Sound good? Unfortunately, FHA loans don't work for all buyers, because of: * Financial qualification rules that disqualify higher-income families. Financial qualification rules that disqualify higher-income families. * * Restrictions on down payment sources. Restrictions on down payment sources. In most cases, buyers must use their own funds or loans from family members (not secondary financing) for the down payment. In most cases, buyers must use their own funds or loans from family members (not secondary financing) for the down payment.* Fees. Fees. FHA loans usually include a loan origination fee that you must pay at closing, plus a higher-than-normal mortgage insurance premium (which can be added to the amount of the mortgage loan). FHA loans usually include a loan origination fee that you must pay at closing, plus a higher-than-normal mortgage insurance premium (which can be added to the amount of the mortgage loan).* Appraisals. Appraisals. The FHA will do its own appraisal of the house you want to buy; if this is less than what you pay for the house, you must make up the difference in cash (not with the FHA loan). The FHA will do its own appraisal of the house you want to buy; if this is less than what you pay for the house, you must make up the difference in cash (not with the FHA loan).* Ineligibility of major fixer-uppers. Ineligibility of major fixer-uppers. Standard FHA loan programs won't help you buy properties needing significant repairs; any work recommended by FHA appraisers must be done before the sale closes. (If you're buying a fixer-upper, check out the FHA's Rehabilitation Mortgage Program, known as Section 203(k).) Standard FHA loan programs won't help you buy properties needing significant repairs; any work recommended by FHA appraisers must be done before the sale closes. (If you're buying a fixer-upper, check out the FHA's Rehabilitation Mortgage Program, known as Section 203(k).) CHECK IT OUT.

Looking for current information on local loan limits and approved lenders? Check out Check out www.hud.gov (under "Buying" in the "Homes" section). HUD's website includes information on all kinds of FHA and other government loan programs, including special programs for Native Americans, homebuyers in rural areas, and more. You can also call the FHA at 800-225-5342. (under "Buying" in the "Homes" section). HUD's website includes information on all kinds of FHA and other government loan programs, including special programs for Native Americans, homebuyers in rural areas, and more. You can also call the FHA at 800-225-5342.

VA Loans

The VA provides access to competitive loans, usually with no down payment and no PMI, for men and women currently in military service and to veterans with an honorable discharge. There are specific eligibility rules that primarily relate to the length of service. For example, service personnel now on active duty are eligible after serving 181 days of continuous duty, regardless of when the service began.

Eligible veterans must have a good credit history, proof of employment during the past two years, enough cash to cover any down payment plus the closing costs, and enough income to meet monthly mortgage payments.

The VA doesn't actually make these loans but, similar to the FHA, guarantees repayment of certain loans (available from participating private lenders, such as mortgage companies, banks, and savings and loans). The most common offerings are 30-year fixed rate mortgages or ARMs.

The VA itself doesn't set a maximum loan amount, but its rules effectively set limits: * The amount of the loan the VA will repay is based on the size of the loan-for example, the VA will guarantee 50% of loans of $45,000 or less, and 25% of loans between $144,000 and $417,000. For loans over $417,000, the VA's maximum guaranty amount for 2009 is the greater of 25% of $417,000 or 125% of the area median price for a single-family home (as long as this doesn't exceed 175% of the Freddie Mac loan limit for a single-family home in the county in which the property securing the loan is located). In some cases, the maximum guarantee could be as high as $1 million. VA maximum guaranty amounts are adjusted annually.* The loan amount may not exceed the VA's Certificate of Reasonable Value (CRV), based on the VA's appraisal of the property.

You must pay the VA an administrative ("funding") fee for the loan, typically ranging from 1% to 3% of the total borrowed (depending on the amount of the down payment). Also, the VA places certain limits on what closing costs you may be charged for.

To avoid making a cash down payment, your loan must be at or below the VA's appraised value for the house. Of course, despite the VA providing backup, you're still expected to repay the whole loan.

CHECK IT OUT.

To apply for the VA's "Certificate of Eligibility" (which may take several weeks) and see lists of participating lenders, contact the VA. See its website, See its website, www.homeloans.va.gov, or call 800-827-1000. Check out VA publications such as VA-Guaranteed Home Loans for Veterans VA-Guaranteed Home Loans for Veterans. Regional VA offices (listed on the main VA site) may also provide loan information.

State and Local Programs

Your state or local housing financing agency may sponsor special home financing programs at competitive rates and with low-down-payment options for first-time homebuyers. Also look for other local benefits, such as down payment assistance or local tax credits.

CHECK IT OUT.

Looking for more information on state and local homebuyer programs? See the HUD website, at See the HUD website, at www.hud.gov/buying/localbuying.cfm.

What's Next?

Now that you understand all your financing options, you're ready to get out there and buy a house. Chapter 8 shows how to make the most of your house search.

CHAPTER 8 8.

I Love It! It's Perfect! Looking for the Right House

Meet Your Adviser Mark Nash, an Associate Broker with Coldwell Banker, who serves the Chicago, Evanston, Skokie, and Wilmette areas of Illinois (www.marknashrealtor.com).

What he doesWhen Marks not working with homebuyers (or sellers), he shares his expertise through books, articles, and media interviews. Among his many books, youll want to check out 1001 Tips for Buying and Selling a Home 1001 Tips for Buying and Selling a Home, about which the Library of Congress invited him to come to Washington, DC, and make a presentation. For the past ten years, Mark has helped hundreds of people buy their first home in Chicago and its suburbs. Hes toured thousands of homes as a Realtor and as a real estate investor. and as a real estate investor.

First houseIt was an 800-square-foot place across from Wonder Lake in Illinois, in a community then mostly used by vacation owners. The view was beautiful, with an empty lot between me and the lake. But the house itself was pretty tired-my mother, who was quite the suburban type, stood in the tiny kitchen (7' x 7'), leaned out over the sink, and said, Mark, this is the craziest thing youve ever done. But by the time I sold it, the area was in greater demand by full-time owners, and it went for three times what I paid for it.

Fantasy houseThe older I get, the less space I want. How a house is finished is more interesting-I like high-quality flooring, cabinetry, and trimwork. As for location, Id take either Gualala, California (I rented a house on the Pacific there once), or the beach in Naples, Florida.

Likes best about his workThe people part. For me, real estate is more about people than houses. Ive worked with some homebuyers for ten years, from their first home on up. For example, I helped one couple now in their 50s buy a series of homes, then I worked with the wifes brother, and most recently her parents, who are downsizing into a condo. Im not exactly part of the family, but Ive sure gotten to know them well. Theres a lesson in that for first-time homebuyers-make sure your agent is the type who attracts return business.

Top tip for first-time homebuyersDont overspend. The first house is for you to get into the market. You dont want to spend all your disposable monthly income. Have a life, go out to dinner, go hiking, kayaking, or whatever. Ive seen people spend so much on a house they were unable to personalize it or even buy furniture. I could show you 4,000-square-foot houses where the buyer has been able to furnish only one room-sure, they can brag about their square footage, but they cant even invite anyone in!

CD-ROM.

For more tips from Mark Nash, check out his audio interview on the CD-ROM at the back of this book.

The brakes are off, and you're ready to visit houses that seem to match your Dream List, and choose one. "Whatever you do, don't settle," says Realtor Maxine Mackle (after nearly 20 years of experience in the Connecticut market). "You should be really enthusiastic about a house before you make an offer on it." Maxine Mackle (after nearly 20 years of experience in the Connecticut market). "You should be really enthusiastic about a house before you make an offer on it."

But first, breathe deeply and cultivate some nonattachment. Sellers of beautiful houses usually know they've got a gem and price it accordingly. Meanwhile, the market contains its share of duds: houses with dark rooms, weird layouts, and repair nightmares. This doesn't mean your perfect house isn't out there, just that you're unlikely to find it on day one. So to make your search productive, we'll show you how to: * get help from your real estate agent, friends, and neighbors* compare each house with your Dream List, looking past the fancy furniture or staging, the need for fixing up, or the shininess of a recent remodel* see whether you can live with the layout* review disclosure and other information you receive from the seller* do your own, informal inspection for repair issues, and* understand how to approach buying a not-yet-constructed house, or one in a common interest development (CID).

How Your Agent Can Help

While you should take an active role in househunting, your agent's expertise will be invaluable in several ways.

Survey Says: The average homeowner looks at 10-15 houses before buying one. Some must be looking at a lot more than 15, so don't sweat it if you're among them! One of this book's coauthors looked at over 200 houses before buying (she had a very very patient agent). patient agent).

Identifying appropriate houses. Using the Multiple Listing Service (MLS) database, your agent can access far more information than the general public (unless you work with a brokerage like ZipRealty, which gives its clients full access). Illinois Realtor Using the Multiple Listing Service (MLS) database, your agent can access far more information than the general public (unless you work with a brokerage like ZipRealty, which gives its clients full access). Illinois Realtor Mark Nash explains, 'The MLS helps me tell buyers things like how long the house has been on the market, its current status ('active,' 'under contract,' 'sale pending,' or 'closed'), what its existing mortgage is, and more. I've had clients say, 'Don't call me unless something comes up within this one city block,' so I keep tabs on such things through the MLS.' And when there's a glut of available houses during a down market, many of which may have been sitting unsold for a while, I can help buyers sift through to find the gems." Mark Nash explains, 'The MLS helps me tell buyers things like how long the house has been on the market, its current status ('active,' 'under contract,' 'sale pending,' or 'closed'), what its existing mortgage is, and more. I've had clients say, 'Don't call me unless something comes up within this one city block,' so I keep tabs on such things through the MLS.' And when there's a glut of available houses during a down market, many of which may have been sitting unsold for a while, I can help buyers sift through to find the gems."

TIP.

No need for embarrassment, your agent has heard it all. Some agent's stories might as easily have come from a therapist: homebuyers they've counseled about whether to have children, couples whose divorces they predicted. Get used to your agent knowing your private concerns, but try to work out any disagreements on your own. A house visit isn't the place to argue about whether you need an extra bedroom for your mother-in-law to live in. Some agent's stories might as easily have come from a therapist: homebuyers they've counseled about whether to have children, couples whose divorces they predicted. Get used to your agent knowing your private concerns, but try to work out any disagreements on your own. A house visit isn't the place to argue about whether you need an extra bedroom for your mother-in-law to live in.

Apart from the MLS, the agent has been watching the market for longer than you and may hear about houses coming up for sale long before they're advertised-valuable even in a down market, where the most desirable houses become the focus of buyers' interest. You'll be driving along and hear your agent say, "If you can wait another week, that house will be on the market."

Identifying reasonable sellers. Especially when the market is changing, some sellers may be stuck in the past, or bent on getting a certain price. Your agent may be able to find out which houses' sellers are worth negotiating with or are ready to drop their price. Especially when the market is changing, some sellers may be stuck in the past, or bent on getting a certain price. Your agent may be able to find out which houses' sellers are worth negotiating with or are ready to drop their price.

Arranging showings. Your agent should take you to tour homes you're interested in-more than once per house, if need be. Your agent should take you to tour homes you're interested in-more than once per house, if need be.

Helping evaluate houses. Another set of eyes can be a great help when visiting houses. Your agent may point out defects that you missed or possibilities you hadn't imagined. Just don't let your agent's judgment overtake your own. And don't be shy about visiting houses without your agent-you can always bring the agent back for a second look. (And you absolutely Another set of eyes can be a great help when visiting houses. Your agent may point out defects that you missed or possibilities you hadn't imagined. Just don't let your agent's judgment overtake your own. And don't be shy about visiting houses without your agent-you can always bring the agent back for a second look. (And you absolutely should should bring your agent back into the process when it's time to prepare an offer.) bring your agent back into the process when it's time to prepare an offer.) And more. Some agents find creative ways to help. For example, homebuyers visiting from out of town may find their agent is willing to pick them up at the airport and make hotel reservations. Mark Nash keeps five umbrellas in his car for rainy days. And agents regularly work evenings and weekends, showing you houses, reporting back on houses they've previewed, and more. Some agents find creative ways to help. For example, homebuyers visiting from out of town may find their agent is willing to pick them up at the airport and make hotel reservations. Mark Nash keeps five umbrellas in his car for rainy days. And agents regularly work evenings and weekends, showing you houses, reporting back on houses they've previewed, and more.

Visit open houses without our Realtor. Although Pat and her husband loved their Realtor (their second one, after they'd fired the first), she was extremely busy. And, says Pat, "We knew finding an affordable house in a good school district, with yard space for our children, wasn't going to be easy-so we spent Sundays looking at every open house we could. By a stroke of luck, an agent at an open house told us that a nearby house would be up for sale soon. Its owner lived out of state and needed to sell in a hurry. Our Realtor made some calls, and we put in a bid. On Christmas Eve, we found out that our bid had been accepted, and we got the house!" Although Pat and her husband loved their Realtor (their second one, after they'd fired the first), she was extremely busy. And, says Pat, "We knew finding an affordable house in a good school district, with yard space for our children, wasn't going to be easy-so we spent Sundays looking at every open house we could. By a stroke of luck, an agent at an open house told us that a nearby house would be up for sale soon. Its owner lived out of state and needed to sell in a hurry. Our Realtor made some calls, and we put in a bid. On Christmas Eve, we found out that our bid had been accepted, and we got the house!"

What's Better? Open House or Individual Appointment?

The answer may actually be "both." Open houses are great for scoping out the possibilities quickly and anonymously, particularly on an action-packed Sunday. Visiting open houses unaccompanied by your agent can be nice for gauging your own reactions with no outside influence. But a quick visit is never enough-if a house looks promising, it's worth revisiting, with your agent.

The Rumor Mill: Getting House Tips From Friends

People planning to sell their house don't usually make a big secret out of it-they tell friends and neighbors, long before they formally list the house. If you can tap into the same network (most likely if you already live nearby), you may find out about a house before it's up for sale.

Tell friends, neighbors, your hair stylist, the florist, your dentist, and more. Some home seekers even print up letters explaining exactly what they're looking for and promising a treat or reward to anyone who helps them find a house.

Planning Ahead for House Visits

Don't get too ambitious-most buyers find that visiting between four and eight houses per day is all they can handle before their brains fry. To make the most of your visits, do some prep work. Make sure you've got not only the complete list of houses you want to visit and a map, but all the items on the House Visit Checklist shown below.

CD-ROM.

You'll find a blank version of the "House Visit Checklist" on the Homebuyer's Toolkit on the CD-ROM included in this book.

While you're looking at a house, the seller's agent (and the seller if present) are evaluating you. Dress comfortably but professionally, without overdoing it. As Realtor Mark Nash puts it, "A lot of bling or overdress means the seller or agent will think you can afford full price. You want to be well groomed, understated, and home-price-range appropriate. This is a business transaction-don't give them a negotiating edge by allowing them to overread you."

Luke: Maybe one place wasn't so bad Maybe one place wasn't so bad.Lorelai: Oh good, describe it to me Oh good, describe it to me.Luke: I don't know. It had walls with a kind of a floor with a light I don't know. It had walls with a kind of a floor with a light.Lorelai: Okay, hold on there, mister. If you tell me it's got a roof, I'm stealing that baby out from under you Okay, hold on there, mister. If you tell me it's got a roof, I'm stealing that baby out from under you.-From the TV series Gilmore Girls Gilmore Girls, 2000 TIP.

If the house has a rental unit, never tell existing tenants what you will or won't do as owner. For instance, saying "I'll keep the rent low" could create false expectations, leading to later arguments. But be friendly, and ask tenants for information concerning roof leaks, sewer backups, break-ins, and more. Tenants may reveal things you'd never learn any other way. For instance, saying "I'll keep the rent low" could create false expectations, leading to later arguments. But be friendly, and ask tenants for information concerning roof leaks, sewer backups, break-ins, and more. Tenants may reveal things you'd never learn any other way.

Unless your child is small enough to carry in a sling or backpack, leave the kids at home for the first visit. Most parents can focus better without chasing a toddler or hearing choruses of "This will be my my bedroom"/"No, bedroom"/"No, mine! mine! " You can (and should) get your kids' okay later. And this should go without saying, but don't bring your pets. " You can (and should) get your kids' okay later. And this should go without saying, but don't bring your pets.

House Visit Checklist Tuck the following into your bag:[image] your Dream List (from Chapter 2). your Dream List (from Chapter 2).[image] your list of Questions for the Seller or Condo/Co-op Checklist (from later in this chapter) your list of Questions for the Seller or Condo/Co-op Checklist (from later in this chapter)[image] your First-Look Home Inspection Checklist (from later in this chapter) your First-Look Home Inspection Checklist (from later in this chapter)[image] a pen and paper, for taking notes a pen and paper, for taking notes[image] binoculars (handy for examining the roof) binoculars (handy for examining the roof)[image] a camera or camcorder, preferably digital, to remind yourself of what you saw a camera or camcorder, preferably digital, to remind yourself of what you saw[image] a tape measure and notes on the type and size of your furniture. a tape measure and notes on the type and size of your furniture.

Come on In: What to Expect as You Enter

Okay, your feet are crossing the welcome mat, and you're getting your first peek inside. The agent is probably in one of the front rooms, happy to greet you and to answer questions. If you've made an appointment, either the seller's agent will let you and your agent in, or the agent will get a key from a lockbox. In rare cases (and with FSBOs), the seller will be there as well.

TIP.

If it's really really awful, you can leave! awful, you can leave! No need to be polite and do the full tour. While some aspects of a house can be changed, such as filthy blinds or old cabinets, trust your instincts and don't waste your time. No need to be polite and do the full tour. While some aspects of a house can be changed, such as filthy blinds or old cabinets, trust your instincts and don't waste your time.

Picking Up the Paperwork

Your first task is to see what paperwork the sellers have made available to you. This might include a property fact sheet, with basic information like the house's size and amenities; a disclosure form that details what the seller personally knows about the condition of the house's features, appliances, and environment; and/or a pest report and possibly a general inspection report, including details discovered by a professional.