspection is an opportunity for you to learn about your new home and ask questions. If the inspector says no, find another inspector.)
- Do you go up on the roof to inspect it?
- How long will the inspection typically take? (Anything less than two hours is not long enough for a thorough inspection.)
- Can I call you with questions that come up later?
- Can you give me names and phone numbers of three people for whom you've inspected homes recently?
The inspector may not inspect swimming pools, wells, septic tanks, and other systems and items, and many inspectors will not conduct environmental tests or wood-destroying insect inspections. You will likely need to arrange for these inspections separately.
You can find a blank copy of the standard inspector report form at www.trec.state.tx.us to give you an idea of what mayor may not be covered in the inspection.
How do you decide which lender is best for you?
There is a lot more to the mortgage process than getting a good rate. High costs in fees and poor service can come as very unhappy surprises.
Here's a list of suggested questions you might ask a lender:
- How large is your company, and how long has it been in business?
- Are you a licensed mortgage broker or loan officer in Texas?
- Is your company a mortgage banker or a mortgage broker? (A banker lends its own funds; a broker searches mortgage sources and arranges for you to receive financing from the lending entity.)
- What is the name, phone number, and e-mail address of the person who will actually be processing my loan application? How accessible is that person?
- Tell me about all loan fees. What fees must I pay up front? What fees will I have to pay at closing?
- How can you assure me I won't pay any unnecessary "add-on" fees?
- Do the costs you are quoting include the lender origination fee?
- Are there loans available with no origination fees? No closing costs? Reduced closing costs?
- What are your interest rates?
- Is there a fee to lock in my interest rate? How long can I lock in the rate? If interest rates go down, can 1relock at the lower rate? If so, will there be a fee for that?
- What information must I provide to get a mortgage loan?
- What documentation will I have to provide?
- Will you require current tax returns? (Take note of this especially between Jan. 1 and April 15 if you haven't prepared your return yet.)
- How long will it take to get complete and unequivocal loan approval and be ready to close?
- I plan to stay in this house for _ years. Can you show me the breakdown of any ARM loans you offer vs. fixed-rate loans to see which could save me the most money in my situation?
- What is private mortgage insurance? Other than a 20% downpayment, how can I avoid the private mortgage insurance?
- In the last three months, how many loan applications have you taken and how many have you been unable to close?
- Can you give me names and phone numbers of two or three people for whom you've funded loans in the last two months?
Currently, Texas-licensed mortgage brokers must use the standard Conditional Qualification and Conditional Approval letters when representing that an applicant is prequalified or preapproved for a mortgage loan. Mortgage bankers may be required to do so in the future.
Three elements are crucial to the purchase of a home-the down payment,
closing costs, and qualifying for a mortgage. Here is a quick rundown of what
you should know:
Typically, conventional lenders will require a 20% down payment, although you may be~able to find loans with down payments of as little as 5% (perhaps less in some cases). With down payments less than 20%, you likely will have to pay private mortgage insurance, which guarantees the lender will be repaid in case of default.
Mortgages insured by the Federal Housing Administration (FHA) and those available to U.S. veterans often require very low down payments. Ask your lender if you can qualify for one of these loans.
If you are having trouble coming up with the down payment, here are some tips to ease the burden:
- Consider down payment assistance programs. The Texas Department of Housing & Community Affairs offers down payment assistance as well as low-cost mortgages for first-time buyers. For more information, visit MyFirstTexasHome.org.
- Start early. Begin saving for a down payment as soon as possible. After a few years, it adds up,
- Ask for a My Community Mortgage. A Fannie Mae product, the My Community Mortgage offers many advantages for buyers, including the ability to use non-traditional forms of credit for loan qualification purposes.
- Convert stocks. Consider selling stock for the down payment. The housing market often is a better investment anyway.
- Sell an asset. If you have "toys" such as a boat, extra car, or other asset, consider selling it for the down payment.
- Borrow from relatives. Today lenders will allow you to use money borrowed from relatives as the down payment. In many cases the relatives do not need to co-sign the mortgage. Check with your lender for restrictions.
No matter what home you buy, there will be closing costs. These can include: discount points, title insurance, escrow fees, attorney fees, termite report, recording fees, appraisal fees, document preparation fees, notary fees, and a loan underwriting fee. Usually these are due in cash, but sometimes they can be folded into the mortgage.
The size of the mortgage you qualify for is based mainly on the interest rate offered and your income. The higher the interest rate, the higher the monthly payment. And, the higher the monthly payment, the more income you will need to qualify for the mortgage.
Contacting a lender before you're actually ready to make an offer on a house can be a good idea. This head start gives you a chance to work out any problems that may arise without the pressure of contract deadlines.
Save on homeowners insurance
Here are seven ways to cut the cost of your home insurance from helpinsure.com, a Texas consumer-friendly Internet site:
- Shop around - and do it early!
Check with several different home insurance companies to get rate quotes. (An independent insurance agent can provide rate quotes from a variety of companies.) And definitely do it well before your policy expires, just in case you run into any snags along the way.
- Raise your deductible
The deductible is the amount of money you have to pay toward a loss before your insurance kicks in. Home insurance deductibles usually start around $250. However, if you increase your deductible to:
- $500, you'll save up to 12% on your premiums
- $1,000? Save up to 24%
- $2,500? Save up to 30%
- $5,000? Save up to 37%
- Buy your home and auto policies from the same company
Many companies will give what's called a "multi-line" discount if you buy both home insurance and auto coverage from them.
- Don't skimp when buying a home
If you're looking at buying a home, think about the cost of insuring the home. A newer home's electrical, heating, and plumbing systems and overall structure are likely to be in better condition than those of an older home - and can lead to a discount on your premiums.
- Insure your home, not the land
While your home and its contents are at risk from fire, theft, windstorms, and other perils, the land your home sits on is not. Don't include the value of the land in deciding how much home insurance you need to buy.
- Improve security and safety
Items such as dead-bolt locks, burglar alarms, and smoke detectors can usually bring discounts of 5% each. Your insurance company may also offer a significant discount of 15% or sometimes even 20% if you install a sophisticated home-security system.
- Check your policy annually
Your policy should reflect the value of your home and belongings. If you review your policy every year, you can easily make the necessary adjustments. If, for example, you just sold a valuable painting, you won't need the same amount of personal property coverage. But if you've added a garage or other addition, you'll need to increase your dwelling coverage.
Information to help you settle into the Lone Star State
If you just moved to Texas, you'll soon learn plenty about the culture, customs, and history of the state. In the meantime, here are a few items to consider as you get acclimated.
Get legal on the road
As a new Texas resident, you have 30 days to register your vehicle and get your driver's license. Before you register your vehicle, though, it must pass the state inspection process. In order, here are the three steps to follow:
- Take ytlur vehicle to a state inspection station. You can find a list of what types of inspections are required in your county and an inspections-station locator at www.txdps.state.tx.us/vi. When you go, make sure you take your driver's license and proof of insurance. If your insurance policy wasn't issued in Texas, you may need to show proof that you carry the minimum coverage required by the state: $20,000 bodily injury or death to one person; $40,000 bodily injury or death to two or more persons; and $15,000 injury or destruction to other property.
- When your vehicle passes inspection, the inspection station will give you a verification form to bring to the county tax assessor-collector's office. This is where you obtain a Texas vehicle registration sticker and license plates. You'll need proof of ownership, such as registration or title from your previous home state, as well as proof of insurance. Again, you may need to show that you carry minimum coverage amounts.
- Apply for a Texas driver's license at the Texas Department of Public Safety (DPS) office in your area. To find the location nearest you, visit www.txdps.state.tx.us.Bring an 10, proof of Social Security number, proof of liability insurance, and proof of Texas vehicle registration. Expect to provide a thumbprint and surrender any valid out-of-state license you currently have.
Register to vote
While at the driver's license office, you can register to vote-or you can pick up a voter-registration application from the county voter registrar's office, a library, post office, or from the secretary of state's Web site at
www.sos.state.tx.us. The application must be received 30 days before an election to vote in that election.
You can find a wealth of information about the state at TexasOnline.com. You can also search here for links to Web sites for counties, cities, chambers of commerce, schools, and libraries. If you're looking for answers to questions about state laws, required business licenses, taxes, and more, you may also find that information here.
Don't fall for misleading solicitations to file your homestead exemption
There is no fee to file a property-tax homestead exemption. You might receive letters, though, on official-looking stationery offering to file your homestead exemption for you for a fee. Even some people who have lived in Texas their entire lives confuse these letters as a form from a state agency requiring a mandatory fee. Don't fall for it. The process is simple and costs nothing. You can download the application from their website at www.window.state.tx.us/taxinfo/taxforms/50-114.pdf, fill out the form, and send it in to your appraisal district.
If you have other questions, please feel free to get in touch with me.
Welcome to your new home!
Credit problems can seem like an insurmountable barrier to getting a home loan.
It's not an easy task, but with patience and some insight you can
turn things around. Here are four ways you can get on the road to credit
repair-and put yourself in a better position for homeownership.
- Develop a budget
Stop all cregit transactions right now. It might sound harsh, but you should hide or destroy ~11 of your cards if necessaryl Now you can manage your inflow of cash and, more importantly. your outflow-money in and money out. Develop a flexible budget. Consider all necessary expenses such as housing, food, and healthcare. Then, eliminate expenses that can be trimmed such as entertainment and dining out. For more help, contact a nonprofit credit counseling agency, such as the TCA at 866/528-0588 or takechargeamerica.org.
- Contact your creditors
If you aren't making timely payments, don't wait for your account to be turned over to collectors. Your creditors may be able to help you get on a lower-interest payment plan or agree to a settlement. A helpful tip: If your balance is unmanageable, offer a 30% settlement payment first. Some creditors will take payments of 30%-40% rather than have you default. Make sure to get the agreement in writing. Once you've paid in full, send the settlement letter to each of the credit bureaus (Equifax, Trans Union, and Experian/TRW) for reference so they will update your credit report.
- Consolidate your debt
Another approach to consider is acquiring a debt consolidation loan. This type of loan will allow you to payoff your outstanding balances with one, lower-interest monthly payment. A home equity loan for debt consolidation could allow the interest you pay to become tax-deductible.
- Avoid bankruptcy if you can
A last resort is bankruptcy because of its long-lasting effects. Bankruptcy can make it difficult to attain future credit, life insurance, and sometimes even a job. It does, however, offer a new start. The primary types of personal bankruptcy are Chapter 13 and Chapter 7. Chapter 13 allows you to keep property that you would otherwise lose, but payoff a default amount during a three-to five-year period. Chapter 7 (straight bankruptcy) liquidates all of your assets that are not exempt. Property is turned over to creditors or sold by a court-appointed official.
Help for homeownership is out there
There are lots of programs to help first-time and low-income homeowners, and even those with spotty credit histories who want to realize the American dream of homeownership. One is the Texas First Time Homebuyer Program. For more information, visit MyFirstTexasHome.org or ask your Texas REALTOR®.