You Know You’re a Grown Up When...
...you’re planning to buy your first home. It’s empowering. It’s exciting. It’s scary. It’s a long-term commitment. And it’s a veritable land-mine of those “extra little things” you have to do or think about. But you know what? You got this! Here are a few things that will help you along your journey.
How do I know if I’m financially ready?
Your first step in the home-buying process is to determine your budget, just as you'd likely do for any other major financial decision. Your monthly mortgage payment should not exceed 28% of your monthly gross income. In addition to your monthly mortgage payment, you also need to consider other related costs such as insurance, property taxes, home repairs and upkeep. You should also think about whether or not you’re ready to settle down in a specific location and how stable your job is.
Who should I talk to when I’m ready?
Once you’ve determined you are ready to purchase a home, your next step would be to contact a loan officer. Be sure you know your financial situation before you approach a lender and borrow accordingly. There are several financial calculators online that will help you chart out how high your payments would be at different rates. Once you know what you can afford to pay on a mortgage, you can figure out your housing price range.
Will I need a down payment?
Most of the time a down payment is required on a home purchase. There are some loans available for a low down payment and sometimes no down payment, but you must meet certain qualifications. Typically, most lenders require a down payment between 5% and 20%. There are several programs for first-time home buyers that may help reduce the amount you’ll need to come up with for a down payment.
What type of documents/paperwork will I need to obtain a mortgage?
There is quite an extensive list of documents you will need to provide to obtain a mortgage. In addition to your drivers’ license and social security card, you will need to provide at least 30 days of pay stubs, tax returns for the previous two years, statements for savings, checking, investment and retirement accounts, and proof of liabilities, such as; statements for credit cards, loans and other credit. Additional documents may also be required, so be sure to check with your lender to verify what is required.
Home Inspection FAQ
What is a "home inspection"?
A home inspection is an objective visual examination of the physical structure and systems of a home, from the roof to the foundation. Having a home inspected is like giving it a physical checkup. If problems or symptoms are found, the inspector may recommend further evaluation.
What does it include?
The standard home inspector's report will review the condition of the home's heating system, central air conditioning system (temperature permitting), interior plumbing and electrical systems; the roof, attic, and visible insulation; walls, ceilings, floors, windows and doors; the foundation, basement, and visible structure.
Why do I need a home inspection?
The purchase of a home is probably the largest single investment you will ever make. You should learn as much as you can about the condition of the property and the need for any major repairs before you buy, so that you can minimize unpleasant surprises and difficulties afterwards.
Of course, a home inspection also points out the positive aspects of a home, as well as the maintenance that will be necessary to keep it in good shape. After the inspection, you will have a much clearer understanding of the property you are about to purchase.
If you are already a home owner, a home inspection may be used to identify problems in the making and to learn preventive measures which might avoid costly future repairs. If you are planning to sell your home, you may wish to have an inspection prior to placing your home on the market. This will give you a better understanding of conditions which may be discovered by the buyer's inspector, and an opportunity to make repairs that will put the house in better selling condition.
What will it cost?
The inspection fee for a typical one-family house varies geographically, as does the cost of housing. Similarly, within a given area, the inspection fee may vary depending upon the house’s size, particular features, and age. The inspection fee may also vary if additional services, such as septic, well, or radon testing, are requested. It is a good idea to check local prices on your own.
However, do not let cost be a factor in deciding whether or not to have a home inspection, or in the selection of your home inspector. The knowledge gained from an inspection is well worth the cost, and the lowest-priced inspector is not necessarily a bargain. The inspector's qualifications, including his experience, training, and professional affiliations, should be the most important consideration.
Can’t I do it myself?
Even the most experienced home owner lacks the knowledge and expertise of a professional home inspector who has inspected hundreds, perhaps thousands, of homes in his or her career. An inspector is familiar with the many elements of home construction, their proper installation, and maintenance. He or she understands how the home's systems and components are intended to function together, as well as how and why they fail.
Above all, most buyers find it very difficult to remain completely objective and unemotional about the house they really want, and this may affect their judgment. For the most accurate information, it is best to obtain an impartial third-party opinion by an expert in the field of home inspection.
Can a house fail inspection?
No. A professional home inspection is an examination of the current condition of your prospective home. It is not an appraisal, which determines market value, or a municipal inspection, which verifies local code compliance. A home inspector, therefore, will not pass or fail a house, but rather describe its physical condition and indicate what may need repair or replacement.
When do I call in the home inspector?
A home inspector is typically contacted right after the contract or purchase agreement has been signed, and is often available within a few days. However, before you sign, be sure that there is an inspection clause in the contract, making your purchase obligation contingent upon the findings of a professional home inspection. This clause should specify the terms to which both the buyer and seller are obligated.
Do I have to be there?
It is not necessary for you to be present for the inspection, but it is recommended. You will be able to observe the inspector and ask questions directly, as you learn about the condition of the home, how its systems work, and how to maintain it. You will also find the written report easier to understand if you've seen the property firsthand through the inspector's eyes.
What if the report reveals problems?
No house is perfect. If the inspector identifies problems, it doesn't necessarily mean you shouldn't buy the house, only that you will know in advance what to expect. A seller may adjust the purchase price or contract terms if major problems are found. If your budget is tight, or if you don't wish to become involved in future repair work, this information will be extremely important to you.
If the house proves to be in good condition, did I really need an inspection?
Definitely. Now you can complete your home purchase with your eyes open as to the condition of the property and all its equipment and systems. You will also have learned many things about your new home from the inspector's written report, and will want to keep that information for future reference.
How do I find a home inspector?
The best source is a friend, or perhaps a business acquaintance, who has been satisfied with and can recommend a home inspector they have used. In addition, the names of local inspectors can be found by searching the American Society of Home Inspectors® database or in the Yellow Pages where many advertise under "Building Inspection Service" or "Home Inspection Service". Real estate agents are also generally familiar with the service, and should be able to provide you with a list of names from which to choose.
Whatever your referral source, you will want to make sure that the home inspector is a Member of the American Society of Home Inspectors (ASHI®) in order to be certain of his or her professional qualifications, experience, and business ethics. A list of ASHI Members in your area is available upon request from the Association's headquarters.
What is the American Society of Home Inspectors?
The American Society of Home Inspectors (ASHI) is the oldest and leading non-profit professional association for independent home inspectors. Since its formation in 1976, ASHI's "Standards of Practice" have served as the home inspector's performance guideline, universally recognized and accepted by professional and government authorities alike. Copies of the Standards are available free from ASHI.
ASHI's professional Code of Ethics prohibits Members from engaging in conflict of interest activities which might compromise their objectivity. This is the consumer's assurance that the inspector will not, for example, use the inspection to solicit or refer repair work.
In order to assist home inspectors in furthering their education, ASHI sponsors a number of technical seminars and workshops throughout the year, often in cooperation with one of its nearly 50 Chapters. ASHI also serves as a public interest group by providing accurate and helpful consumer information to home buyers on home purchasing and home maintenance.
Who belongs to ASHI?
Members of ASHI are independent professional home inspectors who have met the most rigorous technical and experience requirements in effect today. To become an ASHI Member, an inspector must pass two written technical exams, have performed a minimum of 250 professional fee-paid home inspections, and maintained his or her candidate status for no less than six months. ASHI Members are required to follow the Society's Code of Ethics, and to obtain continuing education credits in order to keep current with the latest in building technology, materials, and professional skills.
This article was submitted by the American Society of Home Inspectors, the national professional organization of home inspectors whose mission is to meet the needs of its membership and promote excellence and exemplary practice within the profession. The American Society of Home Inspectors was formed in 1976 as a not-for-profit organization to build public awareness of home inspection and to enhance the technical and professional performance of home inspectors. Submission of this article does not imply an endorsement or recommendation of the Financial Resource Center site.