The Home Buyer's Answer Book: Practical Answers to More Than 250 Top Questions on Buying a Home

306 Pages·2008·1.26 MB·English

by  Diana Brodman Summers

Q
What is a credit rating and how does it aff ect my buying a home? How can
H
HOME
I decide what price range of homes I should be looking at? What types of
O
loans are available? What happens at the closing?
TTHHEE
M
& For most people, a home purchase is the largest purchase they will
make during their lives. The Home Buyer’s Answer Book answers the
A E
most important questions someone buying a home needs answered
BUYER’S
before signing a contract and off ers you insider tips, strategies and B
insights that are critical for anyone buying a home. The Home Buyer’s
U
Answer Book is an authoritative reference for you, providing sound
Y
advice and immediate answers to your most pressing questions.
E
Written by an attorney, The Home Buyer’s Answer Book answers your R ANSWERBOOK
TTMM
most important questions including:
’
S
A How can I qualify for a mortgage How can I select the best real
(cid:2) (cid:2)
N even if I have a low credit score? estate agent for my needs?
A
S
(cid:2) H ow large of a down payment do (cid:2) Do I need a lawyer to handle my N
W
I need to get a mortgage and buy real estate transaction? S More Than 250
Practical Answers to
E the home I want ? (cid:2) How can I fi nd out if the house I W
R
Will I be able to fi nd an want has any serious problems,
(cid:2) Top Questions on Buying a Home
B E
environmentally-responsible and how can I get them fi xed
R
O
home to purchase? before I buy the house?
B
O
K Written in an easy-to-read, question and answer format, The Home Buyer’s Answer Book O (cid:2)(cid:2)(cid:2) CCChhoose tthhe rriighhtt hhome
helps you understand how to successfully buy a home. O for you and your family
TM
Real Estate/Legal Reference K
Diana Brodman Summers received her law $16.95 U.S./ $20.50 CAN/ £9.99 UK (cid:2) Select the best real estate
ISBN-13: 978-1-57248-653-9
degree from DePaul University College of ISBN-10: 1-57248-653-8 TM professional for you
Law in Chicago, Illinois. She is an arbitrator
for the Cook County and DuPage County N (cid:2) Understand the legal and
A
E
mandatory arbitration programs, and is tax implications
an active member of the Association of
Trial Lawyers of America, the American C (cid:2) Successfully fi nance your
P
U
Bar Association, and the Illinois State Bar
home purchase
Association. She currently maintains a law
Summers
Sphinx Publishing
practice in Lisle, Illinois, a suburb of Chicago. ®
An Imprint of Sourcebooks, Inc.®
Naperville, Illinois
www.SphinxLegal.com
DIANA BRODMAN SUMMERS, ATTORNEY AT LAW
The Home Buyer’s 218.qxd 1/17/08 12:53 PM Page i
HHOOMMEE
THE
BBUUYYEERR’’SS
ANSWERBOOK
TM
PPrraaccttiiccaall AAnnsswweerrss ttoo
MMoorree TThhaann 225500 TToopp QQuueessttiioonnss
oonn BBuuyyiinngg aa HHoommee
D B S
IANA RODMAN UMMERS
S P
PHINX® UBLISHING
ANIMPRINTOFSOURCEBOOKS, INC.®
NAPERVILLE, ILLINOIS
www.SphinxLegal.com
The Home Buyer’s 218.qxd 1/17/08 12:53 PM Page ii
Copyright © 2008 by Diana Brodman Summers
Cover and internal design © 2008 by Sourcebooks,Inc.
Cover photo © iStock
All rights reserved.No part of this book may be reproduced in any form or by any electronic
or mechanical means including information storage and retrieval systems—except in the case
of brief quotations embodied in critical articles or reviews—without permission in writing from
its publisher,Sourcebooks,Inc.®Purchasers of the book are granted license to use the forms
contained herein for their own personal use.No claim of copyright is made to any government
form reproduced herein.All brand names and product names used in this book are trademarks,
registered trademarks, or trade names of their respective holders. Sourcebooks and the
colophon are registered trademarks of Sourcebooks,Inc.®
First Edition:2008
Published by:Sphinx®Publishing,An Imprint of Sourcebooks,Inc.®
Naperville Office
P.O.Box 4410
Naperville,Illinois 60567-4410
630-961-3900
Fax:[phone]
www.sourcebooks.com
www.SphinxLegal.com
This publication is designed to provide accurate and authoritative information in regard to
the subject matter covered.It is sold with the understanding that the publisher is not
engaged in rendering legal,accounting,or other professional service.If legal advice or other
expert assistance is required,the services of a competent professional person should be
sought.
From a Declaration of Principles Jointly Adopted by a Committee of the
American Bar Association and a Committee of Publishers and Associations
This product is not a substitute for legal advice.
Disclaimer required by Texas statutes
Library of Congress Cataloging-in-Publication Data
Summers,Diana Brodman.
Home buyer's answer book:practical answers to more than 250 top questions on buying a home
/ by Diana Brodman Summers.-- 1st ed.
p.cm.
ISBN 978-1-57248-763-5 (pbk.:alk.paper) 1. House buying--United States.2. Residential real
estate--Purchasing--United States. I.Title.
HD259.S857 2008
643'.12--dc22
2007050720
Printed and bound in the United States of America.
BG 10 9 8 7 6 5 4 3 2 1
The Home Buyer’s 218.qxd 1/17/08 12:53 PM Page iii
Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .v
Housing Market Basics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .ix
Step One:Get Your Finances in Order . . . . . . . . . . . . . . . . . . . . .1
Chapter 1:Check Your Credit Rating . . . . . . . . . . . . . . . . . .3
Chapter 2:My Credit Report . . . . . . . . . . . . . . . . . . . . . . . .9
Chapter 3:Fix Errors on Your Credit Report . . . . . . . . . . . .17
Chapter 4:Working to Get a Good Credit Rating . . . . . . . .23
Chapter 5:Calculate What You Can Afford . . . . . . . . . . . . .31
Step Two:Look for Your Perfect Home . . . . . . . . . . . . . . . . . . .37
Chapter 6:Select a Neighborhood . . . . . . . . . . . . . . . . . . . .39
Chapter 7:What Do I Need and Want in a Home . . . . . . . .53
Chapter 8:Building a Home and Teardowns . . . . . . . . . . . .59
Chapter 9:Going Green . . . . . . . . . . . . . . . . . . . . . . . . . . . .71
Chapter 10:Real Estate Professionals . . . . . . . . . . . . . . . . . .81
Chapter 11:Viewing Houses on the Market . . . . . . . . . . . . .89
Step Three:Obtain Financing . . . . . . . . . . . . . . . . . . . . . . . . . . .99
Chapter 12:Mortgage Basics . . . . . . . . . . . . . . . . . . . . . . .101
Chapter 13:My Mortgage . . . . . . . . . . . . . . . . . . . . . . . . . .113
Chapter 14:Alternative Sources of Money . . . . . . . . . . . . .123
Chapter 15:HUD,FHA,and VA . . . . . . . . . . . . . . . . . . . .133
Chapter 16:Subprime Mortgages,Predatory Lending,
and Mortgage Fraud . . . . . . . . . . . . . . . . . . . .141
The Home Buyer’s 218.qxd 1/17/08 12:53 PM Page iv
iv The Home Buyer’s Answer Book
Step Four:Make an Offer to Buy . . . . . . . . . . . . . . . . . . . . . . .149
Chapter 17:The Offer and Sales Contract . . . . . . . . . . . . .151
Chapter 18:Inspections,Surveys,Appraisals,
and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .163
Chapter 19:The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . .173
Step Five:Other Aspects of the Home Purchase . . . . . . . . . . .185
Chapter 20:I Need to Sell My House in order to
Buy Another One . . . . . . . . . . . . . . . . . . . . . . . . . . . . .187
Chapter 21:Housing Discrimination . . . . . . . . . . . . . . . . .199
Chapter 22:Owners Who Do Not Sell Through a
Real Estate Agent—For Sale By Owner . . . . . . . . . . . .207
Chapter 23:Foreclosure . . . . . . . . . . . . . . . . . . . . . . . . . . .213
Chapter 24:Buying a House as an Investment . . . . . . . . . .223
Final Words . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .231
Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .235
Appendix A:Websites to Assist You in Buying a House . . . . . .267
Appendix B:Useful Forms . . . . . . . . . . . . . . . . . . . . . . . . . . . .273
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .279
About the Author . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .287
The Home Buyer’s 218.qxd 1/17/08 12:53 PM Page v
Introduction
After I wrote How to Buy Your First Home, I had the opportunity to
meet with many potential home buyers. They all had one thing in
common—questions. Many questions were repeated over and over
again from people in every part of the country.
This book answers the most commonly asked questions and more.
The additional questions are the result of scouring public forums on
the Internet to find out what issues today’s home buyers are
concerned about. A big thumbs-up to Yahoo Answers, a well-
organized forum that allows the public to share both knowledge and
questions about a wide variety of topics,including real estate issues.
To my readers, keep sending me your questions; you may find
answers to them in future books.In the meantime,if you cannot find
an answer to your questions in this book,look at the websites I have
included in the back of this book.There is a wealth of information
about selecting and financing your next home on these websites.
Learn about the housing industry through newspapers, television
shows on home buying, and those wonderful free booklets that list
properties for sale that you will find in supermarkets and other
public places.
A word of caution, though—when it comes to issues of financing,
you must be wary. If the deal seems too good to be true, it probably
is.Unscrupulous,predatory lenders have made a very good living out
of taking money and homes from trusting people. Question every-
thing.Research deals offered,and if pressured to sign right away,walk
away.Finally,protect your fellow citizens by reporting any deceptive
or predatory lenders to the proper authorities.
The Home Buyer’s 218.qxd 1/17/08 12:53 PM Page vi
vvii TThhee HHoommee BBuuyyeerr’’ss AAnnsswweerr BBooookk
How to Use This Book
This book is divided into several topic sections. The first topic
covered is what has been happening in the real estate market.You
need to know some basics about where the market has been to
understand what is happening now.The conditions of the real estate
market determine what is for sale, how you should look at what is
for sale, the details of your offer to buy, and how you should struc-
ture your financing. Please do not skip this first section. If nothing
else,your knowledge of the market will show the real estate profes-
sionals that you have done your homework.
Following the information about the real estate market as a whole,
we begin with steps to make your home purchase.The first step is
getting your finances in order.This is chronologically the first thing
that a future home buyer needs to do. We discuss the documents
that a lender looks at when it is deciding to loan a person a mortgage
and how to make those documents accurately reflect your financial
position.
Step two takes you into the actual search for your future home.
We discuss how to look at neighborhoods,how to look at homes for
sale, building your own home, and the new topic of being environ-
mentally concerned, or going green.We also introduce the reader to
the real estate professionals, how to deal with them, and what they
can do to help you.
Step three gets down to the nitty-gritty of home financing. The
majority of questions that I have received have been about mortgages,
so this is the largest part of the book.We touch on different sources of
money from the common ones to some you probably never thought
about.We also discuss the very serious issues of subprime loans,preda-
tory lending,and mortgage fraud,so you can avoid all three.
Step four goes to the exciting part of actually making an offer to
buy a house and all that this act entails. We discuss the technical
The Home Buyer’s 218.qxd 1/17/08 12:53 PM Page vii
Introduction vii
aspects of inspections, surveys, appraisals, and home warranties.
Finally we go to that very scary event called the closing.We provide
the reader with the tools to make his or her closing less scary and
maybe even a pleasant event.
Finally,at step five we discuss other issues of buying a home that may
or may not affect you.We talk about how to sell a home in today’s
market,how to deal with discrimination in housing,buying a for sale by
ownerproperty,foreclosures,and buying homes as an investment.
While reading this book,please keep a couple of important things
in mind:
• Real estate laws differ by location. States, cities, towns, and
counties can enact their own laws that dictate requirements and
procedures for your real estate transaction.
• What is considered to be standard operating procedure or
common practice also differs by location. In many urban areas,
custom changes by the particular city and county. The people
who are the most knowledgeable about your local real estate
customs and requirements are the local real estate agents and
attorneys.
• The reader can do research on local laws and practices,but ulti-
mately will need to rely on the local real estate professionals to
explain local laws and practices.
It is impossible for one book to contain all the variations that
affect real estate transactions in the United States.
❖ ❖ ❖
The Home Buyer’s 218.qxd 1/17/08 12:53 PM Page viii
vviiiiii TThhee HHoommee BBuuyyeerr’’ss AAnnsswweerr BBooookk
To all my readers, I wish you the very best as you embark on
this adventure of finding your perfect home.I sincerely hope that
you will find the real estate market as interesting and fascinating
as I do.
Disclaimer:Nothing in this book implies or should be construed as
creating an attorney-client relationship between the reader and the
author,Sourcebooks,Inc.,or any agent thereof.
The Home Buyer’s 218.qxd 1/17/08 12:53 PM Page ix
HH
OOUUSSIINNGG
MM
AARRKKEETT
BB
AASSIICCSS
■All I want to do is to buy a home. Why do I need to know anything about
the housing market?
■What does the phrase buyer’s market mean?
■What does the phrase seller’s market mean?
■I hear the media discussing the housing market every day, but I haven’t
really been paying attention. What has been happening with the housing
market lately?
■How did the past seller’s market cause problems?
■Are there any shortcuts to figuring out what the housing market is doing?
■What’s next?