Buying A New Home

Buying a new Home

Get a copy of your credit reports four to six months before you start home shopping and pre-qualify for a mortgage before you start looking.

If you're buying a house strictly for financial reasons, look at each house you're considering as you would evaluate a purchase of stocks or bonds.

Don't buy one of the first houses in a subdivision. The developer may go bust and be unable to complete the development.

Make any offer on a home contingent on its passing an inspection. The purchase also should be contingent on your ability to get financing at or below a set interest rate.

Get an owner's title insurance policy that covers you, not the lender, if your ownership is successfully challenged.

Hire a real estate attorney to review the closing papers and, if you're buying a house still under construction, to draft or review the purchase contract.

Before you buy a house, try your commute to work during rush hour.

Learn about the area surrounding a potential purchase, including the potential for new roads or new development.

Look at a property while it's raining to see how water flows across it. Look for signs of poor drainage and danger of flooding.

Buy a house that's fundamentally sound in construction and materials, even if it doesn't have the latest, greatest design features.

Should I refinance?
As a general rule, if you can shave at least a half point off your current interest rate, it is a good idea to refinance. If you currently have a home mortgage above 7%, the time is now to make a change. However, your decision should also depend on how long you plan to stay in your home. If you are only going to stay 2 to 5 years, you should figure out the cost of the refinance. Will you pay more in closing costs than you will save on your monthly payment? For those who plan to move after a few years, a "no-cost" loan, which drops your mortgage payment a significant amount, would probably make sense.

What is a "no cost" or "zero cost" loan?
A "zero cost" loan means that you pay no closing costs for the loan. A "zero cost" loan is different than a "zero point" loan. You will probably have to take a higher rate to get a zero cost loan, but that is okay. Closing costs include appraisal, credit report, processing fee, underwriter fee, attorney fee, notary fee, title insurance and any other fees the lender may make up. Closing costs typically cost between $2,000 and $2,500.

What are points?
A point represents 1% of the total amount of money borrowed. There are two types of points. Borrowed points are a profit paid to a lender. Discount points are a fee paid in advance to lower the interest rate over the life of a loan.

Do I have to stay with my existing mortgage company when I refinance?
No. You are under no obligation to remain with your current lender.

Should I change from a 30-year to a 15-year loan when I refinance?
If you can afford to pay a bit more each month to pay off your loan, this is a smart move.

What is a "good faith estimate?" Do I need one?
Yes. Every lender you talk to should mail or fax you a good faith estimate of all charges when you discuss a refinance with them. The estimate will include such things as a list of fees, including closing costs, calculated taxes and your estimated monthly payment. The estimate gives you documentation to refer to at the closing of the loan, as well.