Whether you are a first-time homebuyer or entering the marketplace as a repeat buyer, you need to ask why you want to buy. Are you planning to move to a new community due to a lifestyle change or is buying an option and not a requirement? What would you like in terms of real estate that you do not now have? Do you have a purchasing timeframe?

Homes and financing are closely intertwined. (Financing is the difference between the purchase price and the down payment, commonly referred to as debt or the mortgage.) The good news is that over the years new and innovative loan programs have evolved which require a 5 percent down payment or less. In fact, a number of programs now allow purchasers to buy real estate with nothing down.

In addition to a down payment, purchasers also need cash for closing costs (the final costs associated with closing the loan). Several newly emerging loan programs not only allow the purchase of a home with no money down, but also underwrite closing costs.

As to closing costs, in markets where buyers have leverage, it may be possible to negotiate an offer for a home that requires the owner to pay some or all of your settlement expenses.

Those great loans with little or nothing down are not available to everyone: You need good credit. For at least one year prior to purchasing a home, you should assure that every credit card bill, rent check, car payment and other debt is paid in full and on time.

Did you know as a buyer’s agent, we work for you for free! That’s right, you don’t pay us a commission. The seller pays our commission. When you list your house, you will pay a commission on it, and it is typically split between the listing agent and the selling agent.

• We can help you determine how much home you can afford. Often a REALTOR® can suggest ways to accrue the down payment and explain alternative financing methods.
• We, in addition to knowing the local money market, also can tell you what personal and financial data to bring with you when you apply for a loan.
• We are already familiar with current real estate values, taxes, utility costs, municipal services and facilities, and may be aware of local zoning changes that could affect your decision to buy.
• We can research your housing needs in advance through a Multiple Listing Service--even if you are relocating from another city.
• We can show you only those homes best suited to your needs--size, style, features, location, accessibility to schools, transportation, shopping and other personal preferences.
• We often can suggest simple, imaginative changes that make a home more suitable for you and improve its utility and value.

A REALTOR® is sensitive to the importance you place on this major commitment you are about to make. Look for a real estate professional to facilitate negotiation of a win-win agreement that will satisfy both you and the seller.

One of the best ways to determine your budget is to have a mortgage lender prequalify you for a loan. Prequalification is different from preapproval, because it is only an estimate of what you'll be able to afford. On the other hand, preapproval is a more formal process where a lender examines your finances and agrees in advance to loan you money up to a specified amount.
The loan officer will carefully review your financial situation, including your credit report and other information. The lender will then suggest programs which most-closely meet your needs. For instance, a first-time buyer may qualify for state-backed mortgage programs with little money down and low interest rates, while a repeat purchaser (someone who has bought a home before) with more equity (money invested in the home) might want to get a 15-year loan and the lower overall interest costs it represents. Typically, first-time buyers opt for the traditional 30-year loan, with either a floating interest rate or a fixed rate of interest over the life of the loan.

Determine your wants and needs.Your goal is to find the right home for your family without falling in love with one that doesn't suit your needs.
Location is crucial. How far are you really willing to commute to your place of employment? How close are you to the areas you will go for entertainment? Will your new home be next to a vacant lot or a commercial property? Even a picture-perfect dream home can be a mistake if it's in an undesirable location, and a poor-location home can be a particularly bad choice if you anticipate reselling the home within a few years.

There's no doubt that choosing a home is a big decision and you want to do it right.
As a buyer, here's what actually happens. A home has been placed on the market for which the seller has established an asking price as well as other terms. In effect, this is an offer. At this point, you have three choices: accept the seller's offer and create a contract; reject it and not make an offer; or suggest different terms and make a counter-offer. If you choose this last option, the seller may accept, reject or make a counter-offer.
No aspect of the homebuying process is more complex, personal or variable than bargaining between buyers and sellers. This is the point where the value of an experienced REALTOR® is clearly evident because he or she knows the community, has seen numerous homes for sale, knows local values and has spent years negotiating realty transactions.
Can you really afford it?

Remember Step 2 - the preapproval process? Getting preapproved means you have a very good idea of how much you can borrow, what loan programs will most likely work best in your situation and how much home you can afford.
How reliable is a preapproval? While preapproval is not a loan commitment, it's still necessary for lenders to check such items as appraisals and the latest credit reports. Despite fluctuating interest rates, preapproval nonetheless provides a reasoned, careful analysis of what you can afford. After all, loan officers are routinely paid only when loans are originated. It doesn't make much sense for loan officers to suggest high loan limits that later can't be delivered.

Often the cost of real estate financing is routinely greater than the original purchase price of a home (after including interest and closing costs). Because financing is so important, buyers should have as much information as possible regarding mortgage options and costs.

With a variety of different loan programs available, it is important to choose th type of loan that will best suit the buyer’s needs. The determining factors are the length of time the borrower plans to stay in the house and the amount of monthly payment that is affordable.
If the borrower plans to stay in the house for less than 5-7 years, it is reasonable to consider an adjustable rate, balloon, or two-step mortgage. For example, ARMs traditionally offer lower interest rates than fixed-rate loans during the early years of the loan, a two-step mortgage offers a lower interest rate than a thirty-year mortgage for the first 5-7 years, and a balloon mortgage offers lower interest rates for shorter term financing, usually 5-7 years. Low interest rates make it easier to qualify for these types of mortgages. However, borrowers should not accept an ARM unless they can afford the maximum monthly payment.
The borrower makes monthly payments of interest-only for a fixed period of time, usually 5-7 years. After the end of the term, the borrower must pay the balance in a lump sum or start paying off the loan, in which case the payments increase dramatically. An interest-only mortgage might be a good fit for borrowers who have income in the form of infrequent commissions or bonuses, expect a significant increase in earning in future years, or plan to invest the savings between an interest-only and an amortizing mortgage, and are confident that the investments will make money.
A temporary buydown offers an initial discounted interest rate which gradually increases to an agreed-upon interest rate, usually within 1-3 years. This initial discounted rate allows the borrower to qualify for “more houses.” It provides the advantage of low initial monthly payments for the first years of the loan, when extra money may be needed for furnishings or home improvements. Monthly payments can be reduced during the first few years of a mortgage by making an initial lump sum payment. If the borrower does not have the cash to pay for the buydown, the lender may pay this fee if the borrower agrees to a somewhat higher interest rate. The 2-1 buydown is a very popular loan product. For example, if the interest rate on the note is 8% with a 2-1 buydown mortgage, the initial discounted rate is 6% with a 6% interest rate for the first year, 7% for the second year, and 8% afterwards. A buydown may be used to qualify a borrower who would otherwise not qualify because it results in lower payments.
Graduated payment mortgages offer low initial payments that gradually increase at predetermined times. Low initial payments allow the borrower to qualify for a larger loan amount. The monthly payments will eventually be higher in order to catch up from the lower initial payments. In fact, there will be negative amortization during the early years of the loan, the mortgage is paid off at an accelerated pace during the later years of the loan. Lenders offer a variety of GPM payment plans, with variations in the rate of payment increases and the number of years over which the payments will increase. The greater the rate of increase or the longer the period of increase, the lower the mortgage payments in the early years.
Adjustable rate mortgages (ARMs) have soared in popularity. In 2003, ARMs accounted for as little as 0.5% of all mortgages written, but in the first five months of 2005 alone, accounted for 12.3% or mortgages. Legitimate lenders counsel the borrower on the pros and cons of an ARM. A predatory lender, on the other hand, will often state that continued increases in home equity will offset the loan-to-value ratio.
Some ARMs provide an option to convert to a fixed-rate mortgage at designated times, usually during the first 5 years on the adjustment date, an action the borrower can take if interest rates start rising. The new rate is established at the current market rate for fixed-rate mortgages. There is usually a nominal fee buy little paper work is required. The disadvantage is that the conversion interest rate is typically higher than the market rate at that time. Another type of convertible mortgage is a fixed rate loan with rate reduction option. If rates have dropped since the time of closing, it allows the borrower, under some prescribed conditions and for a small conversion fee, to adjust the mortgage to current market rates. However, the interest rate or discount points may be somewhat higher.
A fixed-period ARM starts out with 3-10 years of fixed payments. At the end of the fixed period, the interest rate will adjust annually. Fixed-period ARMs are generally tied to one-year Treasury Securities Index. Arms with an initial fixed period and lifetime and adjustment caps usually also have a first adjustment cap. The advantage of this type of loan is that the interest rate is lower than a 30-year fixed-rate mortgage. Because the lender is not “locked in” for a long time period, the risk is lower, and consequently a lower rate can be changed. The borrower benefits from a fixed rate for a period of time.
Two-step mortgages offer a fixed rate for a time period, usually 5-7 years, after which the interest rate changes to a current market rate. After this one-time adjustment, the mortgage maintains the new fixed rate for the remaining life of the loan.
Option ARM loan programs are targeted to those with variable incomes, such as the self-employed and those who receive large year-end bonuses, because they allow adjustment of monthly payments. Unfortunately, buyers also use option ARMs to buy “more house” than they could otherwise afford; in these circumstances, borrowers can default if interest rates rise.

You sometimes hear that the amount of your offer should be x percent below the seller's asking price or y percent less than you're really willing to pay. In practice, the offer depends on the basic laws of supply and demand: If many buyers are competing for homes, then sellers will likely get full-price offers and sometimes even more. If demand is weak, then offers below the asking price may be in order.
The process of making offers varies around the country. In a typical situation, you will complete an offer that the REALTOR® will present to the owner and the owner's representative. The owner, in turn, may accept the offer, reject it or make a counter-offer.
Because counter-offers are common (any change in an offer can be considered a "counter-offer"), it's important for buyers to remain in close contact with REALTORS® during the negotiation process so that any proposed changes can be quickly reviewed.
A number of inspections are common in residential realty transactions. They include checks for termites, surveys to determine boundaries, appraisals to determine value for lenders, title reviews and structural inspections.

No one would drive a car without insurance, so it figures that no homeowner should be without insurance. The essential idea behind various forms of real estate insurance is to protect owners in the event of catastrophe. If something goes wrong, insurance can be the bargain of a lifetime.
There are various forms of insurance associated with home ownership, including these major types: Title insurance: Purchased with a one-time fee at closing, title insurance protects owners in the event that title to the property is found to be invalid. Coverage includes "lenders" policies, which protect buyers up to the mortgage value of the property, and "owners" coverage, which protects owners up to the purchase price. In other words, "owners" coverage protects both the mortgage amount and the value of the down payment.
Homeowners' insurance provides fire, theft and liability coverage. Homeowners' policies are required by lenders and often cover a surprising number of items, including in some cases such property as wedding rings, furniture and home office equipment.
Flood insurance: Generally required in high-risk flood-prone areas, this insurance is issued by the federal government and provides as much as $250,000 in coverage for a single-family home plus $100,000 for contents. Local REALTORS® can explain which locations require such coverage.
Home warranties With new homes, buyers want assurance that if something goes wrong after completion the builder will be there to make repairs. But what if the builder refuses to do the work or goes out of business? Home warranties bought from third parties by home builders are generally designed to provide several forms of protection: workmanship for the first year, mechanical problems such as plumbing and wiring for the first two years, and structural defects for up to 10 years.
Home warranties for existing homes are typically one-year service agreements purchased by sellers. In the event of a covered defect or breakdown, the warranty firm will step in and make the repair or cover its cost.

In practice, closings bring together a variety of parties who are part of the "transaction" process. For example, while the history of property ownership has been checked, it's possible that the records contain errors, unrecorded claims or flaws in the review itself, thus title insurance is necessary. At closing, transfer taxes must be paid and other claims must also be settled (including closing costs, legal fees and adjustments). In most transactions, the closing agent also completes the paperwork needed to record the loan.

Settlement is a brief process where all of the necessary paperwork needed to complete the transaction is signed. Closing is typically held in an office setting, sometimes with both buyer and seller at the same table, sometimes with each party completing their papers separately.
Whatever the case, the result is that title to the property is transferred from seller to buyer. The buyer receives the keys and the seller receives payment for the home. From the amount credited to the seller, the closing agent subtracts money to pay off the existing mortgage and other transaction costs. Deeds, loan papers, and other documents are prepared, signed and filed with local property record offices.
One of the best parts of settlement is that buyers and sellers need to do very little.
Before closing, buyers typically have a final opportunity to walk through the property to assure that its condition has not materially changed since the sale agreement was signed. At closing itself, all papers have been prepared by closing agents, title companies, lenders and lawyers. This paperwork reflects the sale agreement and allows all parties to the transaction to verify their interests. For instance, buyers get the title to the property, lenders have their loans recorded in the public records and state governments collect their transfer taxes.

You've done it. You've looked at properties, made an offer, obtained financing and gone to closing. The home is yours. Is there any more to the homebuying process?
Whether you're a first-time buyer or a repeat buyer, there are several more steps you'll want to take. Those papers you received at settlement are extremely valuable, so hold on to them! In the short-term they can help establish tax deductions for the year in which the property was purchased. In the future, such papers will be important for tax purposes when the property is sold, and in some cases, for calculating estate taxes.
Also at closing, determine the status of the utilities required by the home, items such as water, sewage, gas, electric and oil service. You want utility bills to be paid in full by owners as of closing and you also want services transferred to your name for billing. Usually such transfers can be done without turning off utilities. REALTORS® can provide contact numbers and related information.
About two weeks after closing, contact your local property records office and confirm that your deed has been officially recorded. Such records are public notices that show your interest in the property.

It is generally understood that sellers will leave homes "broom clean" when moving out. This expression does not mean "vacuumed" or "spotless." Broom clean makes sense because it means the house is ready to be painted and cleaned. Your home, your money
For most owners a home is the largest single asset they hold, so it makes sense to protect that asset.
Many owners make a photo or video record of the home and their possessions for insurance purposes and then keep the records in a safety deposit box. Your insurance provider can recommend what to photograph and how to secure it.
You want to maintain fire, theft and liability insurance. As the value of your property increases such coverage should also rise. Again, speak with your insurance professional for details.
Lastly, enjoy your home. Owning real estate involves contracts, loans, and taxes, but ultimately what's most important is that homeownership should be a wonderful experience. Enjoy!