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Home Journal Special Report
Buying a house?
You should know
o
these things
Buying a home is a big undertaking. It
helps if vou have had previous
experience (the second time is not as
worrisome as the first). Knowing in
advance what to expect and how real
estate transactions are handled is a big
help too.
Herewith, some useful information
for home buyers in Lapeer County. Clip
this and save it if you expect to buy a
home in the near future.
1. OLD HOUSE OR NEW? One of
the first questions the home buyer asks
himself is, shall 1 buy a new house or an
older one? There is something to be said
for each.
Older homes usually cost less. They
have more space, including bigger
closets. Landscaping and those priceless
big trees are already in. The
neighborhood is established. Taxes are
stable.
On the minus side, some older homes
need repairs. They often lack modern
features such as family rooms or 2
bathrooms. Sometimes it’s more difficult
to get a mortgage on an older home.
New houses generally have more
efficient floor plans, the latest bath
fixtures, built-in oven and range. They
are new and clean. Rooms tend to be
smaller. Taxes may be higher. New
houses cost more. Landscaping is
expensive and you have to take care of
this yourself. Workmanship these days is
also variable on the construction.
One thing many home buyers learn
the hard way is that it’s best to have an
open mind. Don’t decide in advance that
you must have a Cape Cod or a rancher,
a new home or an old one. Look at
houses in your price range with enough
bedrooms. When you find the right
house, you’ll, know it. And it might not
be what you thought you wanted!
2. THE PRICE. The usual rule of
thumb for home buying is not to pay
more than 2!4 times your gross yearly
income. Don’t take on high payments
that will be a burden. Some advisers
recommend that the payments, taxes
and insurance should not add up to more
than 1 week’s pay.
3. who’s Calling, please? if
you start calling real estate people about
ads, you may find they want to know
your name. Sometimes buyers are
reluctant to identify themselves, for fear
they will be pestered to death.
Remember that a broker or salesman
dislikes giving information to an
anonymous caller - who may only be a
nosy neighbor. Also, picture the broker’s
frustration if 3 days later he gets a new
listing that he feels would be just what
you wanted - and doesn’t have your
name!
the minihome
For those who like a change of place.
The mountains. The beach’ Pick where you want to go. The Minihome will get
you there in comfort. And keep you there in style. Its kitchen is complete with
stainless sink and water system, stove and ice box, plus built-in drawers and
cabinets. Thedinette passenger lounge converts to a double bed. 1 here’s loads
of storage space, including a full-length wardrobe. And the full-height liber glass
roof gives you plenty of head room. All in all, here’s the one vacation home that
doesn’t tie’you down or tire you out. That’s what great vacations are made of!_
And because the Minihome is a conversion of the Ford Super Econoline Van,
it doubles as a second car and station wagon when you’re not off on vacation and
long week ends.
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Ford Corner 987-2411 Perry, Go.
FORD MflPßfc
Some salesmen will fill out a
“prospect card” listing the features you
want in a home, the down payment you
can afford, the total price and will
break their necks trying to find a home
for you.
4. BE CANDID. When you talk to a
broker about buying a house, be candid
about your finances. Don’t be
embarrassed that you can’t buy for cash,
or can’t buy a better house, or can’t put
more money down, or don’t have a
bigger income. Most buyers are in the
same boat. People like you arc the
bread-and-butter of the real estate
business. Not many people walk into a
broker’s office ready to write a check for
SIOO,OOO for a palatial mansion.
5. IF THIS SHOE FITS, WEAR IT. A
couple was discouraged because they had
been to broker after broker with no
luck. They wanted a house with an acre
of land. But all such houses were priced
too high.
Finally they visited a wise old broker
with long experience in the ways of
buyers. As he talked to them, he began
to suspect that they had no idea how big
an acre was. He took them out in his car
and showed them an acre. They were
astounded. They didn’t want THAT
much land! He sold them a nice little
home on !4 acre of land and everybody
was happy.
6. HOW TO LOOK AT A HOUSE. If
possible, leave the kids at home. If you
can’t, hold them by the hand and make
sure they behave. A seller who is pleased
with a prospective buyer’s conduct will
often make concessions more quickly.
Inspect the house at least twice. Take
your time.
Buyers are often advised by consumer
experts to inspect the building in great
detail. “Pick at the motar in block or
stone walls with a pocket knife to see it
if crumbles” .. . “Measure wall thickness
through a basement window.” ... “Call
in an expert to check the plumbing and,
heating.’
Few buyers make such detailed
inspections of property. Usually buyers
are concerned with layout, size of
closets, number of bedrooms and so on.
If you want to have experts look over
the house before you make an'offer, you
probably won’t get any argument from
the broker or seller. But the perfect
house does not exist. You really find out
what’s wrong with a house only after
you’ve lived in it for a while.
Ask the salesman about taxes, special
assessments, and zoning. Remember that
higher taxes usually mean more benefits,
such as sewage disposal, street lighting,
irtrproved fire protection - or higher
value of property.
7. NEWCOMER? RENT FIRST. It’s
wise for a newcomer in a community to
rent for a few months before he buys. In
that time he can learn the community
and decide where he wishes to live.
8. BRIDEGROOM’S JITTERS. After
you have found the house you want,
comes that dread moment when the
broker asks you to sign the offer to
purchase. The buyer gets a sinking
feeling in the pit of his stomach, like the
bridegroom the day before the wedding.
Doubts assail him. He is tempted to
chicken out. What if it’s all a big
mistake? What if the house isn’t as nice
as it looks? What is the neighbors turn
out to be nasty? What about that
mortgage hanging heavy, heavy over his
head?
Be of stout heart, this is a completely
normal reaction, at least for the first
time buyer. Everything usually turns out
all right.
9. THE FIRST STEP. The first solid
step toward home ownership is the
buyer’s signing of the offer to purchase.
Most brokers use the 4-copy system.
You as buyer sign all 4 copies. The
broker will leave a copy with you. At this
point it has only your signature on it.
He takes the other 3 copies to the
o wner of the house to present the offer
and get the seller’s acceptance and
signature. After the seller has signed all 3
copies, the broker leaves 1 copy with the
seller, keeps 1 himself, and brings the
third one back to you.
You now have 2 copies - one signed
only by you and containing only the
offer, the other signed by you and the
seller, with his acceptance. This is done
so you can see for yourself that there
have been no changes sneakily inserted
in the form between the time you made
your offer the time the seller accepted it.
(Some brokers make 5 copies, 1 for their
attorney)
10. EARNEST MONEY. Th»
salesman will ask you for a deposit of
earnest money - money that shows you
are in earnest about buying this house.
It’s a down payment on the down
payment. The usual amount asked is 5%
of 10%, but brokers have accepted less
and buyers have offered more.
The buyer often worries about this
payment. Who gets the earnest money,
the seller or the brokers? Will be lose the
money if the deal doesn’t go through?
When the deal is closed, the earnest
money will be credited to your down
payment.
Most purchase offers have a clause
stating that if. the seller refuses your
offer, or his title is defective, or you
cannot get mortgage money, your
earnest money will be refunded.
Your earnest money may be forfeited
if you back out of a deal for no good
reason after your written offer has been
accepted in writing and after such
acceptance by the seller has been
presented to you by the broker.
This rarely happens. To avoid it,
don’t let yourself be high-pressured into
making an offer, and once you have
decided to buy, don’t try to back out.
11. CLOSING COSTS. After your
offer has been accepted, the deal will be
closed. When buying a home, it’s smart
to plan for closing costs and moving
costs as well as the needed down
payment.
At a closing, there are some things the
buyer must pay and some the seller must
pay. They buyer pays:
lawyer’s opinion of title (abstract
of title, title search). You pay your
lawyer to make sure the seller’s title is
good and can be conveyed to you
properly. The minimum charge the
lawyer makes for this service is sls. The
maximum rarely goes above $65.
Sometimes, instead of an abstract, the
seller furnishes title insurance. This is an
agreement that protects you from losses
due to defects in title.
-Any prepaid insurance or taxes. For
instances, if the seller paid a year’s fire
insurance in advance on Jan 1 and you
buy the house on July 1, you owe him
for the 6 months insurance from July 1
through Dec 31, unless you cancel the
insurance. In this case, you take out
your own insurance and the seller will
get a refund on his overpayment from
the insurance company.
-Survey. A survey is not always
made. When it is, it can be at either the
buyer’s expense or the seller’s expense.
Generally it-is considered the buyer’s
responsibility to find out whether the
land covered by the abstract is the land
he thinks he is buying.
—There may be other closing costs
such as special costs for FHA loans or a
credit report. Your broker or salesman
can give you a rundown of estimated
closing costs. In the case of rented
property, you may have a credit coming
if rent was paid in advance. (Seller does
not live in house he is selling, but rents
it. He collects a month’s rent on March 1
in advance and you buy the house and
deal is closed March 15. You have the 2
weeks rent coming for the period March
14-March 31.) If the seller is living in the
home and remains there after the closing
date, you are entitled to collect monthly
rent from him.
12. FINANCING. You can pay cash
for your home. Some people do. But
most homebuyers either borrow money
to pay cash (mortgage loan) or pay the
seller in monthly installments (land
contract). In most cases you need a
down payment.
Here are the types of mortgage loans
available:
(a) Conventional loans. Down
payment is about 25% to 40% of the
selling price (varies). Balance to be paid
to lending institution in monthly
installments of principal and interest,
with interest rate about B!£% (varies).
Example; House selling for $20,000.
Bank would lend you $15,000, to be
repaid at sl2l per month for 25 years at
B Vi% interest. You would need about
$5,000 cash for a down payment.
(b) FHA-Insured loan. You get the
money from the bank the same as in (a).
However, less down payment is needed.
But the loan costs more. The Federal
Housing Administration guarantees
payment to the bank on your loan, or
insures it, and you have to pay for the
insurance as well as the loan.
Example: House selling for $20,000
(and appraised at that figure). Under
FHA, bank would lend you $19,050.
Payments would run about sl6l for 25
years at 9% interest.
Both buyer and seller are charged
“points” on FHA loans. This means you
pay back more money than you get,
including interest on money you never
received. Points (also referred to as
discounts) can be considered either a
blessing or a curse. Without them, people
with small cash savings might not be able
to buy a home at all. (For more on
points, see next week’s article on How to
Sell Your Home).
There are no age restrictions on FHA
loans. FHA will probably consider you a
good loan insurance prospect if you have
a good credit record, enough cash for the
down payment and closing costs, and an
income large enough to let you make the
monthly payments without feeling
squeezed.
There is a chance the seller will not
sell FHA. He may not be willing to pay
the points. He is not obliged to.
(c) GI or VA loans. The Veterans
Administrations will guarantee up to
$ 17,500 or 60% of a loan made by banks
to a veteran. The loan itself cun be
greater; this is the guaranty only. Or, the
VA will itself lend up to $21,000 to a
veteran, but these loans are not now
being made in the county. No down
(payment is required in either case.
Closing costs amount to about 2Vi% of
the loan.
Example: House at $20,000, VA
loan, no down payment. Monthly
payments at B Vi% interest would run
about sl6l for 25 years.
(d) Farmers Home Administration
loans. These loans are made for homes in
rural areas or small towns. Borrowers
must meet certain requirements. You
pay an interest rate of only 6&%. The
amount of down payment varies
according to the financial situation of
the borrower.
Example: On a house selling for
$20,000, with no down payment, at
6'A% interest, your monthly payment
will be $132 for 25 years.
(e) If you have enough cash to buy
out the seller’s equity, you can take over
his mortgage and assume the payments.
Often these mortgages are at much lower
rates of interest.
Example: An owner bought a house 5
years ago for $14,000, paying $2,000
down. He is now asking S2O J3OO for it.
f
J Store Wide (
ON AIL SUMMER MERCHANDISE J
) PRICES SLASHED I
I We must move all our Summer goods to
| make room for our Fall merchandise.
| Come in and take advantage of this price
j reduction on items such as swim wear, 1
| sports wear, dresses, and much much
i more. Buy Now while our selection of
n %
. sizes and colors is still good.
| PERRY FACTORY OUTLET
| 351 Carroll Blvd. Perry, Georgia
| Store hours 9-6
i
The Houston Home Journal, Perry, Ga., Thursday, July U, I
His payments at 7% interest at $84.81
have been paid for 5 years out of 25. If
you can buy out his $6,000 equity, you
can take over the remaining payments
for 20 years at $84.81.
A word about mortgages: Thd are
amortized. That is, you pay the same'
amount each month, but each
succeeding month more applies on the
principal and less on the interest After
you have been paying for several years
you gain equity at a much faster rate.
Interest is tax deductible. The interest
on an average loan today can easily reach
or suprass SI,OOO a year for the first few
years -a tidy income tax deduction!
(0 Another way to buy a home is
through a land contract. A down
payment agreeable to the seller is made
and monthly payments are made to the
seller. The seller retains title until all
payments have been made, at which time,
the seller deeds the property to the
buyer.
(g) Or a buyer may take over the land
contract on which the seller is paying,
buying out the seller’s equity. UnsuaUy
the consent of the title-holder, the
original seller, must be obtained to
transfer the land contract.
(h) Some sellers will accept a second
land contract arrangement. Suppose you
want to buy a home selling for $20,000
and the seller his equity of $6,000
out, but you only have $4,000. The
seller may accept your $4,000, assign the
land contract he is paying on to you, and
then accept a second land contract
between you and him for $2,000.
the closing date names in the
agreement is tentative. A lawyer may fall
sick and have to postpone his
examination of the abstractor an
mumber of other things could happen. A
deal is not canceled if not closed by the
spprified closing date. However, it can be
voided if not closed reasonable soon
thereafter.
Government-approved loans are all
tied up in red tape, so don’t expect deals
involving them to be closed quickly.
A real estate salesman or broker
cannot accept a fee from a buyer as an
extra inducement to conclude a quick
sale at reduced terms, or even at list
terms. It’s illegal.
Keep in mind these 7 principal
reasons why people have regretted
buying a house, as listed by the Better
Business Bureau; (1) They began the
purchase without enough money, (2)
The house turned out to be more
expensive than they anticipated, (3) The
house was poorly built, (4) The property
decreased in value during the years, (5)
The family income decreased and the
house became a burden, (6) They didn’t
look the house over carefully enough
before buying, and (7) They became
dissatisfied with the neighborhood. f