Home Buying Kit For Dummies^®, 6th Edition

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Copyright © 2016 by Eric Tyson and Ray Brown

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ISBN 978-1-119-19170-4 (pbk); ISBN 978-1-119-19172-8 (ebk); ISBN 978-1-119-19171-1 (ebk)

Home Buying Kit For Dummies,® 6th Edition

by Eric Tyson and Ray Brown

Cheat Sheet

Top 20 Hints for Home Buyers

1. Buy a home that comfortably allows you to accomplish your other financial goals. Understand how the proposed home purchase fits into and affects your existing financial situation and goals, especially saving for retirement.
2. Get your personal finances in order before you buy. You should make your saving, investment, and insurance plans before you buy.
3. Mortgage lenders and real estate agents can’t tell you how much you can afford to borrow. They can only tell you the maximum that you’re eligible to borrow.
4. The best time to think about selling your house is before you buy it. Be sure that the home you buy has features other buyers will find desirable, or you won’t be able to get a good price when you sell it.
5. Real estate is a good long-term investment. However, home values go through up periods as well as down periods. If you’re a homeowner during most of your adult life, your home should enjoy a healthy appreciation of value.
6. Consider renting if you think you’ll soon need to move. Given all the costs associated with buying and then selling a home, if you don’t expect to hold on to your home for at least three (and preferably five) years, you could very well lose money.
7. Have the courage to be a contrarian. The best time to buy is usually at the bottom of a real estate cycle when fewer people think it’s a good time to buy. Compare the monthly costs of renting a home to buying it to see whether buying offers a good value.
8. You can easily save thousands of dollars by shopping around for a good mortgage. Money is a commodity, just like toasters and toilet paper.
9. Choose a mortgage that fits your needs and ability to accept risk. Don’t take an adjustable-rate mortgage unless you can afford the maximum possible monthly payment and the risk of fluctuating payments.
10. What you don’t know is usually what gets you into trouble. Real estate is a team sport. Put the right players on your team and you greatly reduce the likelihood of problems with your purchase.
11. Invest the time to find the best possible real estate agent that you can. A patient, knowledgeable agent can add value to your home-buying transaction. A mediocre or lousy agent can be a liability.
12. Remember that real estate agents, mortgage brokers, and other players only get paid if you buy, and they generally get paid more the more you spend on a home. To protect yourself against these conflicts of interest, get your financial house in order before you start working with these players.
13. Buying a home is an emotional experience for most people. The better job you do of controlling your emotions, the more likely you are to control the transaction and get a good deal.
14. Beware of fake sellers trying to peddle overpriced houses. Learn how to spot counterfeit sellers before you waste your precious time and money on them.
15. “What’s it worth?” is the most important question to answer when buying a home. Examine sales of comparable homes (a good agent can assist you) to answer this question.
16. There are no absolutes in real estate negotiation. Smart buyers realize that there are times to make a low-ball offer and times to make your first offer your best offer. And remember that everything is negotiable.
17. If the deal you’re getting on a home, mortgage, or any other aspect of a home purchase seems too good to be true, it probably is. Find out why the home or mortgage is so cheap or suffer the consequences later.
18. Never buy a pig in a poke. Don’t try to save money by skipping inspections. Have the home thoroughly inspected before you buy it. If in doubt, reinspect.
19. Buy the most comprehensive homeowners insurance policy you can. Make sure that you have coverage for catastrophic risks, such as earthquakes or floods, that may occur in your area.
20. Don’t let unexpected closing costs sabotage you. Ensure that you have enough cash to buy the home by estimating in advance all the costs you must pay at the time of closing, including moving expenses, insurance premiums, loan fees, and property taxes.

Mortgage Payment Calculator*

To calculate your monthly mortgage payment, simply multiply the relevant number from the table below by the size of your mortgage expressed in (divided by) thousands of dollars. For example, on a 30-year mortgage of $125,000 at 7¾ percent, you multiply 125 by 7.17 (from the table) to come up with an $896.25 monthly payment.

Copyright © 2016 Eric Tyson and Ray Brown. All rights reserved. Item 1796-5.
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Praise for Previous Editions of Home Buying For Dummies

“It is absolutely practical. They cover the basics in straightforward language and go into enough detail to make them the only books you’ll need.”

— Eric Antonow, president and CEO, Katabat Corp.

“As a first-time home buyer, I found this book to be a quick read and immensely helpful in knowing what to ask my agent, what to look for on walk-throughs, what to expect in terms of offers and counteroffers, as well as the entire timeline and process from open house to moving in. This book really is invaluable to anyone purchasing a home, even if you’re not a first-time home buyer.”

— Travis A. Wise, San Jose, CA

“Because I bought this book, I was able to carry on intelligent conversations with my agent and lender when I recently purchased a home. Even better, I felt prepared for those conversations and much more in control of the situation than I would have had I not read this book. Thanks to the authors for doing such a great job!”

— Jeff C. Benson, Lake Zurich, IL

“I never bought real estate in my life. I never shopped for a mortgage in my life. But after reading this book, I am extremely well prepared when I call them and when they walk through the door to meet with me.”

— Ben Milano, Lindenhurst, NY

“If you are considering buying a home, don’t fail to read this excellent new book. The book is full of profitable ‘insider tips’ which most real estate writers either don’t know or are afraid to reveal. The advice is so good I wish I had written it … on my scale of 1 to 10, this outstanding book rates a 12.”

— Robert J. Bruss, Tribune Media Services

“ … Home Buying For Dummies immediately earned a prominent spot on my reference bookshelf … takes a holistic approach to home buying.”

— Broderick Perkins, San Jose Mercury News

“ … invaluable information, especially for the first-time home buyer …”

— Carol Nuckols, Fort Worth Star-Telegram

Here’s what critics have said about Eric Tyson and his previous national bestselling personal finance guides:

“Personal Finance For Dummies is the perfect book for people who feel guilty about inadequately managing their money but are intimidated by all of the publications out there. It’s a painless way to learn how to take control. My college-aged daughters even enjoyed reading it!”

— Karen Tofte, producer, National Public Radio’s Sound Money

“Among my favorite financial guides are … Eric Tyson’s Personal Finance For Dummies.”

— Jonathan Clements, The Wall Street Journal

“Smart advice for dummies … skip the tomes … and buy Personal Finance For Dummies, which rewards your candor with advice and comfort.”

— Temma Ehrenfeld, Newsweek

“Eric Tyson is doing something important — namely, helping people at all income levels to take control of their financial futures. This book is a natural outgrowth of Tyson’s vision that he has nurtured for years. Like Henry Ford, he wants to make something that was previously accessible only to the wealthy accessible to middle-income Americans.”

— James C. Collins, co-author of the national bestseller Built to Last; lecturer, Stanford Graduate School of Business

“Eric Tyson … seems the perfect writer for a … For Dummies book. He doesn’t tell you what to do or consider doing without explaining the why’s and how’s — and the booby traps to avoid — in plain English… . It will lead you through the thickets of your own finances as painlessly as I can imagine.”

— Clarence Peterson, Chicago Tribune

“Personal Finance For Dummies is, by far, the best book I have read on financial planning. It is a simplified volume of information that provides tremendous insight and guidance into the world of investing and other money issues.”

— Althea Thompson, producer, PBS Nightly Business Report

More Best-Selling For Dummies Titles by Eric Tyson

About This Book: The Eric Tyson/Ray Brown Difference

We know that many home buying books are competing for your attention. Here are several other compelling reasons why this is the best book for you:

• It’s in plain English. Because we work with real people and answer real questions, our information is current, and we have a great deal of experience in explaining things. This experience can put you firmly in control of the home buying process (rather than having it control you).
• It’s objective. We’re not trying to sell you an expensive newsletter or some real estate product you don’t need. Our goal is to make you as knowledgeable as possible before you purchase a home. We even explain why you may not want to buy a home. We’re not here to be real estate cheerleaders.
• It’s holistic. When you purchase a home, that purchase affects your ability to save money and accomplish other important financial goals. We help you understand how best to fit your home acquisition into the rest of your personal-finance plan.
• It’s a reference. You can read this book from cover to cover if you want. However, we know you’re busy and you likely don’t desire to become a real estate expert, so each portion of the book stands on its own. You can read it piecemeal to address your specific questions and immediate concerns.

Icons Used in This Book

Sprinkled throughout this book are cute little icons to help reinforce and draw attention to key points or to flag stuff that you can skip.

This bull’s-eye notes key strategies that can improve your real estate deal and, in some cases, save you lots of moola. Think of these as helpful little paternalistic hints we would whisper in your ear if we were close enough to do so!

Numerous land mines await novice as well as experienced home buyers. This explosive symbol marks those mines, and then we tell you how to sidestep them.

Occasionally, we suggest that you do more research or homework. Don’t worry: We tell you exactly what you need to do.

Unfortunately, as is the case in all parts of the business world, some people and companies are more interested in short-term profits than in meeting your needs and concerns. We warn you how, when, and where you may be fleeced, and where appropriate, we show you how to de-fleece yourself!

“If I’ve told you once, I’ve told you a thousand times… .” Remember good old Mom and Dad? From time to time, we tell you something quite important and perhaps repeat ourselves. Just so you don’t forget the point, this icon serves as a little nag to bring back those childhood memories.

Some of you are curious and have time to spare. Others are busy and just want to know the essentials. This geeky icon points out tidbits and information that you don’t really have to know, but understanding this stuff can make you more self-confident and proud!

Want to calculate your monthly expenses? Or have a handy-dandy list available when you interview Realtors and home inspectors? Wanna see what your bank might include on a mortgage application? These along with lots of other important stuff can be found online at www.dummies.com/go/homebuyingkit6e.

Beyond the Book

In addition to the material in the print or e-book you’re reading right now, this product also comes with some access-anywhere goodies on the web. Check out the free Cheat Sheet at www.dummies.com/cheatsheet/homebuyingkit for 20 home buying tips and a monthly mortgage payment calculator.

We’ve also included some additional information online at www.dummies.com/extras/homebuyingkit. These Extras articles address the difference between short-term and long-term interest rates when it comes to choosing a mortgage; why you should save receipts for major home improvements; and common misperceptions when it comes to investing in real estate.

Finally, go online to www.dummies.com/go/homebuyingkit6e to access the “kit” part of this book. You’ll find a variety of useful forms, including many of the lists and applications that we show in the book. You can print out the application forms and fill them in, just to ensure you have all the information you need. And you can also print out the lists of questions for potential Realtors and property inspectors so you’re prepared when interviewing them.

Here’s a list of what you’ll find at www.dummies.com/go/homebuyingkit6e:

Where to Go from Here

Odds are you’re not quite ready to bolt over to the nearest bank and take out a mortgage — and we don’t suggest that you blindly call the first Realtor you find online. It’s up to you where you go from here, but if you’re just beginning to think about buying your first home, we recommend that you read this book straight through, cover to cover, to maximize your home buying savvy. But the A-to-Z approach isn’t necessary — if you feel pretty confident in your knowledge of certain areas, pick other ones that you’re most interested in by either skimming this book’s table of contents or by relying on the well-crafted index at the back of the book.