What You Should Know About Buying a Home

The real estate market can be tricky so it is important to have all of the facts when it comes to buying a home.

Here are answers to some common real estate questions.

What is the first step you should take when buying a home?

The most important step you should take when buying a home is determining how much home you can afford. By taking your gross monthly income and fixed monthly expenses, a reputable lender can tell you what size mortgage your can afford based on the monthly mortgage payment.

Many financial experts recommend finding a home that is priced just below what the lender says you can afford - that way, you will have money left over each month to cover unexpected expenses or to begin a savings account.

What fees are typically associated with a mortgage?

There can be several costs associated with purchasing a home. These costs can include:

• Application Fee: This charge covers the initial costs of processing your loan request and checking your credit report.
• Loan Origination Fee: This charge, also referred to as an underwriting fee, administrative fee or processing fee, covers the lender's work in evaluating and preparing your mortgage loan.
• Points: This is a one-time charge imposed by the lender in order to reduce the interest on your loan. One point equals 1 percent of the total loan amount so if you are obtaining a loan for $200,000 and are paying 2 points, you will need to pay $4,000, or 2 percent of the loan amount.
• Appraisal Fee: This charge covers the costs of an appraisal to ensure that the property is truly worth the amount of the loan.
• Private Mortgage Insurance: Commonly referred to as PMI, this charge is rolled into your monthly mortgage payment and is typically applied if your down payment is less than 20 percent of the value of the home. As you pay down your mortgage, you can request that the PMI charge be dropped as soon as you reach 20 percent equity in your home.

Are real estate agents and Realtors the same thing?

Not exactly. All Realtors are real estate agents or brokers, but not all real estate agents are Realtors. To be considered a Realtor, the agent must be a member of the National Association of Realtors.

What is the National Association of Realtors?

The National Association of Realtors (NAR) is an organization composed of a national network of Realtors. The association was established to provide professional development, access to real estate research and a venue to exchange information for its membership.

What are some benefits associated with hiring a Realtor?

Hiring a Realtor brings with it several benefits, including:

• Realtors must abide by the NAR's strict Code of Ethics so you will know that your agent has your best interest at heart.
• Through their membership in the NAR, Realtors have access to a vast array of real estate research and training so you know you will be hiring a real estate specialist.
• Purchasing or selling a home is a complex contractual matter - hiring a Realtor helps lower the homebuyer's or seller's risk by taking the lead in the legal aspects of the process.
• Realtors typically network with other Realtors so by hiring a Realtor, you will have access to a significant amount of real estate information before most other consumers.