Buy My Home

Homeownership is said to be integral to the American Dream. While that sounds aspirational and amazing, what are the tangible reasons buying a home is beneficial to your overall financial health and stability?

1. Tax breaks. The U.S. Tax Code lets you deduct the interest you pay on your mortgage, your property taxes, as well as some of the costs involved in buying your home.
   
   
2. Appreciation. Real estate has long-term, stable growth in value. While year-to-year fluctuations are normal, median existing-home sale prices have increased on average 6.5 percent each year from 1972 through 2005. In addition, the number of U.S. households is expected to rise 15 percent over the next decade, creating continued high demand for housing.
   Equity. Money paid for rent is money that you’ll never see again, but mortgage payments let you build equity ownership interest in your home.
   
   
3. Savings. Building equity in your home is a ready-made savings plan. And when you sell, you can generally take up to $250,000 ($500,000 for a married couple) as gain without owing any federal income tax.
   
   
4. Predictability. Unlike rent, your fixed-mortgage payments don’t rise over the years so your housing costs may actually decline as you own the home longer. However, keep in mind that property taxes and insurance costs will increase.
   
   
5. Freedom. The home is yours. You can decorate any way you want and benefit from your investment for as long as you own the home.
   
   
6. Stability. Remaining in one neighborhood for several years gives you a chance to participate in community activities, let's you and your family establish lasting friendships, and offers your children the benefit of educational continuity.

Getting started in your first home purchase or your fifth includes essentially the same steps. It’s a multitude of considerations including evaluating your wants and needs, deciding on the ideal home style and neighborhood, and making sure you are financially ready. That may sound daunting, but it’s an exciting time to explore your options and your REALTOR® will be there every step of the way.

1. Wants vs. Needs.
   These are all important questions to ask yourself as you begin the home search process. Your agent will open the door to a bigger and better real estate market and create a plan that will allow you to find a home that’s as unique as you once you have examined your fundamental wants and needs.
   1. What are you looking for in your next home?
   2. How much space will you need?
   3. Are there specific amenities you can’t live without?
   4. How long do you intend to stay in the home?
      
      
2. Ideal Home Style and Neighborhood. Decide what is important for location. Do you want to be close to work, school, your place of worship or specific city amenities? What home styles speak to you? You will find list making and pros vs. cons analyses an important part of your journey and your answers will be invaluable pieces of the puzzle for you and your REALTOR® as you begin your search.
   
   
3. Financial Readiness. Obtaining pre-approval shows sellers that you are equipped to purchase and helps you hone in on a purchase price range you find most comfortable. This is important so you don’t search for homes too high or too low for your situation. Getting preapproved requires that a lender verify your financial information, and it serves as their commitment to lend a specified amount based on that information. It will give you a number of advantages. When you find a property, sellers will take your offer more seriously given that you have a lender that has committed to backing your offer. It also gives you the assurance that you’re looking at homes you can confidently afford to finance. Your efforts will be focused on properties that match your financing abilities. You’ll have an edge over other buyers who aren’t pre-approved. In situations where there are multiple offers on a property, this can be the difference between having your offer accepted or losing the property to another buyer.

In Indiana, REALTORS® are trained through 90 hours of instruction at an accredited school and pass a licensing exam. Additionally, they must also complete 30 hours of post-licensing education every two years in order to maintain their licenses. Any agent who identifies him- or herself as a REALTOR® has affiliated with the National Association of REALTORS® and has pledged to adhere to their code of ethics and professional standards. All sales associates with the F.C. Tucker Company are REALTORS®.

REALTORS® are essentially counselors who are your expert guide through a new, unknown process. A REALTOR® will help you search and find a home, guide you through the offer process, help you finalize financing, and direct you through the closing process.

Real estate agents are paid on commission, generally a percentage of the selling price of the home. The commission for a particular transaction is established in the listing agreement between the seller and his/her agent. The commission is paid at closing. The selling agent's broker receives a portion of the commission, and the buying agent's broker receives the other part. Each agent's broker then pays him/her a portion of the commission.

1. Let People Know You Are Working With An Agent. After you have established a relationship with an agent, it’s important to include that agent in any activity you conduct on your own. If you visit open houses or a builder’s model, you will likely be asked if you “have an agent?” Say yes and let your agent know where you have been. Your REALTOR® can then quickly follow up on more detailed information.

As you begin your home search, your agent will provide you with access to all properties in the Broker Listing Cooperative® (BLC®). By constantly monitoring properties that come on the market, price changes and appraised values, your agent will guide you through this ever-changing market. When you find a property that you would like to visit, your agent will then work with the seller’s agent to coordinate a day and time that works with your schedule.

Additionally, F.C. Tucker has a wide array of tools that we can use to make sure you never miss an opportunity. The TalktoTucker.com website is the largest, fastest in the local market. Additionally, the Tucker App provides a unique search experience and is just one more reason to work with an F.C. Tucker agent.

• It’s FAST. New listings appear within 9 minutes of hitting the market.
• National search sites can’t match our speed or accuracy.
• The Tucker app has 100% of the homes, not just ours, everyone’s. You don’t need to look anywhere else. And the app is so easy to use, you won’t WANT to look anywhere else.
• Over 6,500 Tucker-exclusive photos of over 800 neighborhoods– photos not found on any other app.
• In-depth statistics and analysis at the neighborhood level.
• Find out what homes have sold for and which ones are pending.
• The Tucker app is one of the only places to accurately see which homes are accepting backup offers.
• Find every upcoming open house from every participating company.
• Create advanced saved searches and save your favorite homes.
• If you wish, you’ll receive daily emails of new listings and/or price changes.
• You can even take private notes, and add your own photos to listings as you tour homes during your buying process.

Presenting a successful offer is part art, part science, part dance. Your agent knows the market and knows what asking price is fair and competitive. Your agent will also guide you through the steps of an offer which include laying out not just the price you wish to offer, but all the terms, conditions and timelines.

In order to do this, F.C. Tucker agents use a leading paperless solution through DotLoop to securely manage your documents. This, secure cloud-based program allows everyone involved in your transaction to manage, share and sign documents through mobile technology.

You and your agent will decide on all terms - and the all-important price - and your agent will present the offer to the seller’s agent who will review the offer with their client - the seller. They will then either reject, accept or request concessions to your offer. The offer process can begin a process of multiple offers and changing terms in order to agree to terms that are favorable to all. This can be an emotional step, but your agent will guide you through it all.

These terms are often confused, however one thing is common. Navigating both will likely be the time you will rely most heavily on your REALTOR®. Your agent has seen it all and is bound to represent your interests first and foremost. After you have carefully considered any counter-offers and agreed, it’s time for inspections. It’s quite likely that an offer is contingent on inspection meaning any defects or faults in the home found through the inspection process are revealed and the plan for rectifying them is resolved between the buyer and seller. The inspector will provide a detailed report for your review.

An appraisal is a written report comparing the condition and features of a particular property with others of a similar nature. Its purpose is to produce a professional estimate of the market value of the property. Virtually every mortgage lender requires an appraisal performed by a licensed appraiser. The property must appraise for at least the amount of the purchase price, or the lender will not extend financing. When you apply for a mortgage, your loan officer will immediately want to see a copy of your signed purchase agreement, and then he/she will order an appraisal.

After an offer is accepted on both sides, the process to complete the appraisal and schedule the closing takes about 30-45 days, however it can be completed more quickly in rare cases.

Closing is the conclusion of the real estate transaction, and your REALTOR® will be an invaluable asset in helping you prepare for it. The closing process varies from state to state. In Indiana, closing is done face-to-face; that is, the buyer and seller sit down at the same table to complete the sale. A face-to-face closing involves the resolution of two issues; first, the promises made in the sales contract are fulfilled, and second, the buyer's loan is finalized, and the mortgage lender disburses the loan funds. It may be conducted at the title company or lender's office or at some other mutually agreeable location.

Closing includes many, many signatures, an exchange of documents, the handing over of keys and maybe some champagne - congratulations!

Homeownership is said to be integral to the American Dream. While that sounds aspirational and amazing, what are the tangible reasons buying a home is beneficial to your overall financial health and stability?

1. Tax breaks. The U.S. Tax Code lets you deduct the interest you pay on your mortgage, your property taxes, as well as some of the costs involved in buying your home.
   
   
2. Appreciation. Real estate has long-term, stable growth in value. While year-to-year fluctuations are normal, median existing-home sale prices have increased on average 6.5 percent each year from 1972 through 2005. In addition, the number of U.S. households is expected to rise 15 percent over the next decade, creating continued high demand for housing.
   
   
3. Equity. Money paid for rent is money that you’ll never see again, but mortgage payments let you build equity ownership interest in your home.
   
   
4. Savings. Building equity in your home is a ready-made savings plan. And when you sell, you can generally take up to $250,000 ($500,000 for a married couple) as gain without owing any federal income tax.
   
   
5. Predictability. Unlike rent, your fixed-mortgage payments don’t rise over the years so your housing costs may actually decline as you own the home longer. However, keep in mind that property taxes and insurance costs will increase.
   
   
6. Freedom. The home is yours. You can decorate any way you want and benefit from your investment for as long as you own the home.
   
   
7. Stability. Remaining in one neighborhood for several years gives you a chance to participate in community activities, lets you and your family establish lasting friendships, and offers your children the benefit of educational continuity.

Buying or selling a home requires forms, reports, documents, and statements. A knowledgeable expert will help you prepare the best deal and avoid delays or costly mistakes.

Get objective information and opinions. A professional, licensed REALTOR® can provide local community information on utilities, zoning, schools, and more. That agent will also be able to provide objective information about each property and help you answer these two important questions: Will the property provide the environment you want for a home or investment, and will the property have resale value when you are ready to sell?

Find the best property out there. It will take some investigation by your REALTOR® to find all available properties.

Benefit from our negotiating experience. There are many negotiating factors, including but not limited to, price, financing, terms, date of possession, and inclusion or exclusion of repairs, furnishings, or equipment. An agent can advise you as to which investigations and inspections are recommended or required.

Before you talk to a builder, talk to an agent. REALTORS® are new home specialists. There is no cost to you. An agent can help you determine what you should receive and what “extras” might be available. Questions concerning site location, builder, design and decor are important, and an agent can provide insight into which amenities will add to the resale value of your home.

When visiting an open house. The agent who is holding the open house represents the seller. Their fiduciary duty is to the seller, which means they must represent the seller to the best of their abilities. Anything you say to that agent can be used during negotiations. A buyer’s agent always has your best interests in mind. If you are already working with a buyer’s agent, be sure to let the open house agent know with whom you are working.

Credit scores, along with your overall income and debt, are big factors in determining whether you’ll qualify for a loan and what your loan terms will be. So, keep your credit score high by doing the following:

Obtain free credit report. Secure a report from www.annualcreditreport.com and check for any errors but discuss with lender before making any corrections or paying off anything if within 12 months of buying.

Pay down credit card bills. If possible, pay off the entire balance every month. Transferring credit card debt from one card to another could lower your score.

Don’t charge your credit cards to the maximum limit.

No big purchases. Don’t order items on credit such as appliances and furniture, until after you close on your new home.

No new accounts. Don’t open new credit card accounts before applying for a mortgage. Too much available credit can lower your score.

Shop for mortgage rates all at once. Too many credit applications can lower your score.

Avoid finance companies. Even if you pay the loan on time, the interest is high and it will probably be considered a sign of poor credit management.

This information is copyrighted by the Fannie Mae Foundation and is used with permission of the Fannie Mae Foundation. To obtain a complete copy of the publication, “Knowing and Understanding Your Credit”, visit www.homebuyingguide.org.

Getting preapproved requires that a lender verify your financial information, and it serves as their commitment to lend a specified amount based on that information. It will give you a number of advantages. When you find a property, sellers will take your offer more seriously given that you have a lender that has committed to backing your offer.

It also gives you the assurance that you’re looking at homes you can confidently afford to finance. Your efforts will be focused on properties that match your financing abilities.

You’ll have an edge over other buyers who aren’t pre-approved. In situations where there are multiple offers on a property, this can be the difference between having your offer accepted or losing the property to another buyer.

Fixed-Rate Mortgage

The interest rate stays the same for the entire term of the loan —usually 15 or 30 years — so the interest and principal portions of your monthly payment remain the same. Your payments are stable and predictable, but initial interest rates tend to be higher on a fixed-rate mortgage than on adjustable-rate loans.

Adjustable-Rate Mortgage (ARM)

The interest on an adjustable-rate mortgage is linked to a financial index, such as a Treasury security, so your monthly payments can vary, up or down, over the life of the loan - usually 30 years. Some adjustable-rate mortgages have a cap on the interest rate increase to protect the borrower. The lower initial payments on ARMs make it easier for buyers to qualify.

Conventional Loan

A conventional loan can have as little as 3% down with mortgage insurance. To avoid mortgage insurance, you have to have a minimum of 20% down. The maximum amount for conventional loans is $424,100. Loans above $424,100 require a jumbo loan. The advantage of a conventional loan is that there is no upfront mortgage insurance payment and mortgage insurance can be removed when you have paid the loan down to 80%.

FHA

An FHA loan requires at least a 3.5% down payment. The advantage of an FHA loan is that it has lower credit score guidelines and allows higher debt to income ratios to qualify. This is generally a good choice for first time homebuyers, but be sure to talk to a trusted lender to determine if this is the right product for you.

VA

A VA loan requires zero down payment and does not require mortgage insurance. It also has lower credit score guidelines and allows higher debt to income ratios. This loan is reserved for qualified veterans. To determine if you qualify, you can work with your trusted lender to obtain your certificate of eligibility.

USDA

USDA loans require zero down payments, but they do require guarantee insurance, which is similar to mortgage insurance. Homes are restricted to designated rural areas determined by USDA, and USDA has maximum household income limits for eligibility.

Loan Pre-Application Checklist

When applying for a mortgage, your loan officer will require some information and documentation to finalize the application.

Information Needed For Application

• Full Name, date of birth, and Social Security Numbers for all borrowers
• Last 2 years residence history (dates included)
• Last 2 years employment history (dates and job title)

Documentation Needed For Application

• Last 2 pay stubs for all borrowers
• Last 2 years W2’s / 1099’s for all borrowers
• Last 2 months bank statements (all pages)

Additional Items may be required

These are all important questions to ask yourself as you begin the home search process. Your agent will open the door to a bigger and better real estate market and create a plan that will allow you to find a home that’s as unique as you once you have examined your fundamental wants and needs.

• What are you looking for in your next home?
• How much space will you need?
• Are there specific amenities you can’t live without?
• How long do you intend to stay in the home?

As you begin your home search, your agent will provide you with access to all properties in the Broker Listing Cooperative® (BLC®). By constantly monitoring properties that come on the market, price changes and appraised values, your agent will guide you through this ever-changing market. When you find a property that you would like to visit, your agent will then work with the seller’s agent to coordinate a day and time that works with your schedule. Additionally, F.C. Tucker has a wide array of innovative technology tools that we can use to make sure you never miss an opportunity. The TalktoTucker website is the largest, fastest in the local market. Additionally, the Tucker App provides a unique search experience and is just one more reason to work with an F.C. Tucker agent.

• It’s FAST. New listings appear within 9 minutes of hitting the market.
• National search sites can’t match our speed or accuracy.
• The Tucker app has 100% of the homes, not just ours, everyone’s. You don’t need to look anywhere else. And the app is so easy to use, you won’t WANT to look anywhere else.
• Over 6,500 Tucker-exclusive photos of over 800 neighborhoods– photos not found on any other app.
• In-depth statistics and analysis at the neighborhood level.
• Find out what homes have sold for and which ones are pending.
• The new Tucker app is one of the only places to accurately see which homes are accepting backup offers.
• Find every upcoming open house from every participating company.
• Create advanced saved searches and save your favorite homes.
• If you wish, you’ll receive daily emails of new listings and/or price changes.
• You can even take private notes, and add your own photos to listings as you tour homes during your buying process.

Before an offer is even written, your agent will provide you with a snapshot of the marketplace, including listings in the area that are comparable to the property you want. This crucial information will help establish an appropriate starting offer and ensure that your offer stays competitive. Your agent will then write the offer and present it with the necessary research and documentation to the seller’s agent for review.

Paperless documentation is key. The home sale process can generate hundreds of pages of paperwork that must be exchanged, delivered and saved. F.C. Tucker uses a leading paperless solution through DotLoop to securely manage your documents. This, secure cloud-based program allows everyone involved in your transaction to manage, share and sign documents through mobile technology.

Offer. You will work with your buyer’s agent to create a purchase agreement. The purchase agreement is where you set out the specific terms under which you will purchase the property. You can negotiate price, possession, closing date, which appliances stay with the home, taxes, inspection, and much more. Your agent will help you determine the best approach to negotiating each of the items. The seller can then accept, reject or counter the offer.

Counteroffer. The counteroffer(s) is where you and the seller work toward an agreement acceptable to both parties. There may be several counteroffers before you reach the final agreement.

Earnest Money. Earnest money allows the buyer the opportunity to show the seller that they are “earnest” about their offer. Earnest money is submitted with an offer and the check is deposited and held by the listing agent’s broker upon acceptance of the offer. Earnest money is held in a non-interest-bearing account and is applied to the buyer’s down payment costs at closing.

Contingencies. Contingencies are conditions that must be met for the purchase of the home to proceed. Common contingencies include financing, inspection, insurance, and appraisal.

After the sale and before closing, your agent will:

• Refer you to the F.C. Tucker Home Services Network — an exclusive, free service for Tucker customers— which will offer you the services of a personal service coordinator to connect you to contractors, painters, etc.
• Assist in obtaining a homeowners’ insurance policy.
• Coordinate possession details and final utility readings.
• Help you arrange for any necessary inspections of the property to evaluate the major elements of the home and review the report with you.
• Assist you in determining the appropriate financing and help you select the best financial institutions to obtain your mortgage.
• Inform you of the amount that your wire transfer will need to be at the time of closing. Most banks require ten days for any deposit to clear before they will issue a wire transfer.
• Assist you in obtaining a Power of Attorney if needed.

Key closing terms:

Appraisal. For purchases where a lender is involved, the appraisal is ordered by the lender. The appraisal must meet the purchase price of the home for the lender to agree to finance the purchase. Appraisals are a subjective opinion of the market value of the property and, thus, can sometimes come in lower than the purchase price of the property.

Inspection. The inspection process is designed to help the buyer understand the condition of the home they are purchasing. I always recommend that a buyer get a home inspection. The inspection is ordered by the buyer and paid for at the time of the inspection. An inspector will look for safety issues, major repair items, and maintenance items. Once the inspection is complete, we will work together to determine if we want the seller to make repairs to the home before the purchase moves forward.

Insurance. Homeowners will need to apply for homeowner’s insurance. They should be prepared to provide the BLC® sheet to their insurance agent. Flood insurance can be costly, so a buyer needs to know if flood insurance will be required.

Final Walkthrough. The final walkthrough is an opportunity for the buyer to ensure that all repairs have been made and that the sellers have left the home in “broom-swept” condition. Buyers should also make sure that all appliances that the sellers agreed to leave are in the home.

Now that the home is officially yours, the fun part begins. Do you need to hire a moving company, painter, plumber or any other professional? No one can serve you better than F.C. Tucker’s Home Services network to make sure life in your new home is off to a great start.

F.C. Tucker Home Services

Your dedicated Personal Service Coordinator will work with you to provide the information and services you need before, during and after your move. Through the F. C. Tucker Home Services Network you will receive a higher level of service and may receive savings for a variety of requests including, roofing and siding, moving companies, security systems, general contractors, lawn care/ landscaping, painters, heating and cooling, carpet cleaners, flooring, plumbing, carpentry, windows and doors, electricians, remodeling, window treatments and over 200 additional services.

Home Warranties

Home warranties are designed to insure the home buyer against budget-busting repairs of critical systems in your new home. It is important for the buyer to understand any limitations to their coverage and to call the home warranty company first if a repair is needed.

What Is a REALTOR®?

Every state has its own laws governing real estate licensing; there is no national license. In Indiana, agents are required to successfully complete 90 hours of instruction at an accredited school and to pass a licensing exam. They must also complete 30 hours of post-licensing education every two years in order to maintain their licenses. In addition, any agent who identifies him- or herself as a REALTOR® has affiliated with the National Association of REALTORS® and has pledged to adhere to their code of ethics and professional standards. All sales associates with the F.C. Tucker Company are REALTORS®.

Real estate agents must affiliate with a broker before they can conduct real estate transactions. They operate on behalf of the broker, and he/she is legally responsible for their professional conduct. Any listings an agent has legally belong to the broker.

Who Do REALTORS® Represent?

The answer to this question used to be somewhat complex, but in recent years, the laws have been simplified. Now, agents working with a buyer represent the interests of the buyer and those working with a seller represent the interests of the seller. In practical terms, this means that whether you are a buyer or seller, your agent is now required to:

• Exercise reasonable skill and care in performing their duties
• Deal with you as a client honestly and fairly
• Disclose all facts which are known to the agent (or may be reasonably discovered) that affect the value or desirability of any property you are considering.
• The only exception to this law is when a buyer wants to buy a home listed by his/her own agent-or by an agent affiliated with the same broker (since the listings legally belong to the broker). In this situation, the agent becomes a "limited agent," representing the interests of both parties. This limited agency must be disclosed, and both the buyer and the seller must give their consent in writing for the transaction to move forward.
  
  

How Are REALTORS® Paid?

Real estate agents are paid on commission, generally a percentage of the selling price of the home. The commission for a particular transaction is established in the listing agreement between the seller and his/her agent.

The commission is paid at closing. The selling agent's broker receives a portion of the commission, and the buying agent's broker receives the other part. Each agent's broker then pays him/her a portion of the commission.

Why Should You Work With a REALTOR® When You Buy?

There are many compelling reasons to use a real estate agent when you buy a home:

• They have access to the Broker's Listing Cooperating® (BLC®) which allows them to search for available homes that meet your criteria.
• They will handle the administrative details of scheduling showings for the homes you would like to see.
• They save you time by providing you with information about schools, neighborhoods, etc.
• When you find a home you think you might be interested in, they can use the BLC® to find out the list prices of other homes for sale in the area as well as the sales prices of those that have recently sold. This can help you determine the fair market value of the home before you make an offer.
• They will guide you through the maze of offers and counteroffers, inspections and amendments-always looking out for your best interests. Their advice and insight in these areas can help you avoid potential pitfalls and may save you from costly errors. Your agent will know, for example, which items in the home need to be included in the purchase agreement; some items can be assumed to stay with the house while others must be specifically stipulated. If the inspection uncovers problems, your agent will help you negotiate changes with the seller. Most real estate agents will not tell you what to do, but their training, previous experiences, and professional contacts can help you make better, more informed decisions.
• They can help you research companies that assist with real estate such as mortgage, inspections, repairs, etc.
• They will explain the closing process and all of the paperwork involved.
  
  

Why Should You Work With an F.C. Tucker REALTOR® When You Buy?

The F.C. Tucker Company was founded by Fred C. Tucker, Sr., in 1918. His vision and values were passed to his son, Bud Tucker, and to his grandson, Fred C. Tucker, III, who leads the company today. The F.C. Tucker Company is the market leader. In such a competitive industry, that kind of success does not happen accidentally.

The F.C. Tucker Company leadership has worked hard to listen to consumers, anticipate their needs and stay ahead of the trends.

• More knowledge - Tucker has its own full-time training department which provides pre-service and in-service training to our agents. We have a state-of-the-art computer lab where agents can stay on top of technological advances.
• More professionalism - In addition to the superior training they receive, all F.C. Tucker agents devote themselves to real estate full time. Your agent won't be waiting tables when you want to see a home.
• More offices - We have 14 offices throughout the Indianapolis area, and unlike our "individually owned and operated" competitors, our offices all work together. Wherever you are in the city, you'll have convenient access to F.C. Tucker Company resources.
• More hours - Our offices are open, even with some weekend hours (except holidays), and into the evening on weekdays, making them more accessible when you need them.
• More support - We have more support staff which frees our agents to serve you more efficiently.
• More access to support businesses.
• Each F.C. Tucker office hosts a mortgage loan officer from Tucker Mortgage. While you are in no way obligated to use our mortgage company, the loan officers are easily accessible if you choose to finance your home through them.
• Our title company, Title Services, L.L.C., is headquartered in the same building as the mortgage company.
  We offer home warranties through HMS Warranties. These warranties cover problems not protected by your homeowner's insurance policy.
• Tucker's Home Services will help you move into and maintain your new home: everything from changing utilities, enrolling your kids in school, finding a contractor, or purchasing a new refrigerator - all at no cost to you. Once you enroll in this program, you can use these services whenever you need them. No other company in the state offers such premier customer service.
  
  

How Do You Find a REALTOR®?

You'll want to keep several things in mind as you select a real estate agent. Remember that during your search you may spend a significant amount of time with this agent, so he/she should be someone you can enjoy. You will be seeking your agent's advice on one of the most important decisions you will make, so he/she should be someone you can respect. In the course of your search, you may need to share intimate details of your finances, so your agent should be someone you can trust. In addition, you'll want an agent who will know when to share his/her opinion straightforwardly and when to listen to your opinions.

Before you progress too far into the home-buying process, it's a good idea to talk with a lender about pre-qualifying for a loan. Pre-qualification will let you know how much money you will be able to borrow, so that you know your price range for your home search. Having a pre-qualification letter also assures sellers that you are a serious potential buyer.

Every F. C. Tucker office has a Loan Officer located on site to help you understand your options. Pre-qualifying with a lender does not obligate you to finance your mortgage through that company.

What you can afford will depend on your income and your debt. In general, lenders don't want borrowers to spend more than 28 percent of their gross monthly income on a mortgage payment (your "housing expense ratio") or more than 36 percent on all debt payments combined (your "debt-to-income ratio.") They will define your total mortgage payment as the sum of your principal, interest, taxes, and insurance (known by the acronym PITI), and they will define your long-term debt as any monthly payments which will take ten months or more to pay off.

Low housing expense and debt-to-income ratios do not guarantee that you will qualify for a loan; neither do high ratios always signal a denial. In addition to your gross income and your current debt, potential lenders will consider these factors to determine how much you can borrow:

• The amount of cash you have available for the down payment investment, closing costs and necessary reserves
• Your credit history
• The type of mortgage you are considering
• Current interest rates
• It is true, however, that the more you increase your other debt, the less borrowing power you have for a mortgage.

Follow these steps to get a general idea of how you will pre-qualify:

• Calculate your gross monthly income.
• Multiply your gross monthly income by 28% (.28). This is your maximum monthly housing expense payment.
• Multiply your gross monthly income by 36% (.36). This is your maximum allowable total debt payment.
• How much do you owe each month on long-term debt payments (e.g., credit cards, loans, child support payments, etc.)? Enter that number here.
• Subtract line 4 from line 3 to determine the maximum amount you can spend on debt. This is the income you have available for your monthly mortgage payment.
• Use the smaller of line 2 and line 5 as your maximum housing payment. Multiply that number by 75% (.75). (This assumes that 25% of your payment would be spent on taxes and insurance.)

Line 6 is the maximum monthly principal and interest you can afford. The following table will show you how the monthly payment relates to your loan amount.

What Lenders Need to See

We said earlier that potential lenders will consider six factors to determine how much you can borrow:

• Your gross income
• The amount of cash you have available for the down payment investment, closing costs and necessary reserves
• Your current debts
• Your credit history
• The type of mortgage you are considering
• Current interest rates
• To verify your income, you will need to provide your lender with
• Recent pay stubs
• Two years of W-2 statements
• Two years of federal tax returns
• To verify your available cash, your lender will want to see your two most recent bank statements for both your savings and checking accounts.

To verify your current debts and your credit history, your lender will order a copy of your credit report. Even if you don't anticipate any problems, it's a good idea to order a copy of your report before you begin the loan application process. This will give you time to clean up any errors or problems that may show on the report.

You can obtain a copy of your credit report from one or all of the three credit reporting agencies:

• Trans Union (www.transunion.com / 1-800-888-4213)
• Equifax (www.equifax.com / 1-800-997-2493)
• Experian (www.experian.com / 1-888-397-3742)

You can also look in the yellow pages under "Credit Reporting Agencies" for a location near you. The reports should cost under $10 each, and it's a good idea to get a report from all three companies since they may not be exactly the same.

Correcting Credit Problems

Your first credit problem may be lack of a credit history. You can approach this problem in a couple of ways. First, you can begin to build your credit by getting a credit card and charging small amounts on it. By paying it off each month, you will be establishing a positive credit history without incurring finance charges. Second, you can ask your lender to establish a non-traditional credit history which uses payment information from monthly obligations other than loans: utility bills, rent payments, telephone bills, etc.

If you have a credit history, the credit report will list all of the consumer credit that has been extended to you in the last seven years. For each account, it will show:

• A comment about the account such as current or delinquent (and if delinquent, for how long)
• The status of the account: positive, non-evaluated or negative
• The date the account was opened
• Scheduled monthly payment amounts
• The date the last payment was made
• The type and terms of the account
• Your payment history over the last 12 months
• The original loan amount, credit limit or original amount charged to loss
• The balance owing and amount past due, if any
• If a payment was over 30 days late one time, it might not show on the report. If, however, payments were over 60 days late four times, over 120 days late two times, or over 180 days late one time, your credit will be seriously affected, and this will impact your ability to borrow money.

Sometimes problems will crop up on a credit report because there has been a misunderstanding or error. If you find such a problem on your report, contact the billing department for that account and have them correct it. Keep written copies of your correspondence and keep notes of phone conversations which include the names of the people with whom you have spoken, the dates of the calls and the outcome of each call. Write a letter explaining the error to the lender and attach it to the credit report. Submit copies of your written correspondence and notes from conversations with the creditor as further documentation. If a poor credit rating is the result of past problems, you need to be aware that there are no quick fixes for a poor credit history. Be patient, and improve your credit rating by:

• Contacting each creditor and explaining your situation. Send a good faith letter demonstrating your willingness to pay off the account and include at least a partial payment, if possible.
• If credit problems are associated with a specific incident such as a car accident, sudden illness or loss of a job, write a letter of explanation to the credit bureau explaining the circumstances.
• If you have outstanding collections or judgments against you, take steps to pay them off. Contact the creditors and begin making regular payments, however small.
• Always include your name, address, telephone number, and account names and numbers on any correspondence with creditors, credit bureaus and lenders. Let them know when and where you can be reached.
• As a last resort, get professional assistance from a nonprofit credit counseling service, but be aware that they are primarily representing your creditors' interests. They will make arrangements with your creditors to pay off a percentage of your debt, spread over a longer period of time so that your monthly payments are lower. Then they will arrange with you to pay a higher percentage of the debt, and they pocket the difference. They do nothing to resolve the bad credit history that drove you to them in the first place.
• There is hope even if your credit rating is not what it needs to be. Remember that negative credit information is only reported in your credit file for seven years (with the exception of bankruptcy which can be reported for ten years). After that, it drops out and cannot even be considered, and you have essentially a clean slate.

Additionally, lenders are much more concerned with how you have handled your credit recently than with what happened several years ago. If you had problems in the past but have paid your bills on time since, you may qualify for a loan after as little as two or three years.

Some lenders have begun offering risk-based pricing. In other words, even if you have slightly damaged credit, you may still be able to get a loan; you'll just pay more for it.

Above all else, the quest for your first home should be extremely exciting and a lot of fun. At the same time, however, it may be a little intimidating, especially in the struggle to narrow your search. With all of the homes on the market, how do you find the one that's right for you?

Defining the Decision-Makers

If you're single, this step is easy; you will undoubtedly seek advice and counsel from friends and/or family members, but ultimately the decision will be yours.

For couples, however, it may help to discuss ahead of time how you will resolve the differences that will inevitably surface throughout the home-buying process. Clarify your expectations: every home he's ever lived in has had a workshop in the garage, and the cars have been kept outside; of course, this home will have an attached garage/workshop. She's tired of traipsing in and out of the cold to unload groceries and can't wait to have a garage for the car - and a formal dining room for entertaining.

If children are involved, the process becomes even more complicated. They will have definite opinions about what they want in a home, and their priorities are unlikely to line up with yours. You may want to leave them out of the initial phases of the search and wait to show them the last two or three homes you are considering. This way, they can have input without bogging down the process.

Determining What You Need

By this point, you should have some idea of what you can afford to spend on a home. With that in mind, you need to begin thinking about what you want and then setting some priorities. Ask yourself questions such as:

• What type of home is most appealing to you: ranch, split-level, contemporary, two-story, etc.?
• Which construction do you prefer: brick, vinyl siding, wood siding, stone, stucco, etc.?
• What kinds of activities will take place in your home on a regular basis? If one of you is a student, for example, you will need to have a quiet study area somewhere in your home. If you plan to do a lot of casual entertaining, a rec room may be important.
• How are those activities likely to change with time? How will your needs be different when the student graduates, for example?
• How long do you plan to stay in this home? Does it need to be adaptable as kids grow and needs change, or do you plan to move in five years so that flexibility is less important?
• What kind of ambiance do you want in your home? Bright and sunny? Intimate and cozy? Formal? Informal?
• How many bedrooms will you need? Bathrooms?
• Do you want a master suite?
• Do you want a separate dining room?
• Do you need a basement?
• Do you prefer a large or small lot?
• Is it important to have a garage? Does the garage need to be attached?
• Do you want a fireplace?
• How much square footage do you need?
• Do you need a fenced yard?
• Do you need to be near public transportation?

Once you've defined some of your expectations and desires, you can begin to prioritize them. Which items are negotiable and which aren't? How much flexibility do you have?

You'll also need to decide if you want to buy an existing home or build a new one. If you decide to buy, do you prefer an older home or a new one? And how, for that matter, do you define "old" and "new"? Talk with your REALTOR® about the advantages and disadvantages of each given your lifestyle.

If you decide to build, you will have two options: work with a production builder and choose from pre-determined floor plans or start from scratch and build a custom home. In either case, you will want to thoroughly investigate the builders you are considering. Be sure to look at other homes they've built, and talk with your REALTOR® for recommendations.

Building a custom home can be an arduous process. Potential pitfalls abound from zoning problems to weather delays. If you decide to build, commit yourself to:

• Do the research necessary to know what you want before you begin the process. Don't pay an architect or draughtsman to draw plans for your house until he or she has walked the property with you, studied a survey with setback lines, and reviewed any neighborhood covenants and restrictions.
• Seek out and listen to expert advice. Be particularly careful about arranging payment for the builder so that he or she has incentive to finish your home in a timely manner.

Your REALTOR® can be an invaluable asset through this process.

Deciding Where to Buy

You may have heard that location is everything in real estate. For a homebuyer, location is very subjective; as with deciding what to buy, deciding where to buy is a matter of determining priorities. Is it important to you to be close to your work, your church, your extended family, or a particular school? Do you want to be near a recreational area? These factors will determine the area of town in which you choose to settle.

Ideally, you'll be able to find somewhere that meets these criteria and where property values are rising and zoning laws preserve the integrity of your neighborhood.

When you find a neighborhood you think you might want to live in, you'll need to do some research. Drive through during the day to check out the condition of the homes and infrastructure. Are lawns, homes, and streets well maintained? Are there any parks nearby? Are they well kept? Drive through after a rain. Do streets and lawns drain well? Drive through at night. Do the lights work, and are the streets well lit? Walk through some stores in the area. Do the people there seem like neighbors you would enjoy? Visit the local police station to find out about crime rates and the schools to assess their quality and desirability. Find out if property values have risen, declined or stayed the same over the last five years. Your REALTOR® can be a valuable resource in this part of the process. As you investigate the neighborhood, you'll also want to check out nearby neighborhoods; their condition may be a harbinger of things to come.

The bottom line is that you don't want to buy in an area where property values are declining. Signals that an area is on the decline include:

• An unusual number of unoccupied homes or homes for sale
• Single family homes being converted into multiple-family units
• Poorly maintained homes and infrastructure
• Increased crime often signaled by burglar bars over windows and doors, by vandalism and by graffiti
• Empty retail space

Before you buy in a new subdivision, you need to know something about the developer and the housing market in the area. Although you can't predict how the area will develop or who your neighbors will be, if you know that the developer is reputable and the demand for homes is high, you can be reasonably sure that the lots will sell quickly to a fairly economically homogenous group of people. If demand drops off, however, the developer may compromise his standards and build smaller homes or lower his profit margin to attract less qualified buyers.

The Search Process

You will probably use several resources in your search for the right home. These may include friends, the internet, community newspapers, "catalogs" from local real estate companies, and most importantly, your real estate agent.

Friends

Career counselors will tell you that networking, talking with as many people as you can about your career goals, is an important step in any job search. It's also a good idea in your search for the right home. Talk with your friends about what they like and don't like about living in the area they're in. If their neighborhood interests you, ask them to let you know when they hear of houses coming on the market. In a hot housing market, timing can be everything. If you can get into a home before the sign goes up in the yard, you've got an obvious advantage.

The Internet

The internet is an invaluable resource for homebuyers. Estimates are that anywhere from 30-50 percent of potential homebuyers will search the internet for homes before contacting a real estate agent. Searching the internet allows consumers to educate themselves about what's on the market, and how much they can expect to pay for it, at any hour of the day or night, without leaving their homes and without having to work around anyone else's schedule.

Spend some time doing what you're doing now. By visiting our Search For A Home page, you can view all of the homes listed in the Broker's Listing Cooperative (BLC) in the Indianapolis area.

(The BLC is a cooperative effort between the real estate brokerages in a community. When an agent lists a home, he/she provides information about the listing to the organization that oversees the BLC. That organization, in turn, makes the information available to the other real estate agents in the area.)

MyTucker

Perhaps one of the easiest ways to look for a new home is to set up an account through  MyTucker. MyTucker allows you to specify a few parameters (e.g., number of bedrooms/bathrooms, price, etc.) for homes that are of interest to you. When a home that meets your parameters is listed in the BLC, you will automatically be notified via email. If you find a home that appeals to you, you can drive by for a better look at the home and the neighborhood it's in. If you're still interested, you can arrange a showing.

Be sure to include your REALTOR®'s name when you register, so that he/she will also be notified. If you're not already working with an agent, MyTucker will assign a Tucker agent to follow up with you in a few days. He/she will be able to answer any of your questions and arrange showings for any of the homes you want to see. There is no cost for this service.

Community Newspapers

Weekends are the most popular time for real estate ads since that's when most people have time to look. Pick up a weekend edition of the paper in your area and look through the ads. If you're looking in a large metropolitan area, you might be well advised to look in a smaller, community paper rather than the large city-wide publication; advertising costs will be lower in the smaller papers and more agents will have access to them.

It may take a little time to adjust to the language and abbreviations of real estate ads. Again, your real estate agent can help with this.

Weekend papers will also have ads for open houses. This is a great way to educate yourself about what's available in your area and what you'll have to pay for it. Even if a home doesn't exactly meet the criteria you have established, you might want to visit the open house as a way of double checking your expectations. If you're working with a real estate professional, take one of his/her business cards to the open house so the agent there knows you're already working with someone else.

Real Estate Brokerage "Catalogs"

Many larger real estate companies will publish "catalogs" (or magazines) of their inventory on a regular basis. Tucker's magazine is called Tucker Talks Homes and is published monthly. It's available for free at many Marsh and Kroger grocery stores and at Union Planters banks - or from our home page by clicking on Free Color Magazine.

Alternatively, sometimes a third party will publish a catalog and sell space to local companies to advertise their listings. These publications are usually free and can be found in grocery stores or at other retailers. In Indianapolis, you can call or contact us for a copy with over 1,000 homes in full color.

Your Real Estate Agent

A good real estate agent will be your best resource to find your new home. He or she will use the BLC - and a network of professional relationships - to help you in your search. Unless you are being unrealistic in your expectations (e.g., wanting too much house for too little money), your agent should contact you regularly with updates about homes coming on the market that meet your criteria. In general, you can expect your agent to work around your schedule for visiting homes; however, you'll also want to be flexible since you've both got a lot at stake in the process.

Once you've scheduled a showing, be prompt and expect the same from your agent. He/she should have a printout of the BLC sheet for the home you've visiting. This sheet will list features of the home and provide information regarding property taxes, homeowner association fees, etc. You should bring a notebook and a camera - especially if you will be viewing several homes in a short time. This will prevent confusion later when you try to remember which feature went with which home.

If the seller or his/her agent is present as you tour the home, keep your thoughts and reactions to yourself. Don't weaken your negotiating position by letting them know how much you want the house or how much you're willing to pay for it. Don't act disinterested, but don't be overly enthusiastic. Furthermore, don't eliminate a house with a potential problem without giving some thought to how you might fix it. You are looking for the best home for your needs; you probably won't find a perfect home.

When you have found the home that combines the best of your dreams with the realities of your financial situation, it's time to make an offer.

While you don't have to offer the seller's asking price, if you put in a lower bid for the home and someone else makes a higher offer, you could lose it. Your REALTOR® can help you come to your decision, but ultimately the decision is yours.

You'll need to consider several factors:

• How much can you pay? It's easy to be caught up in the emotion of the moment and decide that you want the home at any price. If you buy the home, however, and later lose it because you really couldn't afford it, you'll be in much worse shape - financially and emotionally. Review the steps you took when you pre-qualified for a loan to determine what you can really afford.
• How much should you pay? Even if you can afford more than the asking price for a home, you shouldn't pay more than the home is worth; you want to be sure that someone else will pay at least what you paid for the home when it's time to sell. To determine the fair market value of the home, ask your real estate agent to search the BLC for sales of comparable homes in the area. Knowing what they sold for will give you some idea of what the market will bear. Sometimes, however, it may be difficult to find comparable sales (in a new development or in an area that's being revitalized, for example). In this case, you may want to ask for an independent appraisal, and make your offer contingent on the appraised value being in line with the sales price.
• How badly do you want this home? Other factors might influence your decision of when and how much to offer: How long have you been looking? What other viable options do you have? How quickly do you need to make a move? If any of these factors are weighing heavily in your decision, you may want to offer the list price (or more earnest money, but more about that in a moment) in order to speed up the process.

You might consider offering the full price of the home if:

• You think the house is accurately priced or under-priced.
• The house is just what you have been looking for, and there are few other houses on the market that meet your needs.
• The owner does not appear to be in any hurry to sell quickly.
• The house has just come on the market and similar houses have recently sold very quickly.
• You have inspected the house thoroughly and there are no indications of problems.
• You can afford it.

Earnest Money

When you submit an offer, you must include a cash deposit, called earnest money. This deposit indicates to the seller that you are serious in your intent to purchase the home.

There is no specific required amount, but general practice says that it should be enough to discourage the buyer from defaulting, compensate the seller for taking the property off the market, and cover any expenses the seller might incur if the buyer defaults. As the buyer, on the one hand, you don't want to put all of your savings into earnest money; you'll need to save some for other expenses. On the other hand, if you really want the home and have reason to believe that the seller may receive other offers, a higher offer of earnest money might sway the seller in your direction. Talk with your real estate professional to determine a fair amount.

Earnest money is generally given to the listing agent who places it in an escrow account where it is held until the closing (or until the transaction falls through). At closing, the deposit becomes part of your down payment.

If the transaction never makes it to closing, the earnest money is either returned to you or given to the seller. You will get the deposit back if:

• The seller fails to live up to the terms of the sales contract
• An inspection reveals major defects in the home
• You cannot obtain financing
• If any specific conditions in the sales contract cannot be fulfilled

If you fail to live up to the terms of the sales contract, the seller can keep the earnest money.

The Sales Contract

An offer to purchase spells out all of the details of the transaction. If, for example, you want to be sure that the washer and dryer are included in the sales price of the home, that intention must be specified in your original offer. A verbal agreement is not enough.

An offer to purchase typically includes:

• The buyer's name and statement of intent to purchase the property
• The address of the property
• The purchase price and how it is to be paid (e.g., amount of earnest money, where it will be deposited, amount of down payment, amount of mortgage, terms of the loan, etc.)
• A provision for the closing of the transaction and the transfer of possession of the property to the buyer by a specific date
• A provision for title evidence
• A provision for the completion of the contract should the property be damaged or destroyed between the time of signing and the closing date
• A statement of remedies available in the event of default
• Dated signatures of all parties
• An expiration date and time (at which point the offer will no longer be valid if the seller has not responded with either an acceptance or a counteroffer)
• All contingencies (e.g., no major defects uncovered by an inspection or title problems discovered in the title search)

It may also include:

• Personal property included in the transaction (e.g., refrigerator, dining room chandelier, storage units in the garage, etc.)
• Any real property to be removed by the seller before closing (e.g., a storage shed)
• The transfer of any applicable warranties
• The identification of any leased equipment that must be transferred to the purchaser or returned to the lessor (e.g., a water softener or security system)
• Closing or settlement instructions
• The transfer or payment of any outstanding taxes or special assessments
• The buyer's right to inspect the property shortly before closing

Any offer may be revoked at any time before it has been accepted. Once the seller acknowledges acceptance of the offer by signing it, the offer to purchase becomes a valid sales contract.

Counteroffers

Just as you don't have to offer the list price for the home, neither does the seller have to accept your offer. Most home sales involve a process of offers and counteroffers until both parties are satisfied with the price.

A counteroffer is a new offer, and it voids most of the terms of the original offer. The buyer may then accept or reject the counteroffer. He/she can continue the process with another counteroffer.

During this process, your real estate agent will serve as a go-between. Be careful not to reduce your negotiating power by revealing too much (e.g., how badly you want the home, how high you are willing to go, etc.)

Like the original sales contract, all counteroffers should be submitted in writing with a specified expiration date and time. They may be revoked at any time prior to the other party's acceptance and become valid contracts when they have been signed by both parties.

Contingencies

Contingencies are additional conditions that must be satisfied before the contract is fully enforceable. They include:

• The actions necessary to satisfy the contingency
• The time frame within which the actions must be performed
• Who is responsible for paying any costs involved

The most common contingencies are:

• Mortgage contingency-protects the buyer's earnest money until financing can be arranged
• Inspection contingency-the buyer may request inspections for termites, lead-based paint, structural and mechanical systems, sewage systems, and radon or other toxic materials
• Survey contingency-a survey confirms lot boundaries and reveals any zoning or code violations associated with the property (e.g, is the property in a flood plain-which will require additional insurance?)
• Property sale contingency-the buyer may make the sales contract contingent on the sale of his/her current home to ensure the availability of cash for the purchase. Likewise, the seller may accept the offer contingent on their purchase of another home.

Sometimes a seller will accept an offer with contingencies but will include an escape clause. This clause permits the seller to continue to market the property until all of the buyer's contingencies have been removed. In this case, the buyer should retain the right to eliminate the contingencies if the seller receives a more favorable offer.

The mortgage world can look like a bowl of alphabet soup: VHA, FHA, ARM, PMI, PITI. It can be confusing and perhaps even a little unnerving. This section will give you a basic understanding of all of the initials and help you prepare for the closing table.

You can scroll down to continue, or click on one of the following links:

• Current Interest Rates
• Tax and Insurance Reserves
• Amortized Loans
• Conventional Loans
• Conventional Loans and Private Mortgage Insurance
• Federal Housing Administration (FHA) Loans
• Veterans Affairs (VA) Loans
• Adjustable-Rate Mortgages
• Discount Points
• Prepayment

From a legal standpoint, a mortgage is a voluntary lien on real estate. A borrower pledges the land to the lender as security, or collateral, for the debt. In practical terms, this means that when you borrow money to buy a piece of property, you voluntarily give the lender the right to take that property (foreclose) if you fail to repay the loan.

Tax and Insurance Reserves

When you borrow money to purchase real estate, the lender has a vested interest in how well you meet other financial obligations-in addition to repaying the loan-associated with the property. For example, if you fail to pay your property taxes and then default on your loan, the government will be paid first-and the lender will lose money on your loan. Similarly, if you fail to pay the premiums on your homeowner's insurance and your home is destroyed by fire, your loan is no longer secured. For these reasons, many lenders require borrowers to provide a reserve fund to meet future real estate taxes and property insurance premiums. In Indiana this fund is called an escrow account. If your lender requires one, you will make the first deposit at your closing. It will cover any unpaid real estate taxes and a portion of the insurance premium liability. For the life of your loan, a portion of each mortgage payment will be allocated to paying off the principal, another portion will pay off interest, another portion will be escrowed for taxes, and the final portion will be escrowed for insurance. Your loan officer may refer to this as PITI: Principal, Interest, Taxes and Insurance.

Amortized Loans

The word amortize literally means "to kill off slowly, over time." Most mortgage loans are amortized, meaning they are paid off slowly, over time-typically 15 or 30 years. Each amortized loan payment partially pays off both principal and interest. Each payment is applied first to the interest owed; the balance is applied to the principal. At the end of the term, the full amount of the principal and all of the interest due is reduced to zero.

For fully amortized loans, monthly payments remain consistent throughout the life of the loan. However, because the interest is paid first, the portion applied to repayment of the principal grows and interest due declines as the unpaid balance of the loan is reduced. Borrowers who make additional payments should instruct the lender to apply the additional funds toward repayment of the principal.

Conventional Loans

Conventional loans are viewed as the most secure loans because their loan-to-value (LTV) ratios are the lowest. The borrower generally makes a 20 percent down payment and borrows the remaining 80 percent of the value of the property. This is important because lenders needs to know that if a property goes into foreclosure, they can get out of it what they have invested in it.

When making a conventional loan, the lender is relying on the appraisal of the real estate (as the only security) and on the reliability of the prospective borrower as indicated in his/her credit history. No additional guarantees or insurance is necessary.

Conventional Loans and Private Mortgage Insurance

It is possible obtain a conventional loan with a lower down payment investment under the private mortgage insurance (PMI) program. PMI allows borrowers to invest less up front while still protecting the interests of the lender. If your down payment investment is less than 20 percent of the purchase price of your home, you will be required to pay at least some PMI to provide additional security on your loan. This will generally add between 5 and 10 percent to your mortgage payment.

You will not have to pay PMI for the life of the loan, however. Once you have repaid your loan to a certain level (determined by the lender), you will be allowed to terminate your coverage.

Federal Housing Administration (FHA) Loans

FHA loans are insured by the Federal Housing Administration and must be made at FHA-approved lending institutions. As with PMI, FHA insurance provides the lender with additional security against borrower default.

Certain requirements must be met before the FHA will insure your loan:

• You will be charged a percentage of the loan as a premium for the insurance. This premium may be paid up front at closing by the borrower or by a third party. It may also be financed as part of the total loan amount or paid as monthly premium. Unlike PMI, these premium payments never stop, but if the FHA doesn't have to pay a claim, you may receive part of your money back at the end of the loan.
• FHA regulations set standards for type and construction of buildings, quality of neighborhood and credit requirements for borrowers.
• The real estate must be appraised by an approved FHA appraiser.
• The loan-to-value ratio must fall within certain limits.

FHA loans are also available for condominiums if specific requirements are met.

Veterans Affairs (VA) Loans

The Department of Veterans Affairs provides guarantees for loans for eligible veterans and their spouses. Under this program, the VA does not actually lend the money; rather, it guarantees loans made by approved institutions.

These loans are available with little or no down payments and at comparatively low interest rates.

To qualify for a VA loan, veterans must meet the following criteria:

• 90 days of active service for veterans of WWII, the Korean War, the Viet Nam war and the Persian Gulf war.
• A minimum of 181 days of active service during interconflict periods between July 26, 1947, and September 6, 1980
• Two full years of service during any peacetime period after September 7, 1980

There are limits on the amount of the loan the VA will guarantee. A lending institution may choose to extend a larger loan, but the additional funds won't be guaranteed by the VA. To determine what portion of a mortgage loan the VA will guarantee, the veteran must apply for a certificate of eligibility. The VA also issues a certificate of reasonable value (CRV) for the property being purchased. The CRV is essentially an appraisal. If the purchase price exceeds the amount cited in the CRV, the veteran must pay the difference in cash.

At closing, veterans will have to pay a loan origination fee to the lender and a funding fee to the VA. The lender may charge additional discount points which may be paid either by the seller or the veteran.

Adjustable-Rate Mortgages

An adjustable-rate mortgage will be originated at one rate of interest and then adjusted up or down during the life of the loan based on some objective economic indicator. Because the interest rate may change, the borrower's monthly payment amount may also change. Details of how and when the interest rate will be adjusted are specified in the mortgage note.

Common components of an adjustable-rate mortgage include:

• The interest rate is tied to the movement of an objective economic indicator called an index.
• The interest rate is the index rate plus a premium, called the margin.
• Rate caps limit the amount the interest rate may change. Most ARMs have two types of rate caps: periodic and aggregate. A periodic rate cap limits the amount the rate may increase at any one time. An aggregate rate cap limits the amount the rate may increase over the entire life of the loan.
• A payment cap protects the borrower by setting a maximum amount for the payments. The downside is that this can result in negative amortization where the loan balance is actually increasing over time.

Discount Points

Your lender may want to sell your loan to investors. To make the sale more attractive to the investors, the lender may charge you "discount points." A point equals one percent of the amount being borrowed. So, if you are borrowing $100,000 and the mortgage company you are considering will charge you three discount points, that's an additional $3000. Sometimes this amount is financed as part of the total loan amount, and sometimes it must be paid in cash at closing. Before you finalize your financing, be sure you understand the lender's requirements.

Prepayment

If you repay your loan before the end of the specified term, your lender will not collect as much interest/profit as anticipated. For this reason, some mortgage notes contain a prepayment clause which requires the borrower to pay a penalty on any payments made ahead of schedule. Ask potential lenders about prepayment penalties before finalizing your financing. Lenders can not charge prepayment penalties on mortgage loans insured or guaranteed by the federal government.

Mortgage interest rates are based off of the prime rate (the amount the Federal Reserve charges to banks). For this reason, you're probably not going to find a huge difference in the rate you'll pay from one lender to another (though some lenders will try to hide this fact by publishing a lower interest rate and then charging discount points to make up for it). You may find a slight variation in the loan origination fee charged by each lender, but it probably won't be enough to sway you from one lender to another. So what considerations are important in choosing a lender?

Ultimately, it comes down to your convenience. If you have a solid credit rating, a good mortgage loan officer should be able to tell you, within minutes, what documents you need to turn over to him/her for processing and have you approved for a loan within a couple of hours of receiving your application.

So your primary questions for a potential lender are:

• Do you have a comprehensive selection of loan packages?
• Can you provide quick, efficient service?

With those criteria in mind, we would strongly encourage you to consider Tucker Mortgage. Each of Tucker's metropolitan Indianapolis sales offices houses a loan officer from Tucker Mortgage. They have a full range of loan packages available, and their automated approval system can usually provide an answer for you within an hour. And since they're located in your REALTOR®'s office, you don't have to make any extra stops.

Having just signed a sales contract on a home, you may be feeling some financial pressure, wondering how it's all going to come together: the down payment, the closing costs, the mortgage insurance payment, the loan payment, the move-in expenses, the initial repairs, etc. In the face of this pressure, you may be tempted to skip the home inspection. Don't. It may be vital to your personal and financial safety.

Any home is bound to have defects. Maybe the furnace was replaced just last winter. How do you know it was installed properly? Maybe the door frame that's slanting slightly in the older home you're planning to buy is just part of its charm; or, perhaps it's evidence that termites have hollowed out a supporting girder. What if there's a crack in the chimney? Since the current homeowners never use the fireplace, they may not know the crack is there, but the first time you build a fire, you could be setting your roof on fire. Even if the home is brand new, are you willing to take the builder's word that he/she did everything as promised? The potential problems are endless, and the cost of ignoring them could be astronomical.

A home inspection is essentially a visual process meant to uncover any glaring problems and help you reduce any risks you might encounter by moving into a home. A professional inspector has specific technical skills, but he/she will not take anything apart and is not licensed to make any repairs. Nevertheless, an inspection can provide grounds for a repair addendum to your sales contract and/or help you plan for future repairs. For example, if you have an inspection contingency in your sales contract and the inspection reveals that the home needs a new roof, you will have three options: ask the seller to make the repairs before you close on the home, ask the seller to compensate you for the cost of replacing the roof, or void your contract. Or, the inspection may determine that there are three layers of shingles on the roof; it doesn't need to be replaced now, but you know that you need to budget for a new roof in a few years.

A professional inspector will examine:

• Furnaces and air conditioners (within limits)
• Pilot lights
• Fuse boxes
• Main water shut-off controls
• Foundations
• Floors
• Walls and partitions
• The roof
• Windows and doors
• Your plumbing system
• The electrical system
• Energy efficiency
• Siding

Additional inspections can evaluate:

• Wells and septic systems
• Swimming pools
• Water quality
• The presence of radon
• The presence of termites

If at all possible, you should arrange for the inspection at a time when you can be there to follow along and ask questions. It's also not a bad idea for the current owner to be present; a diplomatic inspector can address the seller's concerns was well. At the inspection, ask the inspector to return to the home with you a day or two before closing for a walk through. At that time, the expert can verify that the promised repairs were done and that no new problems have developed in the interim.

Following the inspection, the inspector will generate a report which can be used to write a repair addendum if necessary.

To find a good inspector, ask your real estate agent for referrals. Make certain that the inspector is licensed and a member of a professional organization such as the American Society of Home Inspectors (ASHI), the National Association of Home Inspectors (NAHI), or the American Inspectors Association (AIA).

A location survey is a professional drawing showing the boundaries of the property you are purchasing. It will be required for closing unless you are purchasing a condominium or other home that does not include property. If there is any question about property lines, however, you may want to order a stake survey (where a surveyor actually comes to the property, measures, and sets stakes around the perimeter) prior to the closing. This is expensive, but it will be worth it to avoid problems later.

If a survey is required, it will be drawn by a licensed engineer and will depict the property boundaries, the location of the residence and any other improvements on the property, and the existence of any easements. (An easement grants someone else the right to use your land. Public utilities may require easements, for example, or your neighbor may have an easement on your property if his/her property would otherwise be inaccessible.)

Use the survey to be certain that you are buying all of the land you think you are buying. Look for shared or encroaching driveways and fences. With new construction, make sure that your home does not violate zoning restrictions such as set-back lines (the distance required between your home and your property boundaries).

Ownership of land can be passed from one person to another in several ways. A landowner can be granted full ownership for a pre-determined period of time (e.g., his own or someone else's lifetime); he/she can be given the land with certain conditions (e.g., no gambling can ever take place on the land, or, it must always be used for church purposes); or he/she can be granted full ownership for an indefinite amount of time, complete with the right to pass the land on to his/her heirs.

Ownership is evidenced through a document called a title, and for every piece of property there should be a consistent chain of title showing who owned the land at all times. Before your lender will extend credit for your mortgage, he/she is going to want to know the history of the title to your property. It may be that there are gaps in the chain - a period where no title seems to have existed for the land. If that's the case, someone else could come along later, produce a valid title, and claim the land you now "own." Or, there may be a condition on the land that makes it illegal for you to have your home there. Or, the property owner thirty years ago may have defaulted on his taxes so that the government really owns the land you're trying to buy. Obviously, you, and your lender, need to know up front exactly what you're getting when you buy this land - if you really can buy it.

To this end, once you have a loan commitment, your lender will order a title search from a title company. (The seller pays for the search in his/her closing costs.) The title company will research public records to trace the title back 40-60 years (considered the "root" of the title). If your title is marketable - it has no serious defects, doesn't expose you as the buyer to the possibility of future litigation, and can be transferred at your discretion - the title company will produce a certificate of title which certifies the results of the search. This does not guarantee your ownership, however; problems could still surface later.

To protect yourself against past problems that may surface sometime in the future, you will purchase a title insurance policy at your closing. This policy will protect you from:

• Defects that could be found in public records
• Forged documents
• Incompetent grantors (e.g., a past title wasn't valid because the person who conveyed wasn't legally competent to do so)
• Incorrect marital statements
• Improperly delivered deeds

Title insurance does not protect you against defects that were known at the time of your purchase and were listed in the policy.

You're convinced that you want to buy a home-or you're at least curious enough to continue the process. Where do you go from here? In this section we will help you move from finding a REALTOR® all the way through to the closing. You can read from beginning to end, or you can follow these links to sections that are of particular interest to you. Using the expanded menu at the left of this page, you can navigate through sections that cover:

• Working with a REALTOR®
• Getting Pre-qualified for a Loan.
• Finding a Home
• Making an Offer
• Understanding Mortgages
• Choosing a Lender
• Home Inspections
• The Appraisal
• The Survey
• Title Insurance
• Homeowner's Insurance
• Property Taxes
• Closing Successfully

Your mortgage company has a vested interest in making sure that you have insurance for your new home. They need to know that their investment has been safeguarded so that if your home is destroyed by fire six months after the closing, you will be able to either rebuild or repay the loan. For this reason, you will have to provide them with proof of insurance prior to your closing.

Homeowner's policies insure your home and other structures on your property (e.g., a detached garage, shed, etc.) against loss or damage. This does not apply to structures used for business purposes (e.g., a garage used as a body shop) or rented to other parties. The policies also protect personal property in your home, although items of special value (e.g., expensive jewelry or furs) may require additional "riders" in order to be covered.

Your homeowner's policy will also include liability insurance. If a friend falls down your stairs and breaks his leg, your liability insurance will cover the medical expenses and any legal liability you incur for bodily injury (up to the limits of the policy).

Like other insurance policies, your homeowner's policy will have a deductible (the amount you have to pay before you insurance coverage will begin). The lower your deductible, the higher your premiums will be.

Homeowner's insurance typically covers loss or damage caused by:

• Fire or lightning
• Ice, snow or sleet
• An explosion
• Aircraft and other vehicles
• Smoke
• Wind or hail
• Theft or vandalism
• Riot or civil commotion
• Frozen or broken plumbing
• Malfunctioning heating and cooling systems
• Falling objects

Such policies generally don't cover damage caused by:

• A flood or underground water
• Earthquakes or mudslides
• Settling or deteriorating structural components
• Birds, rodents, insects or domestic animals

General real estate taxes are the taxes levied on real estate by various governmental agencies and municipalities (e.g., states, counties, cities, school districts, etc.) to fund the operations of the agency. They are "ad valorem" taxes, which means that they are based on the value of the property being taxed.

Real estate is valued for tax purposes by county or township assessors. The valuation process is called "assessment," and the property's assessed value is generally based on the sales price of comparable properties. Property owners who feel that their assessment is too high relative to other properties may appeal to a local board of appeal. If an agreement can not be reached, the case could ultimately go to court.

Tax rates are determined by each taxing body separately. They project operating expenses for the coming year and divide the monies needed by the total assessments within their jurisdiction. A property owner's tax bill is determined by multiplying their assessed value by the tax rate.

Due dates for tax payments are set by statute. Taxes are payable in two installments annually. If you fail to pay your taxes on time, you will be assessed a penalty.

Finally, depending on how taxes are collected in your area, you may owe some of them to the seller at your closing. For example, suppose taxes in your area are paid in advance and due in November and May, and you are closing at the end of January. This means that the current homeowner paid taxes in November for four months when you will be living in the house (February to May). He may ask you to reimburse him at the closing for those taxes. That's called "prorating," and your REALTOR® can help you figure out exactly what you will owe.

Closing is the consummation of the real estate transaction, and your REALTOR® will be an invaluable asset in helping you prepare for it.

The closing process varies from state to state. In Indiana, closing is done face-to-face; that is, the buyer and seller sit down at the same table to complete the sale. A face-to-face closing involves the resolution of two issues; first, the promises made in the sales contract are fulfilled, and second, the buyer's loan is finalized, and mortgage lender disburses the loan funds. It may be conducted at the title company or lender's office or at some other mutually agreeable location. The following people may attend:

• The buyer
• The seller
• The REALTOR® or broker for each party
• Attorneys for either party
• Representatives of the buyer's lending institution
• A representative of the insurance company

A representative of the lender or the title company typically presides. He/she will lead a review of an array of documents, such as the title insurance policy, surveys and other items.

When all parties are satisfied that everything is in order, the exchange is made. All pertinent documents must be recorded in the correct order to ensure continuity of title. For example, if the seller is paying off an existing loan and the buyer is obtaining a new one, the seller's mortgage must be satisfied and recorded before the buyer's since the buyer cannot pledge the property as security for the loan until he/she owns it.

As the buyer, you will be signing a lot of documents at your closing. These will include, but are not limited to:

• The HUD 1 or Uniform Settlement Statement. This statement is required by federal law. It adds together your loan amount and closing costs and deducts your down payment to arrive at the amount of cash you will need to close. (As a buyer, you should be given a copy of the HUD statement prior to your closing.) Itemized costs may include:
• Loan origination fee
• VA funding fee, if applicable
• Appraisal fee
• Credit report fee
• Settlement agent's fee
• Survey fee
• Fee to record the mortgage
• Fee to record the deed
• Document preparation fees
• Tax service fee
• Flood certification fee
• Courier fees
• Prepaid items (e.g., homeowner's insurance premium, property taxes, interest on your loan from day of closing to the end of the month)
• A survey
• A note
• A mortgage
• A Federal Truth-in-Lending Disclosure Statement
• A name affidavit
• A statement that neither your credit nor your job situation has changed since you applied for your loan
• A form to be filed with the IRS allowing you to deduct your mortgage loan interest payments
• A check for your down payment and closing costs
• Endorsement of the check for the mortgage from your lender

You may or may not take possession of the home on the day that you close; those details will have been specified in your purchase agreement. Either way, be sure to take the time to celebrate your closing and welcome to the American dream!