A home is the most expensive purchase most people make, so it should be no surprise that buying a home is quite a bit more complicated than other purchases and involves many moving parts. Prospective home buyers have to learn an entirely new vocabulary in order to understand the vast web of lending laws, state and municipal land use laws, all of the required inspections, and other the small but important details. This section contains a vast collection of resources to help you make sense of it all, including handy checklists of documents you may need and questions to ask your real estate agents and lawyers.
Before Buying a Home: Get Informed and Organized
It cannot be overstated how significant and life-changing the home-buying process is for most people, particularly since the majority of home mortgages are paid over a 30-year period. Before you even start looking for homes, however, you need to determine whether you're actually ready to buy by considering your finances, credit history, and cash on hand. Also, you need to consider not only how much you can spend each month on mortgage payments, but also the ongoing and "surprise" costs associated with home ownership.
You shouldn't feel rushed when buying a home, since time often is on your side as a buyer. If you need more money for a down payment (which will lower your monthly payments are perhaps give you a better rate), then you can set a target for when you expect to have enough saved. If the market is particularly volatile, perhaps you want to wait until it has settled before jumping in. In any event, make sure you know what you're getting into.
Learning the Lingo
One of the ways to get a handle on the home-buying process is to learn the applicable legal, financial, and real estate-specific terminology. Many of these terms will be found in contractual language, so learning their meaning will help you make better decisions and understand what it is you're signing. Terms related to buying or selling a home include the following:
- Acceleration Clause - Condition in a mortgage that may require the balance of the loan to become due immediately, if regular mortgage payments are not made or for breach of other conditions of the mortgage.
- Contract for Deed - A contract for deed is a contract that allows a buyer to take possession of property in exchange for monthly payments until the balance is paid off, even though the seller maintains legal title to the property until the final payment is made. The parties negotiate the terms of a contract for deed.
- Quitclaim Deed - A deed which transfers whatever interest the maker of the deed may have in the particular parcel of land. A quitclaim deed is often given to clear the title when the grantor's interest in a property is questionable. By accepting such a deed the buyer assumes all the risks.Such a deed makes no warranties as to the title, but simply transfers to the buyer whatever interest the grantor has.
Using a Financial Worksheet
This section also includes a home buyer's financial worksheet, where prospective home buyers list their various household expenses and sources of income. Basically, this worksheet is designed to help you determine how much you can afford and how much you need to save for a down payment. While it may look complicated at first glance, just follow the instructions to get the most out of it.
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