essential guide to buying your first home 2nd (2009)

Table of Contents


Title Page
Praise
Copyright Page
Acknowledgements
About the Authors
Your Homebuying Companion
CHAPTER 1 - What’s So Great About Buying a House? Why You Can
and Should Do It

Investment Value: Get What You Pay For … And Then Some
Tax Breaks: Benefits From Uncle Sam
Personality and Pizzazz: Your Home Is Your Castle
No More Mr. Roper: Say Goodbye to Renting
You Can Do It … If You Want To

CHAPTER 2 - What Do You Want? Figuring Out Your Homebuying
Needs

Know Your Ideal Neighborhood: Why Location Matters
Know Yourself: How Your Lifestyle, Plans, and Values Affect
Your House Priorities
Know Your Ideal House: Old Bungalows, New Condos, and More
Would You Like Land With That? Single-Family Houses
Sharing the Joy, Sharing the Pain: Common Interest Properties
Factory Made: Modular and Manufactured Homes
Putting It All Together: Your Dream List

CHAPTER 3 - Does This Mean I Have to Balance My Checkbook?
Figuring Out What

Beyond the Purchase Price: The Costs of Buying and Owning a
Home
Spend Much? How Lenders Use Your Debt-to-Income Ratio
Blasts From the Past: How Your Credit History Factors In
What’s Your Monthly Budget? Understanding Your Finances
Getting Creative: Tips for Overcoming Financial Roadblocks
The Power of Paper: Getting Preapproved for a Loan

CHAPTER 4 - Stepping Out: What’s on the Market and at What Price

What’s the Buzz? Checking Out Neighborhoods From Your Chair
See for Yourself: Driving Through Neighborhoods
On Foot: Talking to the Natives
Sunrise, Sunset: Getting Day and Night Perspectives
Got Houses? Finding Out What’s Locally Available
How Much Did That One Go For? Researching “Comparable”
Sales
Hot or Cold? Take the Market’s Temp
Just Looking: The Open House Tour
Nothing to Look at Yet? Finding Your Dream Development

CHAPTER 5 - Select Your Players: Your Real Estate Team

Your Team Captain: The Real Estate Agent
Your Cash Cow: The Mortgage Broker or Banker
Your Fine Print Reader: The Real Estate Attorney
Your Sharp Eye: The Property Inspector

Your Big Picture Planner: The Closing Agent
Strength in Numbers: Other Team Members

CHAPTER 6 - Bring Home the Bacon: Getting a Mortgage

Let’s Talk Terms: The Basics of Mortgage Financing
Who’s Got the Cash? Where to Get a Mortgage
Narrowing the Field: Which Type of Mortgage Is Best for You?
Getting Your Cash Together: Common Down Payment and
Financing Strategies
Where Do I Look? Researching Mortgages
I’ll Take That One! Applying for Your Loan
Unique Financial Considerations for Co-op Buyers

CHAPTER 7 - Mom and Dad? The Seller? Uncle Sam? Loan Alternatives

No Wrapping Required: Gift Money From Relatives or Friends
All in the Family: Loans From Relatives or Friends
A One-Person Bank: Seller Financing
New Home Financing
Backed by Uncle Sam: Government-Assisted Loans

CHAPTER 8 - I Love It! It’s Perfect! Looking for the Right House

How Your Agent Can Help
The Rumor Mill: Getting House Tips From Friends
Planning Ahead for House Visits
Come on In: What to Expect as You Enter
Do We Have a Match? Using Your Dream List
All the World’s Been Staged: Looking Past the Glitter

Recent Remodels: What to Watch Out For
Walk the Walk: Layout and Floorplan
What Do They Know? Reviewing Seller Disclosure Reports
Reviewing the Seller’s Inspection Reports (If Any)
Poking Around: Doing Your Own Initial Inspection
Hey, Nice Dirt Pile! Choosing a Not-Yet-Built House
Buying a New or Old Condo or Co-op? Research the Community

CHAPTER 9 - Plan B: Fixer-Uppers, FSBOs, Foreclosures, and More

Castoffs: Searching for Overlooked Houses
A Foot in the Door: Buying a Starter House
Have It Your Way: Buying a Fixer-Upper or House You Can Add
on To
Share Your Space: Buying Jointly
Subdivide Your Space: Renting Out a Room
Hey, Where’s Their Agent? Looking for FSBOs (For Sale by
Owners)
On the Auction Block: Buying Short Sale, Foreclosure, or Probate
Properties

CHAPTER 10 - Show Them the Money: From Offer to Purchase
Agreement

Start to Finish: Negotiating and Forming a Contract
More Than Words: What’s in the Standard Purchase Contract
Too Much? Not Enough? How Much to Offer
Keeping Your Exit Routes Open: Contingencies
Putting Your Money Where Your Mouth Is: The Earnest Money
Deposit

Divvy It Up: Who Pays What Fees
Deal or No Deal: Picking an Expiration Date
Think Ahead: Closing Date
Strategies in a Cold Market: What to Ask For
Strategies in a Hot Market: Making Your Offer Stand Out
Contracting to Buy a Brand-New Home

CHAPTER 11 - Toward the Finish Line: Tasks Before Closing

Wrappin’ It Up: Removing Contingencies
Will It Really Be Yours? Getting Title Insurance
Yours, Mine, or Ours? What to Say on the Deed
Get Ready, ’Cause Here I Come: Preparing to Move

CHAPTER 12 - Send in the Big Guns: Professional Property Inspectors

Inspection Overview: What, When, and at What Cost?
House Calls: Your General Inspection
Tagging Along at Your General Inspection
Say What? Understanding Your General Inspection Report
Termite or Pest Inspections
When to Get Other, Specialized Inspections
Trouble in Paradise: Inspecting Newly Built Homes

CHAPTER 13 - Who’s Got Your Back? Homeowners’ Insurance and
Home Warranties

Damage Protection: Hazard Insurance
Protection for Other’s Injuries: Liability Insurance
Your Out-of-Pocket: Homeowners’ Insurance Costs

Shopping Around for Homeowners’ Insurance
Jointly Owned, Jointly Insured: What Your Community
Association Pays For
Home Warranties for Preowned Houses
Home Warranties for Newly Built Houses

CHAPTER 14 - Seal the Deal: Finalizing Your Homebuying Dreams

Preview of Coming Attractions: What Your Closing Will Involve
Is It Really Empty? Final Walk-Through of an Existing House
Is It Really Finished? Final Walk-Through of a New House
Your Last Tasks Before the Closing
The Drum Roll, Please: Attending the Closing
Closing Documents, Part One: Your Mortgage Loan
Closing Documents, Part Two: Transferring the Property
Can I Move In? Taking Possession

CHAPTER 15 - Settling Into Your New Home

Tell the World You’ve Moved
Home, Hearth, and Hors d’Oeuvres: Settle in Socially
The Safest Home in Town: Yours
Cozy Up … Without Breaking The Bank
There’s a Place for It: Organize Your Records
Back to the Future: Get Your Finances on Track
APPENDIX A
Index
NOLO
Sample Forms From the CD-Rom
Questions for Seller Worksheet

Condo/Co-Op Worksheet
Questions for Talking with Locals

“The most complete home-buying book you will find … doesn’t leave out any of the
essentials. On my scale of one to 10, this superb new book rates an off-the-chart 12.”
—Robert Bruss, syndicated real estate columnist


“Coming from a gal that knows tools, this book is a must-have tool for any home buyer. It
offers so much essential information, purchasing a home without it would be like trying to
drive a nail without a hammer!”
—Norma Vally, host of Toolbelt Diva (Discovery Home) and author of
Chix Can Fix: 100 Home Improvement Projects and True Tales From the
Diva of Do-It-Yourself


“Any first-time homebuyer owes it to him or herself to get this book. It’s packed with
information you won’t find anywhere else, yet is remarkably accessible, even when
covering complex financial issues.”
—Elisabeth DeMarse, CEO, Creditcards.com, former CEO, Bankrate.com


“Enthusiasm, hints and tips all rolled into a great read for first-timers.”
—Pat Lashinsky, President of ZipRealty


“…Provides in-depth insight and helpful advice that is easy to understand and use.”
—Rob Paterkiewicz, CAE, IOM, Executive Director, American Society of
Home Inspectors

“Like having over a dozen real estate experts over for dinner.”
—Steve Kropper, President, Bank on Real Estate, founder of
Domania.com


“Nolo’s excellent guide for novice home buyers provides fresh, updated information
about the whole process that even those in the know will find useful.”
—Library Journal


The NOLO Story

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Bray, Ilona M., 1962-Nolo’s essential guide to buying your first home / by Ilona Bray, Alayna
Schroeder, & Marcia Stewart. 2nd ed. p. cm.
ISBN-13: 978-4133-0935-5 (pbk.) ISBN-10: 1-4133-0935-6 (pbk.)
1. House buying. I. Schroeder, Alayna, 1975- II. Stewart, Marcia. III. Title.
HD1390.5.B734 2009
643’.12 dc22
2008037049



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Acknowledgments

We didn’t really write this book.
Well, we did, just not by ourselves. This book was a 100% team effort
and couldn’t have been written without the advice, stories, and ideas of
real estate experts and homebuyers from around the United States. First
and foremost, we thank the members of our advisory board, who spent
countless hours reviewing chapters, explaining local practices, and

sharing the best and worst memories from their professional experiences.
Special thanks to Broderick Perkins, a real estate journalist based in San
Jose, California, and founder and Executive Editor of DeadlineNews.Com
(www.deadlinenews.com), who reviewed and contributed to every
chapter.
Our other invaluable sages included:
• Asheesh Advani, President of Virgin Money USA,
(www.virginmoneyus. com), and an expert in alternative forms of
home financing
• Nancy Atwood, Designated Broker with ZipRealty in Framingham,
Massachusetts (www.ziprealty.com)
• Steve Elias, attorney, author, and community radio programmer in
Lakeport, California. He writes blogs on bankruptcy and
foreclosure law, and books on a variety of subjects, all of which
can be accessed through the Nolo website at www.nolo.com.
• Stephen Fishman, Bay Area attorney, tax expert, and author
(many of his books are available from www.nolo.com)
• Sandy Gadow, expert on real estate closing and escrow, and best-
selling author of The Complete Guide to Your Real Estate Closing
(www.escrowhelp.com)
• Paul Grucza, author, TV show host, and faculty member of the
Community Associations Institute (CAI), (www.caionline.org)
• Mary I. Husk, Director of Faculty Development for The National
Alliance for Insurance Education & Research in Austin, Texas
(www.scic.com)
• Richard Leshnower, New York-based real estate attorney
• Mark Nash, Associate Broker with Coldwell Banker, who serves
the Chicago, Evanston, Skokie, and Wilmette areas of Illinois
(www.marknashrealtor.com), and author of 1001 Tips for Buying
& Selling a Home

• Paul A. Rude, professional inspector and owner of Summer Street
Inspections, in Berkeley, California (www.summerinspect.com)
• Bert Sperling, city and neighborhood expert and author in
Portland, Oregon, and founder of www.bestplaces.net
• Fred Steingold, attorney and author in Ann Arbor, Michigan
(many of his books on small business and other legal matters can
be found on www.nolo.com)
• Russell Straub, founder, President, and Chief Executive Officer of
LoanBright, a mortgage intermediary service based in Evergreen,
Colorado (see www.loanbright.com and
www.compareinterestrates.com).

A number of other experts provided additional advice—you’ll see
many of them quoted in this book. They include Neil Binder, New York
real estate investment expert (www.bellmarc.com); Elisabeth DeMarse,
CEO, Creditcards.com, former CEO of Bankrate.com, and New York-
based real estate industry expert (www.demarseco.com); Kartar Diamond
(www.fengshuisolutions.net); Debbie Essex, child and family therapist
based in Berkeley, California; Joanna Hirsch, real estate agent with
Pacific Union in Oakland, California (); Joel
Kinney, attorney with Goldstein & Herndon, LLP, in Chestnut Hill,
Massachusetts (www.brooklinelaw.com); Annemarie Devine Kurpinsky,
associate with George Devine, Realtor® (www.georgedevinerealtor.com);
Pat Lashinsky, President, ZipRealty (www.ziprealty.com); Jeff Lipes,
President of Family Choice Mortgage in South Yarmouth, Massachusetts
(www.familychoicemortgage. com); Maxine Mackle, Connecticut
Realtor® (www.country-living.com); Paul MacLean, retired home
inspector in Austin, Texas; Carol Neil, retired Realtor®; Fiore Pignataro,
Realtor® with Windermere Realty in Seattle, Washington
(www.windermere.com); Lorri Lee Ragan, of the American Land Title

Association (www.alta.org); Mary Randolph, attorney and author at Nolo
(www.nolo.com); Frank Rathbun, Vice President of Communications,
Community Associations Institute (www.caionline.org); Ira Serkes,
Berkeley RE/MAX Realtor® (www.berkeleyhomes.com,
www.berkeleyblogcast.com); Debbie Stevens, Oregon real estate agent
(www.ramsayrealty.com); Rich Stim, attorney and Nolo author
(www.nolo.com); and Craig Venezia, real estate author
(www.craigvenezia.com).
No amount of advice can substitute for a personal story, so we’d also
like to thank the many homebuyers who shared the good, the bad, and the
ugly of their own experiences or told us what they’d like from this book,
including Amy Blumenberg, Laurie Briggs, Dave and Danielle Burge,
Karen Cabot, Linda Chou, Jennifer Cleary, Jaleh Doane, Phil Esra, Lisa
Guerin, Gabrielle Hecht, Pat Jenkins, Ellie Kania, Justin and Tamara
Kennerly, Chris and Libby Kurz, Talia Leyva, Willow Liroff, Meggan
O’Connell, Evan and Tammy Ohs, Leny and Frank Riebli, Leah Scheibe,
Diane Sherman, Bruce Sievers, Luan Stauss, Tom and Heather
Tewksbury, Josh and Gillian Viers, Julie and Malachi Weng-Gutierrez,
and Kyung Yu.
Within Nolo, we got huge amounts of help from our talented
colleagues. Special thanks to Lexi Elmore, who gave us a 20-something,
Internet-savvy perspective—and a lot of stellar research and writing help.
Rich Stim did an excellent job with the audio interviews on the CD-ROM.
Other colleagues who lent a hand, researching everything from 50-state
legal matters to fun facts, included Cathy Caputo, Stan Jacobsen, Terry
McGinley, Leah Tuisavalalo, and Joe Warner. Sandy Coury and Sigrid
Metson helped line up advisory board members.
Big thanks go to our colleagues in the editorial department, who
supported us through the (long) process of writing this comprehensive
(and yet fun!) text. Kudos to Susan Putney in Nolo’s Production

Department who took a challenging compilation of information and
turned it into a beautifully designed book. And to Ellen Bitter in Nolo’s
Application Development Department for helping put together the capital
Homebuyer’s Toolkit on the CD-ROM.
Thanks also to Nolo founder Jake Warner, who championed this book
idea for many years.
Our basements may be cluttered, our gardens may need weeding, and
our floors may need a good scrubbing—but we love our homes. Thanks to
the people who helped us get there—professionals (some who taught us
what to do, others who taught us what not to do!) and our families, who
share the joy of homeownership with us.
About the Authors

Ilona Bray is an attorney, author, and legal editor at Nolo. Her other real
estate books include The Essential Guide for First-Time Homeowners and
Selling your House in a Tough Market, both co-authored with Alayna
Schroeder. Her working background includes solo practice, nonprofit, and
corporate stints. She recently celebrated her own house’s 90th birthday—
it’s a 1917 Arts and Crafts bungalow, with the original woodwork and
leaded glass intact. Her fantasy house would be a Greene & Greene
mansion of the same style (like the Gamble House in Pasadena), with a
large sun porch and lots of surrounding trees.
Alayna Schroeder is a member of Nolo’s editorial staff whose legal
career has taken her from corporate law firm to consulting to a stint in the
Peace Corps. According to Sacramento Magazine, the home she shares
with her husband and Bolivian-born dog, Luna, is in one of the
Sacramento area’s ten Great Neighborhoods—a fact Alayna tries to
remember as she redoes the aging plaster and labors over the new patio.
Alayna’s idea of a fantasy house is always changing, but she’d settle for
an A-frame in the woods with a lake view, big deck, and gourmet kitchen.

Marcia Stewart is the author or editor of many Nolo real estate books,
including the best-selling Every Landlord’s Legal Guide. Years ago, she
found the perfect “starter” house in one of her favorite neighborhoods. As
her family started to grow, so did the house, with a new second story and
deck. Someday, Marcia may even get around to remodelling her 1950s
kitchen—if she doesn’t give it up for her fantasy house first. That would
be a Queen Anne Victorian on a tropical beach, with a sunny kitchen,
home theater, and a detached cottage office.

List of Forms and Resources in the Homebuyer’s
Toolkit on the CD-ROM

Tools for Househunting

Dream List Directions
Dream List
Questions for Talking With Locals
Common Real Estate Abbreviations
House Visit Checklist
Questions for Seller Worksheet
First-Look Home Inspection Checklist
Condo/Co-op Worksheet
Cobuyer Discussion Worksheet
Homeowners’ Insurance Terminology
Financial Tools

Debt-to-Income Ratio Worksheet
Financial Information for Lenders
Gift Letter
Private Loan Terms Worksheet

HUD-1 Settlement Statement
Tools for Choosing Professionals

Real Estate Agent Interview Questionnaire
Real Estate Agent Reference Questionnaire
Mortgage Broker Interview Questionnaire
Mortgage Broker Reference Questionnaire
Attorney Interview Questionnaire
Attorney Reference Questionnaire
Home Inspector Interview Questionnaire
Home Inspector Reference Questionnaire
Tools for Evaluating a House’s Physical Condition

Indiana Seller’s Residential Real Estate Disclosure
California Real Estate Transfer Disclosure Statement
California Natural Hazard Disclosure Statement
Sample Home Inspection Report
Final Walk-Through Checklist (Existing Home)
Final Walk-Through Checklist (New Home)