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Determining whether to rent, buy, and how to afford your place of living are among the most important decisions a consumer can make. Click below for more information on various topics related to the place you call home.

Topics of Interest - Charities 4

Buying a Home

  • When buying a home, look slightly under your budget so you have financing left over for repairs or upgrades.
  • Buying a home is one of the biggest tax deductions one can have because the interest you pay is tax deductible.
  • Buy a home that matches your needs, such as close to schools or work or with an extra room for guests.
  • Change the locks after you have moved in since you know that only you and your family have access to the house.

Understanding Real Estate Sales Commission

  • Real estate agents usually make a sales commission, or payment based off of a percent of the total sale price of a house.
  • Commission fees are usually around 6% of the purchase price and paid by the seller at closing unless the parties negotiate otherwise. The commission comes out of the sale of the home, and is not in addition to the sales price.
  • This fee is split between the buyer’s agent and seller’s agent to compensate them for the work they each have done.
  • The terms of the commission and what services will be provided should be laid out in the contract you sign with the real estate agent before looking at properties.

Home Inspection

  • Have the property thoroughly inspected for defects or repairs.
  • Not all inspections test for everything, such as mold or pests, so make sure you know what is included in the inspection and decide if you need to pay for a more expansive inspection.
  • Make sure the inspector can access every part of the house, including the roof and any crawl spaces.
  • You should attend the inspection and not be afraid to ask questions about the property or to have the inspector take a closer look at something.

Mortgages

  • Many lenders will require you to have private mortgage insurance if you are unable to put an initial down payment of 20%, which will increase your monthly payment. Once you have made payments that equal 20% equity in your home, you can cancel this. Not all lenders will tell you that you can cancel this extra insurance, so it may be up to you to ask for a cancellation.
  • The most common type of mortgage loan is a 30-year fixed-rate loan but there are also 10-, 15-, or 20-year fixed-rate loans and adjustable rate loans.
  • Adjustable-rate loans are those that have an interest rate that will stay fixed for a certain number of years and then it will adjust after that. This can be good if you only plan on staying in the house for a short period.
  • You may get approved for a specific amount, but make sure you can afford the monthly payment. If you can’t afford the payment, don’t take out as much for your mortgage or you could risk defaulting on the loan.

Choosing a Lender/Financing

  • Get multiple quotes from different lenders to determine who will give you the best option for monthly payments and interest rates.
  • When getting a mortgage loan, it’s common to put 20% down, but many states have first-time home buyer programs that allow as little as 3% down or help you with the down payment, so check with lenders in your state, city, or if the lender itself offers any first-time home buyer programs.
  • Check your credit before obtaining financing, as credit is one of the main factors in determining if a lender will finance your home purchase.
  • If it is an option, get pre-approved for a loan so you know how much they will lend you and at what terms, so you have a realistic budget when shopping for a home.

Title Insurance

  • Title insurance protects you from any unknown claims of ownership on your home. If someone claims they own your home, the title insurance company will pay for the costs of defending your claim of ownership.
  • Unlike other insurance policies, this is a one-time payment and most lenders require you to purchase title insurance.
  • The title insurance company, during the escrow period, will conduct a search back in time to discover if anyone has a claim to the property (such as from a will), whether there are any liens against the property or if there are any pending legal actions. If any claims are discovered during the title search and you decide to still purchase the property, the insurance may not cover these known claims.
  • This insurance will only cover any amount left on your mortgage, not any payments you have already made, so you should consider buying an owner’s policy as well. This covers the interest and payments you have already made. You can purchase an owner’s policy that includes inflation to adjust your coverage as time goes by to reflect the increase in your property’s value.
  • In some states, it is negotiable if the buyer or seller will pay for these insurance policies, so check with a realtor or lender to find out your state’s law.

Disclosures

  • In most states, sellers are required to disclose any known defects about the home, but not all sellers will do so. They might also disclose any improvements or upgrades done to the home to make the property more appealing.
  • Some standard disclosures include pest problems, property line disputes, liens against the property, and defects with major systems or appliances. The seller should disclose anything that would impact the buyer’s decision to purchase the house. Some states also require disclosures if the house is in a flood zone, earthquake prone area, and near pollution that could affect the property.
  • Federal law requires sellers whose property was built before 1978 to disclose any lead-based paint used on the property, and give the buyer 10 days to test for lead-based paint.
  • In some places, sellers can be liable for what they disclose or don’t disclose for up to 10 years.
  • Disclosures are not the same as inspections, so make sure you have the property inspected before purchasing since sellers are only required to disclose known issues. An inspection can discover defects that the seller was not aware of.

Closing Information

  • Closing costs usually run between 2% and 5% of your loan amount, and can cover expenses such as home inspections and title searches. You can negotiate with the seller to cover a portion or all of the closing costs.
  • Signing documents on the closing day can run two hours or more, so make sure you have the time set aside when it comes time to close.
  • Bring a cashier’s check or certified check to cover the down payment and closing costs. Federal law requires you to be told how much this will be before the closing date so you can obtain one of these checks.
  • You will be signing papers for the mortgage loan and for the real estate transaction at closing. These papers should state how the buyer and seller are splitting property taxes and utility bills for any time before the buyer owns the home.
  • You should do a final walk-through of the home before closing to make sure the seller has vacated, there house is in the condition agreed up, and the seller has made any repairs that they agreed to fix.
  • Bring proof of homeowner’s insurance and government-issued identification to the closing.

Moving

  • Not all moving companies are reputable. If the company demands payment up front, does not have a physical address, shows up with a truck that does not have a logo on it, or asks you to sign a blank contract in advance, do not use them as they are most likely a scam company.
  • If you decide to use a moving company, get a written estimate after they have come to your home to estimate how many movers will be needed, how long it would take, and who will be in charge of the packing.
  • Get estimates from multiple companies to get the best price for your needs.
  • Change your address with the post office, your state motor vehicle department, voter registration, and any government agency that you receive benefits from, such as the Social Security Administration.

Utilities

  • Don’t wait to set up utilities after you move in. Some utility companies have a grace period between owners but not all do, so have utilities set up when you move in.
  • If you’re moving within the same area, you can usually just change your address with the company to switch utilities. If you are moving to a new area, make a list of all utilities and contact information for the new providers, then contact them about having utilities set up for move-in day.

Home Repair

  • Hire a licensed and insured contractor to avoid liability if a worker is injured on your property. They, as well as any subcontractors, should have insurance that covers personal liability, workers compensation, and property damage.
  • Don’t hire a contractor who shows up at your door when you haven’t requested a contractor, as they are most likely a scam artist.
  • When hiring a contractor, ask for a list of materials that will be used to ensure they are not using low quality materials that could lead to future repairs. The lowest bidder is not always the best because they may use low quality materials or cut corners.
  • Make sure you have a detailed contract that contains the time frame, cost, materials, payment plan, contractor’s license number, permits obtained if the work requires permits, what the contractor will and won’t do, and names of additional parties involved.
  • The contractor should be in charge of getting the permits, not you. It protects you because the work will be inspected by the city or county to make sure it is up to code.
  • When the project is complete, make sure to get an affidavit of final release or lien waiver, which states they paid any subcontractors, so third-parties cannot come after you for payment.
  • Don’t make the final payment until you are satisfied with the work.

Insurance

  • Hire a licensed and insured contractor to avoid liability if a worker is injured on your property. They, as well as any subcontractors, should have insurance that covers personal liability, workers compensation, and property damage.
  • Don’t hire a contractor who shows up at your door when you haven’t requested a contractor, as they are most likely a scam artist.
  • When hiring a contractor, ask for a list of materials that will be used to ensure they are not using low quality materials that could lead to future repairs. The lowest bidder is not always the best because they may use low quality materials or cut corners.
  • Make sure you have a detailed contract that contains the time frame, cost, materials, payment plan, contractor’s license number, permits obtained if the work requires permits, what the contractor will and won’t do, and names of additional parties involved.
  • The contractor should be in charge of getting the permits, not you. It protects you because the work will be inspected by the city or county to make sure it is up to code.
  • When the project is complete, make sure to get an affidavit of final release or lien waiver, which states they paid any subcontractors, so third-parties cannot come after you for payment.
  • Don’t make the final payment until you are satisfied with the work.

Reverse Mortgage

  • A reverse mortgage is a home loan that allows you to convert a portion of the equity in your home that you have built up into cash. You don’t pay back the loan until you no longer use your home as your principle residence or you default on your mortgage, however interest continues to accumulate.
  • To be able to get a reverse mortgage you must be at least 62 years old, own the home or have a low mortgage balance, be able to pay the taxes, insurance, and utilities for the home, not be delinquent on any federal debt, and you live in the home.
  • There are three types of reverse mortgages: single purpose reverse mortgages offered by states or local governments; proprietary reverse mortgages which are private loans; and federally-insured reverse mortgages, known as Home Equity Conversion Mortgages.
  • The property must be either a single family home, a 2 to 4 unit home where you occupy one unit, or a HUD-approved condominium.
  • You can take out the money in monthly installments, quarterly installments, or as a lump sum.

Foreclosure

  • Foreclosure occurs when a mortgage borrower misses payments. If the borrower cannot pay the debt or sell the house to pay the debt, then the lender may take the home and sell it to recover the remainder of the loan.
  • After a series of missed payments, the lender records a public notice indicating that the borrower defaulted. The borrower then has a grace period to repay the debt. If they fail to repay the debt, then the house is sold at a foreclosure auction.
  • You should talk to your lender as soon as you know you can’t make a payment, rather than avoiding them until you default. They may be able to work with you to repay the debt, such as by offering to refinance the loan into lower payments or paying the amount owed in a lump sum.
  • If the property is sold for less than what is owed on the mortgage, a court could enter a deficiency judgement against the borrower for the remainder of the debt so you could still be responsible for some debt.
  • Foreclosure will impact your credit rating, but if you pay your other payments, you can rebuild your credit in a few years.
  • If you are trying to purchase a home in foreclosure, get a preapproval letter for a mortgage as these homes go quickly, and the bank that is selling the home usually won’t also finance a home they already foreclosed on.
  • Most foreclosed properties are sold “as-is,” so there won’t be room for negotiating repairs. You should still have a home inspection done, so you know how much the property may cost you in repairs in addition to the actual purchase price.
  • Foreclosed homes often offer big savings on the purchase price, but make sure they are in a habitable condition and maintained properly.

Renting Your Home

  • Renting out your home can be a good way to pay your bills or make a profit, but it also includes a lot of responsibility. You will be in charge of repairs, collecting rent, and keeping an eye on the tenant to avoid wear and tear on the property. You can hire a property management firm to handle these tasks if you do not want to manage the property yourself.
  • You should consult an attorney to make sure you are following all landlord-tenant regulations, local rules for renting, and drafting the lease.
  • You will have to change the status of your home to a rental with the local ordinance, and obtain Landlord property insurance.
  • When choosing a tenant, check their employment history, credit history, income, background checks, and references to make sure you are choosing a reliable tenant who will use the property properly.

Renting or Being a Renter

  • You should spend no more than 30% of your income on rent. Some rental places will put a minimum income limit for their tenants. If you have a low credit score, you may be required to have a co-signer to rent.
  • Choose a location that fits you-whether you need public transportation, nearby shopping, or good schools.
  • Choose a place that has the features you want, such as number of bedrooms, a sizable kitchen, or access to a backyard.
  • Make sure you understand the terms of your contract, such as pet fees and how much time you must give as notice to terminate the lease.

Landlord/Tenant Relationship

  • The Federal Fair Housing Act prohibits a landlord from discriminating against a possible tenant based on race, color, origin, family status, disability, or sex.
  • Except for an emergency, a landlord must provide notice to the tenant before entering their unit, usually at least 24 hours.
  • Landlords are required to keep the property in a habitable condition, generally providing heating, plumbing, and electricity as well as repairing any of the above in a timely manner.
  • If the landlord doesn’t make a repair when requested, a tenant can usually withhold rent until it is repaired, make the repair themselves and deduct the cost from their rent, move out, or pay the rent and sue the landlord.

Renters Insurance

  • Most places require you to have renters insurance. Landlord insurance typically only covers damage to the building, not the personal property inside the building.
  • Renters insurance can cover the loss of your personal belongings, like clothing or appliances, up to a certain amount, liability insurance if someone is harmed in your home or if there is damage to the property, and additional living expenses if you are unable to live on the property, such as due to a fire, and have to find temporary housing. It may even cover additional food expenses if you are in temporary housing that does not have a kitchen, so you have to eat out.
  • Some luxury items, like jewelry, may only be covered to a certain amount, so you should consider adding additional coverage if you want those items protected.
  • You can choose coverage that will replace the items lost, or coverage that will pay you cash for the items minus depreciation.
  • Some insurance agencies will offer discounts if you have additional safety features, like an alarm system or sprinklers, or if you have other insurance policies with them.
  • Basic coverage may have exclusions if damage is caused by a natural disaster, such as a flood or earthquake.
  • Some insurance companies require additional coverage if you have a high risk dog.

Television

  • It is often cheaper to bundle your television service with internet and/or phone services.
  • Some areas are only available to certain television services, so make sure the service is available in your area and don’t be afraid to shop around with the services that are provided.
  • Satellite TV can be less expensive because it requires fewer materials than cable, but cable TV can be more reliable in bad weather.

Streaming Services

  • If you are deciding whether to go with a streaming service, rather than standard cable or satellite, you need to first decide what channels you want. Then you will have to research different streaming service providers to see if they provide those channels.
  • You may have to get more than one streaming service to get the channels you want. This can quickly add up to more than a standard cable or satellite package.