FAQs

Frequently Asked Questions

QUESTION: How do you determine how much a home is worth?

QUESTION: What are the advantages of owning a home?

ANSWER:
There are many. Among the most appealing: you own it, which gives you, instead of a landlord, control of your living space. Other benefits stem from potential tax savings and the build up of equity as your property likely appreciates in price over time. Equity can be used to help put children through college, purchase a second home, or make home improvements. The mortgage interest paid on a home loan is tax deductible, as is the local property tax. If you get a fixed-rate home mortgage loan, you also can invest more wisely knowing your monthly mortgage payment, unlike rent, will not change substantially.

QUESTION: What is the first step to buying a home?

ANSWER:
Make sure you are ready — psychologically and financially. Ask yourself the following questions: Do I have steady income? Is my debt lower than my total income? Do I have enough money to pay for the down payment and closing costs? Am I working hard enough to improve bad credit? A house needs constant care and attention. Also ask yourself if your budget will allow for unexpected repairs and upkeep. Once you can honestly answer "yes" to these questions, you are several steps ahead of the game and that much closer to becoming a homeowner.

QUESTION: How much can I afford?

QUESTION: Is it best to save for the ultimate dream home or begin with a less expensive starter home?

ANSWER:
It can take a long time to save for that perfect dream home. Meanwhile, the market has been flooded with some of the most favorable mortgage interest rates in years. Low rates make housing more affordable, which is why so many buyers have jumped on the home buying bandwagon. Home-price appreciation has also been strong, making very solid gains in communities across the country. In fact, home prices are expected to increase 2.5 percent to 3 percent annually over the next five years. If you purchase a starter home today, you can potentially begin to build value that can lead to the purchase of a larger, or more desirable, trade-up home in the future.

QUESTION: What does homeowners’ insurance cover?

ANSWER:
It protects against disasters — whether natural, manmade or mechanical. A standard policy insures the home, as well as your possessions. Because this insurance is packaged, it covers liability for any harm, loss, and property damage that you or your family members cause others. And it includes additional living expenses in case you are temporarily displaced because of damage from a fire or other insured disaster.

While you are not legally required to have homeowners' insurance, mortgage lenders stipulate that you do. It protects their investment in the home in case of a natural disaster or catastrophic event.

If your mortgage is paid up — or you never had one — it is still a good idea to have homeowners' insurance to protect your home and your belongings.

QUESTION: What kind of home insurance should I get?

ANSWER:
A standard policy will do in most instances. It protects against several natural disasters and catastrophic events. However, it will not guard against earthquakes, floods, war, and nuclear accidents. The policy can be expanded to include these disasters as well as coverage for such things as workers' compensation. In fact, the lender may require that you purchase flood or earthquake insurance if the house is in a flood zone or a region susceptible to earthquakes.

You also can increase coverage beyond the depreciated value of personal property such as televisions and furniture by purchasing a replacement-cost endorsement. Home-based business-coverage, once overlooked, is an ever-increasing popular rider. It does not cover liability associated with the business but rather contents such as home office equipment and general liability to cover injuries to clients and employees.

Other considerations: an inflation rider, which increases coverage as the home's value rises, and getting insurance that is equal to the full replacement value of the home. Insurance companies usually require an amount equal to at least 80 percent of the full replacement value. Otherwise, only a portion of the loss would be covered.

QUESTION: What about title insurance?

ANSWER:
Title insurance protects the lender against unclear title to the property you are buying. It is almost always a requirement for closing on a home. If you desire coverage as well, buy an owner's policy, which will protect you against any title-search errors and losses that arise from disputes over property ownership. The cost of title insurance is usually a set value per thousand of dollars of the total loan amount.

QUESTION: What are closing costs?

QUESTION: Is there anything I should know about closing day?

ANSWER:
Yes. The following to-do list can help save you a few headaches and keep the closing on track:

• Keep extra money in your account. Something unexpected can pop up during the closing that will require more money out of your pocket. Take your checkbook. Even better, find out how much you will need to pay and write a certified check for the total amount.
• Take your loan commitment letter. Use it to verify loan approval in case of a mistake or misunderstanding with the lender.
• Take your contract to purchase. Pull it out if something a little suspicious comes up.
• Take your personal ID. A driver's license or other personal identification will do.
• Do a before-closing inspection. It is always a good idea, when possible, to walk through the property to make a list of any problems.
• Utilities. Arrange in advance to have the water and electric meters read on closing day and the service switched to your name to prevent interrupted service. The same applies for the fuel tank.