Closing Costs: Keep Your Checkbook Handy!

If you're gearing up to buy a home, get your checkbook ready. You'll have to pay some extra expenses associated with your home loan. These expenses are called closing costs, and they can vary widely depending on a number of factors.

Closing Costs 101
Closing costs are the expenses your lender incurs in the origination of your new home loan. These expenses generally include the cost of your credit reports, application processing, property appraisals, loan origination fees and other fees.

As part of your purchase agreement, you can ask the seller to pay a portion of all of your closing costs. However, if the seller does not agree to pay these costs for you, you should be prepared to pay them out of your own pocket. Closing costs generally run between 2 and 3% of the amount you're borrowing from your lender. However, each state includes different fees and taxes in closing costs, so it's important to talk to your lender about how much you can expect to pay.

Good-faith estimates
Closing costs can quickly add up and push you way over-budget on your home purchase. That's why you should find out ahead of time how much you'll have to pay.

Ask your mortgage lender for a good-faith estimate. Lenders are required to provide one of these closing costs estimates within three days of receiving your mortgage application. However, do not accept a verbal estimate-insist that they send it in writing.

Other expenses
In addition to closing costs, you may have to cough up cash a couple of other home loan expenses, including loan discount points and prepaid items. Loan discount points are fees a borrower can pay to a lender at the closing to lower their mortgage interest rate. If you so choose, you can "buy" points from your lender to bring down your interest rate. The cost of each point is equal to one percent of the loan amount. For example, for a $100,000 loan one discount point equals $1,000.

Each discount point you pay on a 30-year loan will typically lower your interest rate by only 0.125%. That means a 7.5% rate would be lowered to 7.375 % if you purchase one point. Many borrowers feel that discount points are simply not worth the high price.

You should also consider the cost of prepaid items. Your lender will probably want you to set up what's called an escrow account, which is basically a savings account with your lender. When you pay your monthly mortgage payment, a certain amount of your payment will be deposited into this account. At the end of the year, when your property taxes and homeowner's insurance comes due, your lender will make the payment out of your escrow account.

On the day of your closing, the lender will probably require you to set up an escrow account with about 9 months worth of taxes and two months worth of insurance payments. These expenses are called prepaid items, and you will have to pay for them out of your own pocket.

However, these expenses will vary depending on your state and unique situation. If you are uncertain about how much you might have to pay at closing, talk to your lender.

The Pre-Approval Letter: A Buyer Must-Have

Before you even start shopping around for a home, you should get a pre-approval letter from your lender. Why? The benefits of pre-approval are endless. Not only will it assure that you'll be able to secure a loan when you find your dream home, but it will also give you negotiating leverage and save you loads of time down the road.

Here are a few good reasons why you should get pre-approved:

It's a step-up from a pre-qual.
Because getting a pre-qualification letter is so easy, it doesn't carry as much weight. You can get pre-qualified with a lender over the phone or online in just minutes. The lender simply asks you a few questions about your finances, and they take your word for it.

On the other hand, a pre-approval is much more involved. The lender actually takes time to verify your information, including your income, employment and overall financial status. Although a pre-approval takes more time, it could be well worth the wait.

It helps you figure out what you can afford.
As their hunting around for homes, most buyers find themselves asking, "Can I really afford this?" A pre-approval letter answers that question for you. During the pre-approval process, your lender takes a look at your monthly income as compared to your monthly debts to figure out just how much home you can afford. That's how they determine how much money they're going to lend you. So, if you've already been pre-approved for a certain amount, you won't be tempted to buy a house you can't realistically afford.

It gives you powerful negotiating leverage.
A pre-approval will make you more attractive to sellers. When you're ready to make an offer on your dream home, you'll have more negotiating leverage if you have a pre-approval letter in hand. That's because the seller knows you've already been approved for a loan, so they're more likely to take your offer seriously. And they'll probably prefer to work with you as opposed to a buyer who does not have proof they can afford the home.

It will save you time down the road.
If you get pre-approved, you'll also save loads of time during the closing process. Because your lender will complete the verification and underwriting steps during the preapproval process, you won't have to go through those steps again at closing.

You and your realtor will have peace of mind.
When you get pre-approved, you'll know without a doubt that you'll be able to secure a loan when you find your dream home-and so will your realtor. A pre-approval letter proves to your real estate agent that you're a qualified, serious buyer. As a result, he or she will be more motivated to help you find the perfect home.

How pre-approval works
During the mortgage preapproval process, the lender will contact your bank, your employer, the credit bureaus and other financial institutions to verify your income, assets, debts and credit history. Based on this information, they will estimate how much mortgage you can afford. If everything checks out and the lender sees you as a low risk, they will issue you a letter stating that the loan of a certain amount is approved for a specified amount of time.

You may have to pay a small fee for preapproval. This amount covers the cost of your credit reports and application processing, but it is often refunded to you at the time of your home closing. Keep in mind that pre-approval letters are not binding for the lender. Not only are pre-approvals valid for only a certain amount of time, but they are also subject to an appraisal of the home you want to purchase.

If your financial situation changes between the time of your preapproval and the closing, be sure to contact your lender immediately. If you lose your job, go through or a divorce or experience another major financial upheaval, your lender may have to recalculate your maximum mortgage amount and issue a revised pre-approval letter.

Don't Skip the Inspection

You can't judge a book by its cover. It may be an old cliché, but it certainly holds true when it comes to buying a home.

Even an incredibly beautiful, fully renovated home that appears to be in mint condition could be hiding some serious cracks in the foundation. That's why every buyer should include a property inspection clause in their home offer.

Let's say a seller accepts your offer. Upon inspection, your inspector discovers the house is infested with termites or the roof needs major repairs. If your purchase agreement includes an inspection clause, you will be able to reopen negotiations with the seller. You can either back out of the contract or request that the seller pays for the necessary repairs before the purchase is official.

On the other hand, if you do not have an inspection clause in place, you won't have a chance to have the home inspected before closing. So, even if you find a major problem just a few days after you move in, you'll have to pay out of your own pocket to fix it.

Not a do-it-yourself job
Unfortunately, too many homebuyers think they can simply inspect the property with their own two eyes. After all, how hard could it be to spot a glaring problem? When these buyers don't find any obvious issues with the property, they go ahead and purchase the house.

A month or so down the road, many of these homeowners discover a major leak in the basement or mold in the attic. At this point, it's too late. They can't return the home to the store. This is why it's critical to hire a professional home inspector. It takes a trained eye to spot potential problems early on-and that's exactly what a home inspector offers.

Home inspection 101
A good home inspector is intimately familiar about construction practices in the area. They also know which designs are built to last and which ones may fall apart at any moment. Plus, an inspector can pinpoint seemingly insignificant problems that could cause major headaches down the road.

After they complete their inspection, they provide you with a full report on the condition of the home's primary components, including:

• The home's structure, including the foundation, walls ceilings and stairs
• The home's exterior, including roofing, flashing, chimney, siding, gutters, patios, decks and the driveway
• The interior of the home, including steps, counters, railings, cabinetry, finishes and visible insulation and ventilation
• The electrical system, including all wiring, fixtures and overload protection
• The plumbing, including piping, fixtures, drains and the hot water heater
• The HVAC systems
• The basement or crawl space, including any stability problems, settling, water damage, construction and visible termite damage or rot
• The attic, including any signs of leakage and ventilation or insulation problems

Depending on where the home is located, the inspector may take samples to test radon gas levels and/or water quality. They may also recommend that you hire other specialists to inspect for termites or analyze special features like swimming pools, wells or septic tanks.

Buying a home is the single biggest purchase most consumers will ever face. As with any other major investment, you should know every tiny detail about the product you plan to buy before you sign on the dotted line.

Find the Right Home Inspector

Because most states do not license home inspectors, you'll have to do some homework to find a qualified inspector. Here are a few steps you should take to make sure you find the best inspector for the job:

Get recommendations
Ask family members, friends, colleagues or your realtor if they can recommend a great inspector. If a friend tells you they would hire an inspector again, he obviously did a great job.

Find a member of ASHI
Before hiring an inspector, ask if he is a member of the American Society of Home Inspectors (ASHI). This national organization enforces a strict code of conduct and specific practice standards. ASHI also tests applicants and requires that all members have a certain amount of experience.

Learn their experience
Ask the inspector about his home inspection training, background and experience. Make sure she has some training in construction and building maintenance standards and at least a few years of experience in the field.

Make sure they know the area
A good home inspector should be intimately familiar about construction practices in your local area. They should also know which designs are built to last and which ones may fall apart at any moment.

Request a sample
If you're considering a home inspector, ask him if he can provide a sample of his checklist or inspection report. This will give you an idea of how thorough he is during each inspection.

Ask for references
Most home inspectors are willing to provide a list of references-a list of home owners who have used her services. Call the home owners on the reference list and ask if they were satisfied with the inspector's work.

Attention Youngsters: It's Never Too Early to Plan for Your First Home

If you're still in college or just started your first job, you may not be thinking about buying a home-at least not yet. But it's never too early to start planning for home ownership. If you think you may want to buy a home at some point it the future, it's important to think ahead.

Here are a few steps you can take today to make sure you'll be in a great position to buy a home tomorrow:

Take care of your credit score.
Believe it or not, using a credit card is a good thing-as long as you don't abuse it. That's because owning a credit card allows you to establish a credit history. You can also establish credit by applying for a car loan or student loan and putting your name on the apartment lease and utility bills. However, it's important to make all of your credit card, loan and other bill payments on-time every month. This allows you to keep your credit score high, which will be critical when you decide to buy a home down the road.

Save your pennies.
When you decide to buy a home, you'll need to have plenty of cash on-hand to make a healthy down payment and cover closing costs. The larger the down payment you make, the lower your monthly mortgage payment will be. So, the sooner you start saving, the better. Open up a savings account and try to make monthly deposits. You'll be amazed at how quickly it will grow.

Figure out where you want to live.
If you don't plan to stay in your hometown forever, you may want to start reading up on other parts of the country. Do your research on cities and towns that interest you, and think about where you'd like to end up after college. Once you have your list narrowed down to your favorite areas, read up on the housing markets in those towns. Are homes affordable or expensive? Do most people in the area buy single-family homes or condos? How high are property taxes?

Talk to home owners.
Ask your parents, older brothers and sisters and other home owners how they saved up to buy their homes and what their home buying experience was like. If you know any real estate agents, talk to them about the home buying process. While you may not be in position to buy a home now, these conversations will get you thinking about the future. By the time you're ready to buy a home, you'll know what to expect.

Home Owner Tax Breaks

There are countless advantages to owning a home, but one of the most valuable perks is the range of home owner tax breaks. These days, many Americans buy homes simply to save on their tax bills. After all, you save taxes when you buy a home, you save while you own your home and you save when you sell your home.

Here are a few of the tax advantages home owners enjoy:

Mortgage interest deduction
Of course, the most famous of all the home owner tax breaks is the mortgage interest deduction. When you make your monthly mortgage payment, the majority of your payment probably goes toward interest. Unless your home loans add up to more than $1 million, you can deduct every last cent of the interest you pay on your first and second home.

To top it off, joint filers can deduct the mortgage interest they pay on up to $100,000 in home equity loans. However, if your home loans add up to $1 million or more, the IRS limits the amount of interest you can deduct.

Points
If you bought points from your lender to get a better interest rate on your loan, you can fully deduct those as well. Also called origination fees and loan discounts, each point equals one percent of the financed amount. Even if the seller paid for your points, you may still be able to deduct the points on your tax return.

However, if you used your home loan to purchase your primary home, you must deduct these points in the year you paid them. In order to qualify for the points deduction, you must meet certain requirements-such as that points payment is an established business practice in your area and the points you paid fell into the typical range. Make sure that your loan meets all of these requirements before you try to deduct points.

If you pay points on a refinanced loan, you may also be eligible for this tax break-but in most cases, you must deduct the points over the life of the loan. However, if you refinance again, you can write off the full balance of the points from your old refinance.

Property Taxes
Property taxes, which are also called "real estate taxes," are yet another deduction. You can deduct the property taxes you pay each year from your income. When you purchase a home, your lender will most likely want to set up an escrow account, which is basically a savings account. When you pay your monthly mortgage payment, a certain amount of your payment will be deposited into this account. When your property taxes come due, your lender will make the payment out of your escrow account.

At the end of the year, your lender will send you an annual statement, which includes the total amount of property taxes you paid. You can deduct this amount from your annual tax return. If you just bought your home this year, be sure to look at your settlement sheet from the closing. When the property was transferred from the seller to you, the property tax payments were probably divided between you and the seller. You should only deduct your share of these taxes.

If your settlement statement shows that you paid money into an escrow account for future taxes, you cannot deduct this amount. You can only deduct the taxes your lender actually paid to the property tax collector that tax year.

Mortgage interest tax credit
If you are a first-time home buyer with an income below the median income level for your area, you may qualify for a mortgage interest tax credit through the Mortgage Credit Certificate (MCC) program. This credit was created to help lower income families afford home ownership.

To be eligible for the credit, you must receive an MCC from your state or local housing department before you get a mortgage. This tax credit offers qualified first-time home buyers a tax credit of up to 20 percent for the part of the home mortgage interest they pay.

Home sale profits
When you decide to sell your home, you'll also avoid some taxes on the profit your make. You can deduct all the selling costs, including the broker's commission, title insurance, legal fees, inspection fees and administrative costs, from the gain. The gain is the selling price of your home minus deductible selling expenses minus your cost basis. (Your cost basis is the original purchase price, plus capital improvements, minus any depreciation.)

In the past, a homeowner could only avoid paying taxes on the sale of their home if they used the sales proceeds to buy another home. However, the law changed when the 1997 Taxpayer Relief Act passed. Under this act, up to $250,000 in sales gain ($500,000 for married joint filers) is tax-free as long as the home owner owned the house for two years.

Advice for House Hunters

With millions of properties on the market across the nation, it can be tough to find your dream home. Luckily, there are some steps you can take to ensure home buying success. If you're a house hunter on the lookout for the perfect home, consider these top house-hunting tips:

Do online research
In today's digital age, you can hunt for homes, check out virtual tours and search for neighborhood stats and school district info without even walking out your front door. Because most of this info is readily available online, you can narrow down your house list long before you start your in-person search.

Check out real estate listing websites, compile a list of your favorite properties and send those listings to your realtor so he or she can schedule showings. While you're online, do some research about various areas and neighborhoods to figure out where you want to settle down. Many real estate sites provide statistics about population, crime and other important info. You can also find websites that provide info, ratings and reviews for school districts across the nation.

Know what you want
It may seem obvious, but you need to know exactly what you're looking for before you begin your house search. If you're house-hunting with a spouse, it's particularly important to sit down together and discuss your wants and needs. You may find that you disagree on a lot of house features-but it's better to work out your differences now than while you're out looking at homes. Try to compromise and make a list of all the features you agree the house should include.

Do you want a cozy two-bedroom, one-bathroom home or does your family require at least five bedrooms and three bathrooms? How much square footage do you think you need? Do you prefer one or two-story homes? Do you want an older home with more character or a brand new home with the most modern design? Do you want a fixer-upper or a completely renovated home? What extra features are a must-have? Are you dead-set on a large, open kitchen, a pool, a huge backyard or a full basement? Do you want to live in the best school district or are you more concerned with living close to the office?

Don't just think about what you need today-you should also plan ahead for you what you may need in the future, especially if you plan to stay in this home for five or more years. For example, while you may not have children now, you could have one or two kids within the next five to ten years. Look ahead and plan accordingly. Otherwise, you may outgrow your home more quickly than expected.

Pinpoint the best location
It all comes down to location, location, location! It's one of the most commonly used phrases in the real estate industry, but it's absolutely true. It doesn't really matter if you live in the biggest, most beautiful home if it's located three hours from your office or a foot away from a noisy railroad track. Location does matter.

Plus, one of the quickest ways to narrow down your list of potential homes is to pinpoint the area or neighborhood where you want to live. If you're hoping to shorten your commute, look for homes within a five or ten-mile radius around your office. If you're more concerned with your child's education, search for homes in the best school district. Maybe you've had your eye on a certain community for the past few years. Search for homes in that community and surrounding areas.

Work with a pro
Sit down with an experienced real estate agent and go over all of your wants, needs, likes and dislikes. Discuss your must-haves and your "would-be-nice-to-haves." Talk about how you would like to go about searching for homes. Maybe you want your realtor to find home listings for you based on your list of wants and needs. On the other hand, you may want to help out by searching for homes online and sharing your findings with your realtor.

Stay flexible
While it's good to know what you want, try not to be too specific or overly picky. When it comes to searching for homes, it's important to stay flexible. After all, the home of your dreams may not exist exactly as it is in your mind's eye. But keep in mind that you can always make changes and transform a house into your dream home.

Get pre-approved
Before you even start your house hunt, you should get pre-approved for a loan. When you get pre-approved, you'll know without a doubt that you'll be able to secure a loan when you find your dream home. Plus, you won't be tempted to buy a house you can't realistically afford. When you're ready to make an offer, preapproval also gives you stronger negotiating leverage. If a seller knows you've already been approved for a loan, they'll be more likely to take your offer seriously.

No matter how you approach your house-hunting adventure, remember that your real estate agent is always there for you. He or she can offer you the guidance and support you need, every step of the way.

Why Buyers Need a REALTOR®

A home is probably the largest purchase you'll ever make. Because this is such an important (and expensive!) decision, you shouldn't try to make this journey alone. If you want to land your dream home, work with an experienced professional who can guide you through the complex home buying process, every step of the way.

There are countless benefits to working with a real estate agent instead of trying to go at it alone. Here are just a few advantages realtors have to offer:

• They are educated and experienced. Real estate transactions are complicated, confusing and often frustrating. If you're working with a pro, you won't have to know all the ins and outs of the real estate business. They'll handle all the complex details for you.
• They can help you with your house hunt. If you're ready to start looking for homes, you'll definitely want a realtor at your side. Not only can a realtor get you into properties quickly, but she may have access to listings you don't know about.
• They have insider info. A real estate pro often finds out about home listings before the general public knows. Plus, a realtor can give you insider information on neighborhoods and other area statistics.
• They are master negotiators. Because real estate pros are skilled at the art of negotiation, they will be able to negotiate the best price for you.
• They handle all the paperwork. A purchase agreement can be 10 pages or longer, and that does not include the disclosures. One tiny mistake could cost you thousands of dollars or even land you in court. A real estate agent can handle all of this confusing paperwork for you, and they'll make sure all the information is absolutely accurate.

Find your perfect match
If you're looking for a real estate agent, ask your friends, family members and colleagues if they can recommend an excellent professional. Don't forget to ask them if they would work with the agent again. If the answer is yes, you may have found your ideal realtor. You should call a few highly regarded real estate firms and ask if they can recommend agents who work in your area.

When you meet with a potential realtor, explain your home buying goals and ask how they can help you find the perfect home. You should also ask the agent who they will be representing in this transaction: you (the buyer) or the seller. It's extremely important to ask this up-front so you know where you stand.

Look for a Realtor®
Believe it or not the words "agent" and "REALTOR" are not interchangeable. A real estate agent is licensed in the state where they work. Licensed agents are required to meet certain education and experience standards.

However, a Realtor is a step up from an agent. After they receive their real estate license, most agents join their local board or association of REALTORS® and the NATIONAL ASSOCIATION OF REALTORS®. Only then can they use the title, REALTOR®. Real estate professionals who are REALTORS must adhere to a strict code of ethics which oftentimes surpasses state laws. Also, many REALTORS have achieved a higher degree of training and experience than a typical agent.

Sizeable Savings: How Much You Really Need?

If you're like many other first-time home buyers, you might think you'll have to save up hundreds of thousands of dollars before you can even consider buying a home. Not true! Believe it or not, if you have a strong credit score and steady monthly income, many lenders will loan you up to 95% of the amount of a home!

But that still leaves the question: Can I really afford a home? Fortunately, there are some steps you can take to answer that critical question.

Get your finances in order
Before you dive into house-hunting, it's important to take a closer look at your finances and ensure that you can truly afford a home. Here are a few important financial steps you should take:

1. Take stock of your finances: Do you have enough income to pay a mortgage payment that may be higher than your monthly rent? How much can you afford to spend? Do you have any money saved up for a down payment and closing costs? Will buying a home detract from your other financial goals, like saving up for retirement or your child's college education?


2. Pay down your debt: If you're currently carrying around a hefty load of debt, you should focus on paying that down as much as possible before you buy a home. Your total debt expenditures, including credit card debt, student loans, car loans and home debts should add up to no more than 36% of your gross income.


3. Check your credit score: Before you start shopping around for a home, order a credit report to find out your credit score. Your credit score will determine whether or not you get approved for a loan and what kind of interest rate you receive. These days, most lenders require a credit score of at least 720 before they'll offer you a loan. If you notice any errors on your credit report, be sure to notify the major credit bureaus and ask them to make corrections. If your credit score is low, now is the time to give it a boost. The fastest way to do that is to pay down your credit card debt and pay all of your bills on time.


4. Save up for a down payment: The higher your down payment is, the lower your house payments will be. So, even if you have to cut way back on your spending or take on a second job, it could be well worth the effort. Many buyers try to save up enough so they can make a 20% down payment on their home. That's because if you make a down payment of at least 20% of the purchase price of the home, you'll avoid paying private mortgage insurance (PMI). PMI is a type of insurance that protects the lender against the risk of your default. Although the cost of PMI varies depending on your mortgage company, premiums typically run about 0.5 percent of the loan amount for the first year of the loan. PMI premiums usually decrease after the first year.

However, depending on your unique situation, you can a buy a home with a very small down payment-or even no down payment, if you're a veteran. To find out what kind of loan you may be eligible for, talk to a few different lenders and discuss your financial situation.

Know what you can afford
The best way to figure out how much home you can afford is to get pre-approved for a loan. During the mortgage preapproval process, your lender will contact your bank, your employer, the credit bureaus and other financial institutions to verify your income, assets, debts and credit history. Based on this and other information, they will estimate how much mortgage you can afford. If everything checks out and the lender sees you as a low risk, they will issue you a letter stating that the loan of a certain amount is approved for a specified amount of time.

Generally, lenders don't want you to spend more than 28 percent of your gross monthly income on a mortgage payment. Lenders will also look at the housing expense-to-income ratio, which is determined by calculating your projected monthly mortgage cost, property taxes, hazard insurance and HOA dues. Your expense-to-income ratio should fall somewhere between 28 and 33 percent. If it's much higher, you probably cannot afford the house.

Find Your Dream Home

Many buyers quickly discover that finding their perfect home is no easy task. How do you know for sure if a house is the right fit for you and your family? How will know when you've found the home of your dreams?

Here are a few things to keep in mind as make this extremely important decision:

Know what kind of home you want
You'll never land your dream home if you're not sure what you want. First and foremost, figure out if you want to buy a single-family home, a multi-family home (which often includes up to four units) or a condo. Once you've made that decision, think about size. Will two bedrooms and one bathroom do the trick, or does your large family need more bedrooms and bathrooms? How much square footage do you think you need?

Next, consider the style of home you prefer. If you hate climbing stairs, you may want to look at one-story ranch-style homes. Do you like cozy, old-fashioned homes or spacious, modern houses? Do you want a fixer-upper or a completely renovated home?

You should also consider where you want to live. Do you want to live in the best school district or are you more concerned with living close to the office? If you're hoping to shorten your commute, look for homes within a five or ten-mile radius around your office. If you're more concerned with your child's education, search for homes in the best school district. Maybe you've had your eye on a certain community for the past few years. Search for homes in that community and surrounding areas.

Finally, think about the features that are important to you. Are you a master chef? If so, maybe you should focus on homes with spacious, updated gourmet kitchens. Do you like to spend lots of time outdoors? Look at homes with lots of acreage or wooded lots. If you and your family are swimming fanatics, look at homes with pools.

Check out lots of homes
Try to look at as many homes as possible before you settle on one. Along the way, you'll figure out what you like, dislike, the features you have-to-have and those you can live without. You'll start to understand how much various features are worth and when a home is overpriced or a great deal. The more properties you visit, the more certain you'll be when you find the perfect home.

Stay flexible
Try not to be too rigid about your wants and needs. Keep in mind that you can always make changes to a home to fit your family. For example, let's say you find the perfect-sized home in your favorite neighborhood in the best school district. Unfortunately, it doesn't have the modern kitchen you want with granite countertops and stainless steel appliances. Big deal! You can always update the kitchen later. Focus on the things you can't change, such as the location, lot size and layout of a home-and try to stay open-minded about the cosmetic features you can change, like paint colors, flooring and countertops.

Figure out if it fits your budget
Let's you stumble across the home of your dreams, but it's $75,000 over your budget. So, it may not be the perfect home for you after all.

If you've already been pre-approved for a certain loan amount, you'll know how much you can realistically afford. It's not wise to go too far over that loan amount unless you have a significant amount of money saved up for a down payment. Don't let your emotions get the best of you. Although you might fall in love with a home at first sight, you have to stay financially savvy. The worst thing you can possibly do is buy a home you can't truly afford.

Pinpoint the Perfect Neighborhood

Location, location, location! If you've heard it once, you've heard it a million times. When it comes to finding a home, location is quite possibly the most important feature.

Not to mention that deciding where you want to live is one of the quickest ways to narrow down your house search. If you're hoping to shorten your commute, look for homes within a five or ten-mile radius around your office. If you're more concerned with your child's education, search for homes in the best school district. Maybe you've had your eye on a certain desirable community for the past few years. Search for homes in that community and surrounding areas.

Here are some things to consider as you compare potential neighborhoods:

• Property values
• Crime rates
• Population statistics
• Quality of schools
• Traffic
• Future growth or construction
• Proximity to your office
• Distance to schools, shopping, public transportation or other important places
• Community recreation facilities, such as a pool, tennis courts, playground and clubhouse

Won't you be my neighbor?
So, maybe you can't afford to live in the wealthiest gated community or the highest-profile part of town. You can still narrow down your search to neighborhoods that most closely meet your needs but still fit your price range. Here are a few tips for finding the perfect community that you can realistically afford:

• Look for up-and-coming neighborhoods located in the most desirable areas.
• Don't discount great neighborhoods that are a little further out from the city.
• Ask your realtor for info on the most popular neighborhoods. If a lot of homes have recently sold in a certain community, this could be a good sign.
• If you can't afford a house in your favorite neighborhood, consider buying a condo instead.

Choose the Right Home Loan

Unless you plan to pay cash for your home, you'll need to score a mortgage to finance it. Of course, finding the perfect loan is easier said than done. With so many different loan options and countless lenders out there, shopping around for mortgages can be a confusing, stressful and frustrating process.

Here are a few steps you can take to make sure you land the perfect home loan:

Shop around
Take time to shop around and find the best possible interest rate and loan terms. You should talk to a minimum of three different lenders before you make your final decision. Do some online research and don't be afraid to call up lenders and ask lots of questions.

Ask for recommendations
Your friends, co-workers and family members may be able to recommend a good lender. Ask them if they are happy with their loan and their lender's customer service. Whatever you do, do not settle for the first company that offers you a loan. Find a trustworthy, reliable lender that is the best fit for you.

Weigh your options
Because there are numerous types of mortgage loans available to home buyers, choosing the right one can be challenging. Here are a few things to keep in mind as you consider your options:

1. Fixed-rate vs. adjustable rate: A fixed-rate mortgage has an interest rate that locked in throughout the life of the loan (usually 15 to 30 years.) On the other hand, an adjustable rate mortgage (or ARM) has interest rates that vary over the life of the loan. With an ARM, your interest rates can change every six to 12 months or even monthly. Typically, an ARM's interest rates are tied to an economic index, such as the national mortgage rate. When rates are high, your rate will increase. When rates are low, your rate will drop.

   If mortgage rates are extremely low when you're buying a home, you should probably choose a fixed rate loan. That way, your rate will be locked in at this low level for the life of your loan. On the other hand, if interest rates are very high and you think they will decrease soon, you may consider an ARM. However, this is an extremely complicated decision, so you may want to discuss your options with your real estate agent or a financial advisor.



2. Rate lock-ins: If you expect interest rates to rise in the near future, you should ask your lender for a mortgage rate lock-in when you apply for the loan. This ensures that the rate the lender offers you will stay the same for certain period of time (usually 30 to 60 days.) That way, if you buy a home within the next month or two, you'll be guaranteed the same mortgage rates that are available today. Once you lock in your rate, ask your lender for a contract or statement including your interest rate and the amount of time the rate will stay the same.


3. Closing costs: There are countless fees and closing costs associated with mortgage loans. These fees can add up quickly and easily push you over budget. Make sure your lender provides you with a Good Faith Estimate, and take time to read all the fine print. Ask plenty of questions about any fees you don't understand or consult an attorney for further explanation.


4. PMI: You are required to pay Private Mortgage Insurance (PMI) if your down payment on a home is less than 20 percent of the total purchase price. PMI is a type of insurance that protects the lender against the risk of your default-which is what happens if you can no longer make your monthly mortgage payments. Although the cost of PMI varies depending on your mortgage company, premiums typically run about 0.5 percent of the loan amount for the first year of the loan. PMI premiums usually decrease after the first year.


5. VA Loans: the Department of Veterans Affairs (VA) offers a loan program that allows buyers who are veterans to receive a legitimate no down payment loan. Through this valuable loan program, veterans can get a no-down loan and still avoid paying PMI. If you think you might be eligible for a VA Loan, talk to a mortgage broker or VA Loan Specialist. You can also call the U.S. Department of Veterans Affairs directly at (800) 827-1000 or visit homeloans.va.gov

Get pre-approved
Once you find the perfect lender, go through the preapproval process with them before you start your house search. When you get pre-approved, you won't be tempted to buy a house you can't realistically afford. Plus, when you're ready to make an offer, preapproval also gives you stronger negotiating leverage. If a seller knows you've already been approved for a loan, they'll be more likely to take your offer seriously.

This is War! How to Win a Bidding Battle

Making an offer on your dream home can be confusing, stressful and downright terrifying-especially if you find yourself in the middle bidding war. A bidding war is what happens when a seller receives multiple offers on their home. These types of battles are much more common in a seller's market when demand for homes is high and supply is limited.

Many buyers will tell you that there's nothing worse than getting caught up in a bidding war over a home. Not only can multiple offers drive up the house price, but you could end up losing your dream home to another buyer.

If you find yourself stuck in the middle of one of these much-dreaded bidding wars, here are a few things to keep in mind:

Offer as much as you can afford
If you think the house of your dreams may attract multiple offers, the last thing you want to do is make a low-ball offer. Offer the highest price you can afford the first-time around and you'll stand a much better chance of winning the bidding war.

Get pre-approved
A seller is more likely to take your offer seriously if they know you've been pre-approved for a loan. If you and another buyer without pre-approval make offers on the same home for close to the same amount, the seller is more likely to accept the offer from the pre-approved buyer. That's because they'll have peace of mind that the buyer's financing won't fall through down the road.

Provide down payment proof
Make the largest down payment you can afford, and provide documentation that proves you can afford to make that down payment. If your current home is under contract or in escrow, provide details to the seller.

Don't make your offer contingent on the sale of your home
If you plan to pay for the home with proceeds from the sale of your current home, don't make your offer contingent on selling your home. Instead, make your offer contingent on obtaining financing. If your current home doesn't sell, you won't be able to afford the down payment, so you'll get out of the contract under the financing contingency. However, an offer contingent on financing is much more attractive than one contingent on the sale of a home.

Write a note to the seller
Include a personal note in your offer explaining why you want to buy the home. People have emotional attachments to their homes, and appealing to those emotions could give you a leg up on other potential buyers.

Of course, even if you walk through all of these steps, there is still a chance you'll lose the house to another buyer. It can be extremely disappointing to lose a home you've been eyeing. Give yourself some time to "mourn" the loss, and then get back to house hunting as soon as possible. After all, another perfect house may be out there waiting for you.

Renting vs. Buying

If you're trying to decide whether you should buy a home or keep renting, you may want to keep this in mind: According to most financial experts, buying a home is the smartest financial decision you can make. In almost every situation, you'll get more bang for your buck if you buy instead of rent.

Unless your rent is extremely low or you plan to move in less than three years, buying is probably the best choice. Then again, home ownership isn't for everyone. A home is a massive responsibility that sometimes requires a lot of hard work…and that may be something you can't or aren't willing to take on at this point in time.

Here are a few more things you may want to consider as you make this tough decision:

Homeowners enjoy major tax breaks
These days, many Americans buy homes simply to save on their tax bills. After all, home owners enjoy some valuable tax benefits, from the mortgage interest deduction to property tax write-offs. As a matter of fact, you save taxes when you buy a home, you save taxes while you own your home and you save taxes when you sell your home. Talk about some serious savings!

Renters are more mobile
If you tend to change jobs or move around a lot, owning a home may not be for you. Renters can easily move from one place to the next because they don't have to worry about selling or buying a home. Therefore, if you plan to move within the next two years, you probably shouldn't buy a home.

Home mortgage payments don't change
If you lock in your monthly mortgage with a fixed rate loan, you'll take comfort knowing that your housing expenses will not skyrocket in the future. Renters rarely have that advantage because their monthly rent could increase at any time.

A home is smart investment
There are some valuable long-term benefits to owning a home. Depending on the real estate market, you could make a substantial profit on your home when you decide to sell. That's because the value of your home will likely increase over time.

Homes make you wealthier
A home allows you to accumulate wealth and boost your overall net worth. Studies show that there is a gigantic gap between the average net worth of home owners versus that of renters. According to the Federal Reserves' Survey of Consumer Finances, home owners with an annual income of $50,000 to $79,999 have an average net worth of $194,610. However, renters in that same income bracket have an average net worth of only $25,000. The numbers don't lie-homeowners are typically wealthier than renters.

Homes are a lot of work
Although it's nice to know that your home is all yours, it can also be a burden. When you own a home, you're responsible for handling all the repairs, taking care of the yard and keeping your property safe and well-maintained. If you rent, your landlord handles all of those tasks for you.

By the same token, when you own a home, you reap the rewards of your home improvements. You are in control. You have the power to decide which areas you want to improve, and you'll take pride as you transform your house into a home.

There are other costs involved
Of course, owning a home can be very expensive. Not only will you have to save up for a down payment on a home, but then you'll have to pay for closing costs, property taxes, home insurance and house repairs. However, depending on how much you're currently paying for rent, buying a home could still save you money in the long run-even with these expenses.

Talk to your financial advisor or a real estate professional to discuss the financial benefits of owning a home.

Home Loans 101

Unless you plan to pay cash, you'll need to obtain a loan to finance the purchase of your new home. A home loan, also known as a mortgage, is probably the largest amount of debt you'll ever take on in your lifetime.

Your mortgage is a legal contract and your home is the collateral. When you sign a mortgage, you're promising that you'll pay off the loan in monthly installments over a period of 15 to 30 years. If you don't make your monthly payments, the lender can take your home back and sell it to cover the debt. (This is known as foreclosure).

Your monthly mortgage payment will include principal, interest, taxes and insurance, also known as PITI. This is how PITI breaks down:

• Principal: This is the total amount of money you borrow from the lender to buy your home. The principal does not include the down payment you make on a home.


• Interest: This is the amount the lender charges you for the money you borrow. The amount of interest you pay is determined by the interest rate on your loan.


• Taxes: The tax portion of your mortgage payment includes property taxes charged by your community. The amount of property taxes you pay is based on a percentage of the value of your home. These taxes go to local schools, roads, infrastructure and other community costs.


• Insurance: Because your home is probably the single biggest investment you'll ever make, you'll want to take measures to safeguard that valuable investment. The best way to do that is with homeowners insurance. Most homeowners roll their insurance policy payments into their monthly mortgage payments.

Because there are countless mortgage loans available to home buyers, choosing the right one can be challenging. Take time to shop around and find the best possible interest rate and loan terms. You should talk to a minimum of three different lenders before you make your final decision. Ask your realtor, friends and family members if they can recommend a good lender.

Negotiate for the Best Price

Perhaps the most challenging part of buying a home is putting together a purchase agreement that makes both you and the seller happy. Therefore, when you decide to make an offer on your dream home, you'll have to tap into your negotiation skills.

Unfortunately, many home buyers have not perfected the art of negotiation. That's where your realtor can help. After all, real estate professionals are typically master negotiators. Here are a few tricks and tips you should keep in mind as you and your realtor work to turn that seller's "no" into a "yes":

Make a strong offer
Although you may be tempted to make a low-ball offer, it's important to be realistic. If your offer is too low, you may insult the sellers and reduce your chances of getting the home. Do some research, take a look at recent sales prices of other homes in the area and work with your realtor to come up with a fair figure.

Put yourself in their shoes
Try to put yourself in the seller's shoes and think about what their priorities might be. For example, maybe they want to make a certain amount of money on their home, but they're more flexible on other aspects of the agreement. If the seller seems unwilling to come down from their asking price, maybe they'll pay a portion of your closing costs, replace the carpet or leave behind their washer and dryer.

Split the difference
If you and the seller keep going back and forth over the closing date or who will pay a certain fee, split the difference. This is a great way to compromise and meet in the middle.

Don't try to win it all
Buying a home is all about compromise. It's rare that a buyer gets everything he wants out of the deal. That's why you shouldn't expect to win it all. Focus on your top priorities and be willing to compromise.

Ask for guidance
Your realtor has probably negotiated countless purchase agreements in her past-so tap into that vast experience! As your real estate agent for advice, guidance and suggestions about how you can turn that seller's no into a yes.

Who's the Home Buying Boss? YOU Are!

When it comes to buying a home, you're in charge. While you may feel stressed, frustrated and uncertain at times during the home buying process, it's important to remember that you are in control and you will ultimately make the final decision.

Your realtor can offer you priceless advice and invaluable guidance, but in the end you are the one who gets to make the decision about which home to buy. That's why it's so important to do your research, stay on your toes and keep your cool at all times.

Here are two ways to ensure you are the master of your home buying fate:

Stay informed at all times.
Although it's your realtor's job to educate and inform you about the home buying process, you should also do plenty of research on your own. Read up on real estate practices, look up mortgage terms and ask lots and lots of questions. If you do your homework and gain a true understanding of the home buying process, you'll be certain to make smart, well-educated decisions.

Take charge.
As you walk through the home buying process, you may feel like everyone else is more powerful than you. The lender has the power to decline your loan application, your agent has the power to influence your decisions, and the seller has the power to reject your offer. But in reality, you are the one in charge-so start acting like it! Think about it this way: if you suddenly decide you no longer want to buy a home, the entire process comes to an end. In other words, you're in the driver's seat. Everyone else, including your realtor, is working for you.

Buying a home can make you feel vulnerable and even helpless at times. But as soon as you realize that you're the boss, you'll take on whole new perspective. When you take charge, you'll gain peace of mind that ultimate decision will be yours.

Three Valuable Home Owner Tax Benefits

It's no secret that owning a home offers some valuable tax benefits. But did you know that when you buy a home, you'll ultimately save on taxes in three different ways? You'll save when you buy it. You'll save when you own it. And you'll save when you sell it.

Here's how the three major home owner tax benefits break down:

Save when you buy.
While most home buying expenses are not tax deductible, there are a few things some buyers can deduct. For example, most loan discount points and origination fees are tax deductible to the buyer, even if the seller paid for them. However, you have to deduct these fees the year you buy the house. Check your settlement statement or talk to your CPA to find out if you may be eligible for this deduction.

Additionally, if you are a first-time home buyer with an income below the median income level for your area, you may qualify for a mortgage interest tax credit through the Mortgage Credit Certificate (MCC) program. This credit was created to help lower income families afford home ownership. This tax credit offers qualified first-time home buyers a tax credit of up to 20 percent for the part of the home mortgage interest they pay. To be eligible for the credit, you must receive an MCC from your state or local housing department before you get a mortgage.

Save when you own.
When you make your monthly mortgage payment, the majority of your payment probably goes toward interest. Unless your home loans add up to more than $1 million, you can deduct every last cent of the interest you pay on your first and second home. Since most of your monthly payment is interest in the early years of your loan, this deduction adds up quickly. Depending on where you live and your tax bracket, this tax break could lower your borrowing costs by almost a third. You can also deduct mortgage interest you pay on up to $100,000 in home equity loans.

To top it off, you can deduct property taxes you pay while you own a home. When you purchase a home, your lender will most likely set up an escrow account, which is basically a savings account. When you pay your monthly mortgage payment, a certain amount of your payment will be deposited into this account. When your property taxes come due, your lender will make the payment out of your escrow account, and you can deduct this amount from your annual tax return.

Save when you sell.
When you decide to sell your home, you'll save some serious taxes. Under the 1997 Taxpayer Relief Act passed, if you have owned and occupied your principal residence for at least two of the past five years, you can earn up to $250,000 on the sale of your house ($500,000 for married joint filers), and you won't have to pay federal income tax on your earnings.

The Purchase Agreement: Read the Fine Print

When you make an offer on a home, you may be so excited that you simply glance over the fine print in that purchase agreement. Don't make this mistake. Even if the seller is happy with the amount you offer, but they counter with a few "minor" changes to the purchase agreement, it's important to review every single word before you accept.

It can be difficult to understand all the complex lingo and jargon used in a real estate purchase contract. Ask your realtor to walk you through each term and condition, step by step, to make sure you understand what you're signing.

Here are five of the most important details that are often included in a purchase agreement:

Cutoff dates
Pay close attention to the cutoff dates for inspections and approvals of inspection reports. The seller may try to rush you through this process, but you'll want to make sure you have ample time to hire a top-quality inspector who will thoroughly inspect the home.

Warranties
You should also check to see if the seller is offering any warranties on the condition of their home. For example, the seller may warrant that the roof, central heating or A/C are all in working order at the time of closing. If they do not make these representations, that means the home is being sold "as is."

Repair responsibilities
You may want to specify that the sellers will be responsible for making any necessary repairs that surface from the home inspection. Otherwise, the seller may not be required to fix these problems.

Home warranty plan
Look to see if someone will be purchasing a home warranty plan. A home warranty plan is a limited insurance policy that covers the basic major systems and appliances in a home.

The closing date
This is an extremely important date because this is the day the sale of the home will be official-and it's also the day you'll get to move in.

The Ins and Outs of an Offer

In this day and age, verbal home purchase agreements are simply not strong enough. Everything real estate-related should be put in writing, in the form of a legal contract. So if you're ready to make an offer on a home, it's time to get out the pen and get to work on that purchase agreement.

Your realtor probably has a standard purchase agreement on file, and he or she can walk you through the contract, step by step. Once you submit this offer, if the seller accepts it, it will become a binding sales contract. That's why it's important to make sure all the information is completely accurate.

Details, details
Here are just a few items you'll need to include in your offer or "purchase agreement":

• The address of the property you want to purchase
• The amount of money you want to offer
• The terms of your agreement (For example, it may be subject to you obtaining financing.)
• Target closing date
• Amount of earnest money (This is a deposit that you give when making an offer on a house to prove that you are a serious buyer. The amount varies depending on where you live. A realtor or an attorney usually holds the deposit, and if your offer is accepted, it will become part of your down payment.)
• A time limit on the seller's response (The seller must respond by this date or the offer will expire.)
• Contingencies (A contingency is a condition that must be met before a real estate contract is legally binding. For example, buyers typically include an inspection contingency in their purchase agreement, which means the contract is not binding until a qualified inspector provides an inspection report for the home.)

The seller's response
If the seller accepts and signs your offer as it stands, the offer will become a binding contract. If the seller rejects your offer, the deal is off.

If the seller likes you offer but wants to make some changes, they will send back a written counteroffer. This will include the changes they are requesting, which could include a higher purchase price, a different closing date or different terms. (Such as they will not leave the washer and dryer you requested in your offer.)

There is no limit to the number of counter offers that can be submitted back and forth between a buyer and a seller. Sometimes, this process can go on for weeks. However, when it comes to responding to offers or counter offers, time is of the essence. All of these offers have an expiration date, so you must respond before it expires if you want to continue negotiating with the seller.

Withdrawing your offer
Let's say just as you start negotiating with a seller, you have a change of heart. Maybe you come across a home you like even more, or maybe you've decided you simply are not ready to buy. In most cases, you can withdraw your offer as long as the seller has not accepted it. However, you should speak with a real estate attorney first to ensure you do not lose your deposit or end up getting sued by the seller for damages.

Making an offer on a home can be confusing, stressful and downright terrifying. However, with a knowledgeable real estate agent at your side, you can make a strong offer that will improve your chances of getting the home.

The Almighty Contract

If you're like most home buyers, you're probably hung up on the purchase price of your dream home. But don't forget about all the other details. After all, the purchase price isn't the only item that will affect your home buying budget. You should also pay close attention to the closing costs, the items the seller plans to leave behind and every other tiny detail.

Before you send in that offer, be sure take a look at the following contract items:

Transaction costs
Transaction costs typically include the broker's commission, the termite inspection, the home inspection, attorney's fees, transfer taxes, a title search, recording fees and more. So, who's going to cover these costs? If you're sending in a low-ball offer, you may want to offer to cover them. On the other hand, if you're offering close to asking price, you may consider asking the seller to cover all or the bulk of these costs. Remember-buying a home is all about negotiating. If you want to get a little, you have to give a little.

The down payment and earnest money
Earnest money is the deposit that you give when making an offer on a house as a sort of "good faith" measure. The amount of this deposit as well as the size of your down payment can have a major impact on your seller's response. If you offer a substantial down payment and large amount of earnest money, you'll prove that you are a serious buyer.

The leave-behinds
Also known as "real property," a fixture is anything of value that is permanently attached to or a part of real property that will remain in the home after the property is sold. This might include light fixtures, window coverings, carpet and landscaping features. Everything else is considered the seller's personal property. However, there is often confusion about which items will be left behind, especially when it comes to appliances like the refrigerator and the washer and dryer. Make sure to spell all of this out in the contract. You could also request that the seller leaves other items, such as a swing set, a pool table or an entertainment center.

Mortgage financing contingency
Unless you're planning to pay cash, you'll need to include a mortgage financing contingency. This means that you will only purchase the home if you can obtain financing. Without this contingency, you could end up legally obligated to buy the home even if you don't get approved for a loan.

Before you submit any offer, make sure that your realtor walks you through every detail of the contract so that you understand exactly what you are signing.

Take a Closer Look at Your Credit

If you're thinking about buying a home, it's time to take a peek at your credit score. Before you even start thinking about your house search, you'll want to order a credit report and see where you stand.

Why's my credit score so important?
For years, financial experts have preached to consumers about how important it is to have a great credit score. After all, when you have a good credit score, you're more likely to be approved for loans and score lower interest rates.

In this day and age, only those home buyers with the best credit scores are scoring the best rates on mortgages. On the other hand, consumers with bad scores are paying sky-high interest rates-if they can even get approved for a home loan.

What is included in my credit report?
Your credit report includes information about your financial history, such as:

• Account payment and history from credit card companies
• Car loan information
• Mortgage information
• Requests from companies to look at your credit report. (Companies can view your credit report without your consent. If you have applied for credit, the company will look at your credit report.)

Your credit report only includes information gathered from lenders and other companies-not individuals. Therefore, if you borrowed money from a friend or family member to buy a car, that data will not be included in your credit report.

If you notice any errors on your credit report, be sure to notify the major credit bureaus and ask them to make corrections.

Give your score a boost
Your credit score will determine whether or not you get approved for a loan and what kind of interest rate you receive. Most lenders require a credit score of at least 720 before they'll offer you a home loan. If your score is any lower than that, it's time to give it a boost. The fastest way to do that is to pay down your credit card debt and follow these rules:

• Pay your bills on time each month
• Keep balances low on credit cards
• Don't apply for more credit cards than you need
• If your credit card company increases your line of credit and you don't need it, ask them to reduce it
• Avoid applying for a car loan, credit card or any other major loans until after you have purchased the home.

How to I order a credit report?
Under the federal Fair Credit Reporting Act, each of the major credit bureaus is required to provide you with a free copy of your credit report once a year. To order your free annual reports, visit Equifax at www.equifax.com or call 800-997-2493; visit TransUnion at www.transunion.com or call 800-888-4213; and visit Experian at www.experian.com or call 888-397-3742.

Use Your Heart AND Your Head to Find the Perfect Home

So, you've finally found the perfect home, and it's love at first sight. But wait! Is this really the right home for you? Does it meet all of your requirements?

While it's a great feeling to make an emotional connection with a home, don't let your emotions completely take over. It's important to use your heart and your head to decide if this is the right home for you. Before you dive in and send in an offer on that home, ask yourself these questions:

Is the price right?
Your lender may say that you can afford it, but you may want to crunch the numbers again. Can you really afford that monthly mortgage payment? Do you have enough cash to make a down payment and cover closing costs and moving expenses? Will you need extra funds to renovate or redecorate your home? Make sure the price is right before you mentally move in.

Is the home the right size?
Think back to when you made that list of requirements for your home. If you originally said you needed four bedrooms, can you really settle for just three? Is 1500 square feet really enough space for your growing family? Is the family room big enough for your entertainment center and furniture?

Is the house in good condition?
It may be in the perfect part of town, but is it in good condition? Can you really afford to buy a new roof or upgrade the electrical system? Is it a fixer upper with lots of potential or could it potentially be a money pit?

Are the extra features worth the hassle?
So, you've fallen in love with a home that has a pool and fish pond, but are you really ready to take care of these high maintenance items? Again, go back to your original list of requirements. If a swimming pool wasn't on your original list, maybe you don't really need one.

Even if you fall head over heels in love with a home, take some time to think things through before you jump into a long-term relationship. After all, buying a home takes a lot of heart and plenty of brains, too.

Work with a Certified REALTOR®

If you're ready to buy a home, you'll want to find the most qualified real estate agent who will help you find the perfect property. Here are a few tips to help you find your match.

Look for a Realtor®
Believe it or not the words "agent" and "realtor" are not interchangeable. A real estate agent is licensed in the state where they work. Licensed agents are required to meet certain education and experience standards.

However, a Realtor is a step up from an agent. After they receive their real estate license, most agents join their local board or association of REALTORS® and the NATIONAL ASSOCIATION OF REALTORS®. Only then can they use the title, REALTOR®. Real estate professionals who are REALTORS must adhere to a strict code of ethics which oftentimes surpasses state laws. Also, many REALTORS have achieved a higher degree of training and experience than a typical agent.

Ask for recommendations
Ask your friends, family members and colleagues if they can recommend an excellent realtor. However, be sure to ask them if they would work with the agent again. If the answer is yes, then you may have found your partner. You may also want to call a few highly regarded real estate firms and ask if they can recommend realtors who work in your area.

Conduct some interviews
Talk to a few different realtors and ask questions about their background. Here are some questions you might want to ask:

• Are you a REALTOR®?
• Do you have an active real estate license in good standing?
• Are you a full-time real estate agent or is this a second career?
• Who will you be representing? Me or the seller? (The agent should explain the definition of agency in your state so you understand your rights.)
• How can you help me accomplish my home buying goals?
• How much home do you think I can afford?

Find the right fit
After you have interviewed a few agents, choose the pro that seems like the best fit for you. Be sure to choose an agent who is experienced, honest, hard-working and knows the area extremely well.

Fixed-Rate vs. Adjustable-Rate Mortgages

If you're planning on buying a home, but don't have hundreds of thousands of dollars in cash on-hand, you'll probably need to get a home loan. When you start shopping around for loans, you'll quickly realize that there are primarily two types of home loans: fixed-rate mortgages and adjustable-rate mortgages (ARMs).

But how do you know which kind of home loan is the ideal option for you? Read on to learn more about these two different types of loans and which one will best meet your needs:

Fixed-rate mortgage
A fixed-rate mortgage has an interest rate that locked in throughout the life of the loan (usually 15 to 30 years.) With this type of mortgage, if interest rates rise, your mortgage rate will not rise along with them.

Adjustable-rate mortgage (ARM)
An adjustable rate mortgage (or ARM) has interest rates that vary over the life of the loan. With an ARM, your interest rates can change every six to 12 months or even monthly. Typically, an ARM's interest rates are tied to an economic index, such as the national mortgage rate. When rates are high, your rate will increase, too. When rates are fall, your rate will also drop.

What's the best choice?
If mortgage rates are extremely low when you're buying a home, you should probably choose a fixed rate loan. That way, your rate will be locked in at this low level for the life of your loan.

On the other hand, if interest rates are very high and you think they will decrease soon, you may consider an ARM. An ARM may also be a good choice for a homebuyer who expects their income to rise over the life of the loan.

However, this is an extremely complicated decision, so you may want to discuss your options with your real estate agent or financial advisor.

Understanding Escrow

You've probably heard people say that a home is "in escrow." But what exactly does that mean? When a home buyer and seller sign a real estate purchase agreement and a receipt of deposit, the home is officially in escrow. At this time, the buyer's lender will release the funds necessary for the purchase of the home.

Before the actual transfer of property from seller to buyer, the buyer's funds are deposited into an escrow account, which is monitored by a third party. Once all of the contractual obligations have been met (such as the home inspection), the money is deposited into the seller's account.

Who is the escrow officer?
The neutral third party can be an escrow officer from an escrow company, a title company representative, an escrow attorney or any number of other professionals. Depending on your unique situation, either you (the buyer) or the seller will be able to choose the escrow officer.

If you have the opportunity to choose your escrow officer, ask your friends, colleagues and realtor for referrals. Compare each escrow officer's price and quality of service and make sure that you choose a trustworthy professional.

How does the process work?
Once you have chosen an escrow officer, he or she will begin the process by assigning your escrow an account number and collecting all the necessary paperwork, including the contract, the buyer's deposit and other important documents. Your deposit will eventually be applied to the purchase price of the home if and when the deal is completed. If the purchase falls through, the escrow officer will return to your deposit to you.

At this time, you may choose to order title insurance to protect yourself against errors on the title of the home. You'll also need to order a preliminary title search to makes sure there are no claims against the title.

Once all of the contingencies in the purchase agreement have been met (such as financing, home insurance, inspections and repairs), the escrow process comes to an end. Escrow officially closes when the escrow office records a new deed in the buyer's name, the seller receives the money for their home, and all other money is distributed to the proper hands. At this time, you and the seller are ready for the house closing.

How much does it cost?
Escrow fees generally add up to about 1 to 2% of the home's purchase price. Depending on the customs of your particular area and current real estate market conditions, either the buyer or seller will be responsible for covering these costs.

Escrow transactions can be complicated and confusing, and the process varies between each real estate deal. Depending on where you live, you'll probably follow a different set of escrow procedures. However, your realtor can guide you through this complex process and ensure you take all the proper steps.

Ten Advantages to Using a REALTOR

A home is the largest purchase most consumers will ever make. Because this is such an important, life-altering decision, you shouldn't try to make this journey alone. If you want to land your dream home, work with an experienced professional who can guide you through home buying process, every step of the way.

After they receive their real estate license, most agents join their local board or association of REALTORS® and the NATIONAL ASSOCIATION OF REALTORS®. Only then can they use the title, REALTOR®. Real estate professionals who are REALTORS must adhere to a strict code of ethics which oftentimes surpasses state laws. Also, many REALTORS have achieved a higher degree of training and experience than a typical agent.

Here are just ten of the countless benefits a REALTOR has to offer:

1. Realtors are educated and experienced. Real estate transactions are complicated, confusing and often frustrating. If you're working with a pro, you won't have to know all the ins and outs of the real estate business. They'll handle all the complex details for you.
2. They have insider info. A real estate pro often finds out about home listings before the general public knows. Plus, a realtor can give you insider information on neighborhoods and other area statistics.
3. They are master negotiators. Because real estate pros are skilled at the art of negotiation, they will be able to negotiate the best price for you.
4. They handle all the paperwork. A purchase agreement can be 10 pages or longer, and that does not include the disclosures. One tiny mistake could cost you thousands of dollars or even land you in court. A real estate agent can handle all of this confusing paperwork for you, and they'll make sure all the information is absolutely accurate.
5. They can help you figure out how much home you can afford. Your realtor can help you determine your buying power based on your savings and income
6. They can refer you to a great lender. Your realtor can refer you to lenders that are most qualified to help you.
7. They can help you make the right choice. Your realtor can provide you with enough information about each property so that you can make an informed decision.
8. They can guide you, every step of the way. You realtor can guide you through the home search, the offer and closing, step by step.
9. They can show you only the homes that meet your needs. Your realtor will show you only those listings that meet your home requirements, including size, style, features, location and other personal preferences.
10. They can educate you about local facts. Your realtor is familiar with current real estate values, taxes, utility costs, municipal services and facilities, and he or she can share this information with you.