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Home Purchase

1. Making the buying decision
2. How much money should you put down?
3. How much house do you qualify for?
4. Get Pre-approved
5. Start looking for a home
6. Understand market conditions
7. Architectural Styles
8. Suitability Standards
9. Visit properties
10. Compare properties
11. Home Features
12. How Much to Offer
13. Make an offer
14. Negotiate terms
15. Inspect the Home
16. Get final loan approval
17. Contingencies
18. Congratulations Home Owner!
19. Unpacking

Making the Buying Decision

Assuming you plan to own your home for several years and can afford the payments, you'll likely be better off owning versus renting. Here are some points to consider:

• What are my reasons of owning a home?
  Do you need a bigger home? Do you need a better neighborhood? Are you speculating that prices will increase? Whatever your reasons, it helps to write them down. Seeing your reasons on paper helps create objectivity, and will help you follow through in the event you get the "jitters" later on.
• Do I have enough cash for the down payment?
  While this is certainly an important consideration, many lenders today offer zero-down and low down payment loans. However, you may still have to come up with cash for closing costs and moving expenses.
• Can I afford to make house payments in addition to making payments on my other debts?
  This is probably the single, most important question to answer accurately. Spend adequate time creating a realistic budget. If you fall too far behind in your mortgage payments or property taxes, you'll probably lose your home and any equity you might have had in it. Generally, you should spend less than a third of your gross income on your total housing expense, including principal, interest, taxes and insurance.

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Down Payment

An important step in purchasing is home is determining how much of a down payment you'll make, and from what sources the down payment and other costs will come. For accurate answers to these questions, a current inventory of your assets is crucial.

Begin by gathering all financial statements for all your assets. You may not plan to liquidate all assets, but a complete accounting is important. The assets you keep can serve as collateral for a loan and as reserves which may be required by your lender. If you're going to receive a gift from a relative, try to obtain a letter stating the amount of the gift.

You may be able to borrower from your 401(k) without any tax penalties. If you liquidate your 401(k) or IRA, there may be tax implications. Consult with your tax advisor before liquidating any assets.

If you own stock you want to keep, consider borrowing against it with a margin loan. Consult with your stock broker regarding this option.

This worksheet may help you inventory your assets.

Checking Accounts: __________________
Savings Accounts: __________________
CDs: __________________
Stocks: __________________
Bonds: __________________
Mutual Funds: __________________
Other Securities: __________________
Retirement Funds (401K, IRA, etc): __________________
Gifts from relatives: __________________
Total Cash Available: __________________

Determine the total cash needed to close:

Down payment: __________________
Closing costs including points: __________________
Prepaid expenses (taxes, prepaid interest, insurance, pmi): __________________
Cost of repairs, if any: __________________
Total Cash Needed: __________________

Calculating the total cash needed can be challenging, especially if you're doing this for the first time. Consider getting help from a real estate or mortgage professional. They're usually quite generous with assistance and advice in anticipation of helping you with your transaction. Ask your mortgage company to provide a Good Faith Estimate of closing costs--including prepaid expenses.

If you're short on cash, consider asking the seller to pay your closing costs. Discuss this with your Realtor prior to making your offer.

Ideally, you'll want make a 20 percent cash down payment to avoid Private Mortgage Insurance (PMI) and get the best rate. If you are unable to put 20 percent down, there are many programs available. Here are some of them:

• Zero Down Programs There are many zero down payment programs available. If you qualify for a VA loan, you can get a zero down program. Even if you're not a vet, several lenders offer zero down loan programs. Your mortgage broker can help you find the best one for you.
• Low Down Payment Programs There are numerous FHA and conventional programs that allow you to put as little as 2 to 5 percent down.
• Piggy Back Loans By getting a piggy back loan, you can generally avoid paying PMI, even though you are putting less than 20 percent down. The most common piggy back loans are:

80-10-10
In the case of an 80-10-10, you put down 10 percent and get two loans--a first loan for 80 percent of the purchase price, and a second loan for 10 percent of the purchase price. Even though the second loan rate may be higher than the first loan rate, you generally come out ahead since you don't have to pay PMI.

80-15-5
Eighty percent first loan, 15 percent second loan, 5 percent down.

80-20
Eighty percent first loan, 20 percent second loan, no cash down.

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Qualification

Take advantage of our Qualification Calculator to begin the process of determining the home value for which you qualify. You'll also need to discuss your particular financial details with a mortgage company. Like most industries, the mortgage industry uses its own jargon. Understanding the terminology of the industry will serve you well in understanding the process of buying and financing your home. Here is some terminology you will need to understand:

• Application: The loan application is a comprehensive document representing the borrowers income, expenses, assets, liabilities and net worth. It can be considered both an Income Statement and Balance Sheet of the borrower. The application helps the lender determine the borrower's credit-worthiness.
• PITI: An acronym for Principal, Interest, Taxes and Insurance. Principal and interest refer to your monthly mortgage payment. Taxes and insurance refer to 1/12 of the annual property taxes and insurance premium. PITI is designed to represent the monthly cost of home ownership (total housing expense ) for qualification purposes. (Total housing expense can include PMI and association dues if applicable.)
• Gross Monthly Income: Gross monthly income is your monthly income before income taxes. You are usually given full credit for your base salary. Overtime, commissions and bonuses are usually averaged over the previous 24 months. If you are self-employed, the income reported on your tax return will usually be averaged over the previous 2 years.
• Front-Debt Ratio (top ratio): Your front debt ratio is your PITI divided by your Gross Monthly Income. This qualifying ratio is used by the lender in making a decision to grant or deny your loan request. 
• Back-Debt Ratio (back-end, bottom, total expense, total debt ratio): Your back-debt ratio is PITI + Other Monthly Debt Expenses divided by your Gross Monthly Income. Other monthly debts include auto loans, credit cards, person loans, student loans, etc. Your phone and electric bills are NOT considered part of your debt expenses. This qualifying ratio is used by the lender in making a decision to grant or deny your loan request. 
• Loan to Value (LTV): LTV = loan amount divided by the property value.

• Monthly base income: $5,000
• PITI: $1,000
• Other monthly debt (credit cards and student loans): $600
• Home purchase price: $100,000
• Down payment: $20,000

• Front-debt ratio: $1,000 / $5,000 = .20 or 20%
• Back-debt ratio: $1,600 / $5,000 = .32 or 32%
• LTV: $80,000 / $100,000 = .80 or 80%.

Mortgage companies and lenders like to see qualifying ratios at or below acceptable levels set by the industry. Acceptable qualifying ratios denote a borrower's ability to repay the debt. A low LTV is also desirable. The lower the LTV, the greater the equity the borrower has in the home, and the more secure the lender's investment. As the LTV increases, acceptable qualifying ratios decrease.

Here is a table of LTV and maximum qualifying ratios used in the industry. These ratios are general guidelines only. In practice, lenders make their own decisions based on a number of additional factors such as your credit history, length of employment, etc. Please check with your mortgage company regarding your particular situation.

Tips and Tricks: You may be able to increase your purchasing power by:

1. Paying off debt:This would reduce your back-debt ratio. Many lenders do not count the monthly payment on your installment loans if you have fewer than 10 payments left. If you have a car payment with 12 payments left, you may want to consider making additional payments to reduce your total payments left to under 10.
2. Making a larger down payment: This reduces your LTV, total housing expense and provides for higher qualifying ratios. If you make a down payment of 20% or more, you won't have to pay PMI.
3. Borrowing against your 401(k): You can sometimes increase your purchasing power by using the proceeds of your 401(k) loan to pay down your other debt, or to use it towards the down payment. This can be a little tricky, so please consult with a mortgage professional.
4. Obtaining a margin loan: If you own stocks and do not want to sell them, your stockbroker may be able to arrange a margin loan, using your stock as collateral. Since a margin loan has no monthly payments, this generally does not affect your debt ratios. You may use the proceeds towards the down payment or to pay off debt.

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Preapproval

As a potential buyer competing for a property, you'll have a better chance of getting your offer accepted by being as prepared as possible. Consider this hierarchy of preparedness:

1. Neither pre-qualified nor pre-approved
2. Pre-qualified
3. Pre-approved

The benefits available at each level can be easily understood when viewed from the seller's perspective. Imagine you're a seller in receipt of multiple offers to purchase your property. A complete stranger (buyer) is asking you to take your property off the market for at least the next two to three weeks while they apply for a loan. As the seller, let's consider the type of buyer you'd prefer to deal with.

1. Neither pre-qualified nor pre-approved
This buyer provides no evidence that they can afford to purchase your property. You may wonder how serious they are since they're not at least pre-qualified.

2. Pre-qualified
This buyer met with a mortgage broker (or lender) and discussed their situation. The buyer informed the broker regarding their income, expenses, assets and liabilities. The broker may also have seen their credit report. The buyer provided you with a letter from the broker stating an opinion of what the buyer can afford.

3. Pre-approved
This buyer provided a broker or lender written evidence of income, expenses, assets, liabilities and credit. All information was verified by a lender. As a result, much of the paperwork for this buyer's loan has been completed. This buyer will probably be able to close quickly. They provided you with a letter (pre-approval certificate) from the lender. You're as certain as possible that this buyer can close.

As a potential buyer, you can see that being pre-approved will give you the best chance of getting your offer accepted. This is critical in a competitive situation.

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Start Looking for a Home

You're prepared and ready to purchase a home. Now it's time to go out into the market place and find it. Will you use a real estate agent to help you look, or will you look on your own?
For practically everyone, it's worthwhile to use a real estate agent. The benefits of using an agent are numerous.

Advantages of using a real estate agent

A good agent builds a career by creating repeat customers and earning referrals. To that end, she does everything possible to make your home-buying experience as pleasant as possible. An agent is expert in her market. She knows (or can find) everything you want and need to know about the community.

An agent will:

• Arrange access to homes for you to preview
• Accompany you on your tour of homes
• Research the neighborhood, including market values
• Draft the offer to purchase
• Negotiate with the seller
• Arrange inspections
• Abide by all local, state and federal laws
• Help you obtain financing
• Review all closing documents for correctness
• Follow up after closing to make sure you're move-in is accomplished smoothly

Finding and keeping a good agent

Finding a Real Estate Agent whom you can trust and enjoy working with may require some effort. When you find the right person, stick with them. Give them the same respect and consideration you would expect. When an agent knows that they have your loyalty, they will do their best job for you.

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Market Conditions

The price you pay for your home will be affected by prevailing economic (market) conditions. Changes in market conditions can have an immediate and significant effect on property values. For this reason, it's important to be aware of current conditions.

The price of real estate is affected by the supply and demand for credit and real property. The supply of capital is finite. Capital available for lending is shared among government, business, consumer, mortgage and other borrowers. If capital is in relatively short supply, the cost of capital rises. When capital is in relatively great supply, the cost of capital declines.

The supply of money and credit in the economy is regulated by the Federal Reserve Bank. If The Fed makes too little credit available, demand for money can cause interest rates to increase. Borrowing, investing and sales decrease as interest rates rise, which can lead to an economic decline. Alternatively, if there is too much available credit, interest rates can fall. When interest rates are low, price levels for goods and services can increase as people are willing to pay more and more for them, which can potentially lead to inflation. It's The Fed's job to use monetary policy to achieve a growing yet stable economy.

The price you pay for your home can be affected by interest rate levels. Interest rates can change relatively quickly. Conversely, the supply of housing changes slowly. In the short run, the housing supply can be considered fixed.

Consider what can happen in the housing market when interest rates are relatively low. Low interest rates allow a larger number of home buyers (borrowers) to enter the housing market. More buyers competing for a fixed supply of housing can cause the price of housing to increase. This type of market is sometimes referred to as a seller's market . In a seller's market, properties sell quickly, multiple offers are common and property values may be increasing. When interest rates rise, many would-be buyers no longer qualify for mortgages and leave the housing market. This type of market is referred to as a buyer's market. In a buyer's market, property values may be level or decreasing as sellers compete to attract buyers.

As a home buyer, your buying behavior can be influenced by market conditions. If you're in a seller's market, you may feel pressure to act quickly and offer top-dollar for a property. In a buyer's market, you may feel less hurried, more in control of the situation and inclined to offer relatively less for a home.

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Architectural Styles

Cape Cod and Cape Ann Colonial
Usually small in size with symmetrical windows found on both sides of the front door. These one or one and one-half story homes are usually small. The wood shingle roof is steep gambrel or gable. The exterior is usually wood.

New England Colonial
This square or rectangular structure maximizes usable space. It has symmetrical windows on both sides of the front door . This two or two and one-half story home has a wood shingle, gable roof; wood exterior.

Dutch Colonial
This home has a stone exterior and a relatively narrow width (50 ft. wide +/-). Its height is either one and one-half or two and one-half stories with a gambrel roof, dormer windows, and a symmetrical front with the front door in the center.

Georgian and Southern Colonial
A large home requiring a large plot of land. This brick or wood home is symmetrical, has a gabled roof, elaborate front entrance with columns.

English Elizabethan
Requiring a relatively large plot of land, this home has gothic lines and is constructed of brick, stucco or stone. The home has molded stone around the windows and doors. The steep roof is covered with slate or shingle. Leaded metal casement windows are the norm.

English Half-Timber
Requiring a large lot, this home has stucco between protruding timber faces. Most often a two story home with a steep pitched roof; heavy masonry composing the first story.

Regency
Below a low hipped roof, a centered, octagonal window on the second floor can be found. The front entrance is centered; shutters frame the windows; exterior of brick or stone.

French Provincial
This large, one and one-half or two-story home is found on a large lot. The house has large, tall windows with shutters; masonry exterior and very high roof.

French Normandy
This unsymmetrical home often has turrets at the entrance; steep pitched shingle roof and exterior of brick or stone.

True Spanish
This home has stucco walls (light color) red mission tiled roof, wrought iron decorations with enclosed patios.

Small California Spanish
This one story house has a flat roof with mission tile trim in front. The exterior is stucco; no patio and is well suited for a small lot.

Monterey Spanish
This light colored, stucco, two story home has a red mission tiled roof, decorative iron railings and second story balconies.

Modern and Contemporary
This home has a low pitched or flat roof; concrete slab or perimeter foundation; lots of glass; usually one story and is designed for indoor and outdoor living.

California Bungalow or Ranch House
This one story, stucco house has wood trim; concrete slab or perimeter foundation; shake or shingle roof; not symmetrical; often with an attached garage.

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Suitability Standards

Ask these important questions about the home's functionality. As much as possible, you want these standards to be true for the home you're considering purchasing.

Subject Property: ___________________________________________________________

Minimum Standards

Living Room:

• Adequate floor space for efficient placement of furniture.
• Traffic pattern doesn't require you to walk the entire length of the living room to reach other parts of the house.
• Fireplace not near flow of traffic.
• Dining Room or area:
• Kitchen close by.
• Adequate size.
• Shape is nearly square.

Bedrooms:

• Master bedroom size is at least 10 ft. x 12 ft.
• Secondary bedroom sizes are at least 9 ft. x 10 ft.
• Adequate ventilation.
• Don't have to walk through one bedroom to reach another.
• Closet space is at least 2 feet deep by 3 feet wide.

Kitchen:

• Ample and efficient workspace.
• Centrally located equipment to eliminate excessive foot travel.
• Floor, ceiling and wall surfaces are easy to clean and maintain.
• Adequate lighting and ventilation.
• Kitchen conveniently located in relation to dining and/or family room.
• Kitchen has an exterior entrance.
• Laundry facilities are adjacent to the kitchen.

Bathrooms:

• Properly located with respect to other rooms.
• If the home has only one bathroom, it is located off the central hall.
• Bathroom doesn't open into kitchen or living room.
• Bathrooms have exhaust fan or exterior window.
• Floor, ceiling and wall surfaces are easy to clean and maintain.
• Soil is protected from erosion.
• Proper grading provides protection from water damage.
• Walks, walls and other yard improvements are made of adequate materials.

Site Location:

• Property doesn't abut commercial or multi-residential uses.
• If a key lot, it doesn't look upon other back yards.
• If a corner lot, no busses stop at the corner.

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Visit Properties

You'll probably preview several properties before finding the right one. To be efficient in your search, prepare in advance. Consider keeping a tour log. Your log will help you review, compare, investigate and discuss properties, and assist you in making an informed buying decision. Your visit log might contain one or more of these check lists:

Home and Neighborhood Features
Identify and rank the importance of various features in your home and neighborhood. Complete this check list prior to meeting with an agent.

Suitability Standards
Today you're a buyer. In the future you may be a seller. Ask these critical questions about a home's functionality. The better your new home measures up, the more attractive it will be when it's your turn to sell.

Home Inspections and Disclosures
Some property defects aren't readily seen. If you're not sure about the items in this list, order inspections by licensed professionals.

Property Comparison
At a glance, compare features and amenities of many properties.

Architectural Styles
A handy reference for identifying the different architectural styles you might see.

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How Much to Offer

Determining your offering price can be influenced by a number of factors. Market conditions, personal factors affecting you and the seller (if known), and factors directly effecting the property and neighborhood may all play a role.

Market considerations

Market conditions broadly effect the price level of homes. These conditions are external to the property, yet greatly influence your offering price.

In a seller's market, competition for homes is high and property values may be increasing. Under these circumstances, expect to pay a premium price for the home. Listen to your agent's advice regarding what to offer. Offering full- or over full-price in a seller's market is not unusual.

Conversely, in a buyer's market, competition for homes is low and property values may be level or decreasing. Offering less than full-price is the norm under these circumstances.

In the ideal market (a market in equilibrium), demand for and supply of housing are in balance, and neither buyer nor seller is disadvantaged by market conditions.

Property-specific (internal or local) considerations

Property-specific considerations are more easily quantified compared to the market considerations discussed previously. The number of bedrooms, bathrooms, square feet, lot size, etc., are examples of these.

Prior to making your offer, you'll need to compare the home with others in the neighborhood. This is done with the aid of a Competitive Market Analysis (CMA). Your real estate agent should provide one prior to writing the offer to purchase. (A complete appraisal is normally not necessary until after your offer is accepted.) The CMA contains most of the information found in the Property Comparison form, with additional information including:

• Date listed
• Date sold
• Sale price
• Number of days on the market
• Financing
• Expired listings (date listed, price, date expired)
• Properties for sale (date listed, price)

The CMA should provide a comparison of properties similar to the property you're considering purchasing. In a stable market, sold homes are the best indicators of market value. Homes for sale can be expected to set the high end of the market, and expired listings indicate prices too high for the market.

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Make an Offer

You've finally found the property you want to buy and it's time to make an offer. Be careful not to act hastily. Draft your offer carefully and exercise good judgment. Here are some important steps to follow:

1. Act now. Assume there is no time to waste in making your offer. You've invested time and energy in your search for a home--now follow through. If possible, let the sellers know they'll be receiving your offer shortly.
2. Determine your offering price. You'll want to be aware of dynamic market conditions, as well as property-specific factors contained in a comparative market analysis (CMA).
   The CMA is a tool for comparing the subject property with other similar properties in the neighborhood. A well-prepared CMA is critical in helping to determine the fair market value of the home (which may be what you offer). Your real estate agent should have a form specifically designed for this purpose. If during your property search you completed the Property Comparison form, the CMA is practically complete. The CMA will also include Listing Date, Listing Price, Listing Expiration Date, Sale Price, and Sale Date, number of Days on the Market. The CMA should include homes currently for sale, home sold and homes which were listed but didn't sell. 
3. Protect yourself. Your offer should contain financing and inspection contingencies for your protection. If you're working with a licensed real estate agent, it's likely she'll be using a comprehensive form which includes standard text for virtually all normal contingencies.
4. Think ahead. Now is the time to plan when you want to close the transaction. If you're nearing the end of your tax year, discuss with your tax advisor the best time to close. There may be benefits associated with closing in the next tax year. Consider closing near the end of the month. Pre-paid interest on your new loan will usually be less. Coordinate closing with the closing of your current home, or the termination of your lease.
5. Present your offer. If you're working with an agent, she'll likely present your offer for you. Letting her represent you will help protect against emotional flair-ups which can occur in face-to-face negotiations between principals.
6. Negotiate. Unless you're offering the seller exactly what they're asking, prepare to negotiate. A good real estate agent will be schooled in the art of negotiation and will employ important negotiation techniques while representing you. Additionally, you can benefit by reading up on the subject. Local and on-line booksellers will have many books on the subject from which to choose.

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Negotiate Terms

Many books exist on the art of negotiation. If you haven't read a book about real estate negotiation, you can still come out a winner by remembering two important rules. These rules will help save you more money than virtually all other negotiating techniques combined:

1. Deal with a motivated seller.
   The more someone wants something, the more they'll sacrifice to get it. In the case of buying real estate, find a seller who wants your money more than you want their house. A motivated seller is much more likely to make concessions in your favor. You may have to make offers on several properties before you find a motivated seller. When you find one--you'll know it.
2. Know when to walk away. If you reach that point--walk.
   How do you determine ahead of time when to walk away? Before making your offer, you completed (or had your agent complete) a Competitive Market Analysis (CMA). The CMA helps you determine the value of the home. Can you offer more than the CMA suggests? Sure. And in a hot market, you may have to. But decide ahead of time how high you'll go, and what concessions you're prepared to make. Price isn't the only reason you might walk away. Don't compromise on home inspections, removing contingencies too soon, allowing enough time to act, etc.

General principles

By all means, negotiate.
Negotiation is part of the process of buying a home. Price is just one point of negotiation. Personal property, home inspections and repairs, closing dates, etc., may also come into play. If you're like most people, your home is the largest purchase you'll ever make. It's likely the home-buying experience will be an emotional one. If you find yourself reaching the limits of your patience and endurance, don't despair -- that too is sometimes part of the process. By remembering the two rules, you'll do fine.

Maintain your objectivity.
This isn't always easy. At least two compelling influences will test your ability to remain objective: a hot market and finding the "perfect" home. A hot market can sway you to offer more than the home is perhaps worth. Finding the perfect home can also have such an effect. It is true that no two homes are exactly alike. For practical purposes, most homes are very much alike, however. When you think you've found the perfect home, chances are there's another one available just like it and for possibly a better price.

You can always increase your offering price.
But you can seldom decrease it. Unless you have the misfortune of buying in a hot market, start by offering lower than asking price. Just how low you make your first offer depends on several factors. How well is the home priced? If it's priced well and you don't want to risk insulting the seller, offer close to what the CMA suggests. If it's a hot market, you may have to offer full price or more. If it's a slow market and you think you have a motivated seller, you may be successful offering a relatively low price.

Get it in writing.
Your state may require that contracts for the sale of real property be in writing. Do not expect oral agreements to be enforceable.

Give up something to get something.
Ask for something you can easily give up. If the seller sees you're making concessions, they'll be more likely to give you what you really want. In your offer, include some things you can do without. Here's a hypothetical example:
A home is for sale for $110,000. What you want most is to buy it for $105,000. You offer $100,000, 45-day escrow, you get the refrigerator and a $1000 credit to clean the home.
During negotiations, you give up the $1,000 credit, the refrigerator and agree to a 30-day escrow. The sellers feel like they won something, and you get the home for $5,000 less than you were willing to pay!

The Impasse
There may be an item which bogs down negotiations. When this happens, quickly move off the item and onto something you can agree upon--no matter how small. This approach is also used to delay negotiations over an item you're sure will be a challenge to overcome. By reaching agreement on several smaller points, an environment of successful cooperation is created which helps to resolve larger issues.

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Inspect the Home

Generally, the seller should inform you of any adverse property conditions of which he or she is aware. This is of no help if there are adverse conditions of which the seller is not aware. The federal Real Estate Disclosure and Notification Rule requires that you be informed of certain adverse environmental conditions affecting the property. Unfortunately, there are circumstances in which you aren't required to receive the disclosure. As a consumer, it is up to you to protect yourself, your family and you investment. While visiting properties, make notes of items possibly requiring investigation in the event you make an offer. Here are some areas of potential investigation to be considered when visiting and buying a home.

Age and condition of structural components
Be aware of the condition of plumbing, electrical, heating, or other mechanical systems.

Required permits
Have structural additions, alterations, replacements, or repairs been made? If so, were proper permits obtained?

Topography
Are there flood, drainage, settling or soil problems on or near the property?

Common areas
Are there homeowners' association obligations, deed restrictions or common area problems?

Neighborhood
Are there noise or nuisance problems?

Environmental conditions
Is there lead-based paint, asbestos, radon gas, fuel, chemical storage tanks, contaminated soil or water affecting the home? You may want to contact the United States Environmental Protection Agency for more information.

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Get Final Loan Approval

Perhaps you were pre-approved prior to or during your home-hunting activities. Pre-approval can take place in the absence of having identified a home to purchase.

When you enter into a contract to purchase your home, you begin the process of obtaining final loan approval. To convert your pre-approval to final loan approval, the main items the lender needs include the appraisal, purchase contract and title information. Your real estate agent, loan agent and attorney (where applicable) will be instrumental in providing these documents to the lender.

If you were pre-approved, you probably gave many of these documents (below) to your lender. Review the list to make sure the lender has current documents. If you're just beginning the approval process and the lender will be verifying your income, assets and liabilities, you'll need to gather these documents:

A.  All Borrowers:

• Copy of purchase contract
• Copy of sales contract on real estate you are selling
• Divorce or separation documents
• Bankruptcy files
• Relocation agreement
• Copy of most recent Social Security check
• Award letter and copy of most recent checks for disability, retirement, or legal settlement
• Recent statements for all credit card accounts
• Bank and financial brokerage account statements for the previous three months
• IRA, Keogh and 401(k) statements for the previous three months
• Title documents for automobiles under five years old

B.  Employed Borrowers:

• (Documents in section A.)
• Pay stubs for the previous 30 days
• W-2s for the previous two years
• 1099s for the previous two years

C.  Self-Employed Borrowers:

• (Documents in section A.)
• Federal tax returns for the previous two years
• Year-To-Date Profit-and-Loss statement for your business

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Contingencies

Your offer to purchase will be dependant (contingent) upon certain things occurring, or certain conditions existing. Contingencies are designed to protect you. You will be able to cancel your contract if conditions described in your contingencies are not met. If you're working with a real estate agent, she will likely be using a standard, printed form containing a number of boilerplate (standard, typed) contingencies. If the boilerplate doesn't adequately describe your particular situation, you'll want to add verbiage accordingly.

Financing
If you need to obtain a loan to purchase the property, the purchase will be contingent upon you obtaining financing. Your offer will contain a financing contingency.

Title
Key to creating value in real property is that it be freely transferable. There should be no dispute as to who has rights to the property. It would be extremely unusual if a title contingency were not in the boilerplate of the contract. Be sure it is.

Inspections
The inspection contingencies you incorporate into your contract depend upon your particular situation and the property you're considering purchasing. Regarding physical conditions, older homes usually require more inspections than newer ones. Regarding intended use, you'll want to check local zoning laws if you plan to use part of your home for commercial purposes. Don't assume you'll be able to add that extra bedroom or work shed. If possible, make your offer contingent upon obtaining the appropriate building permits before closing the transaction.

Common Physical Inspection Items
Consider these common problem areas when making an offer on a home. You might want to incorporate one or more of these inspection contingencies into your offer.

Drainage
Poor drainage can be corrected by repairing or replacing gutters and downspouts. Over time, the surface of the soil may have changed enough to require grading to direct water away from the structure.

Environmental Hazards
The federal Real Estate Disclosure and Notification Rule  requires that sellers disclose to prospective buyers any known information and reports about lead-based paint and lead-based paint hazards. The seller, however, may not be aware of existing information or reports. If you're buying a home constructed prior to 1978, you might consider an inspection.
Asbestos, formaldehyde, radon gas, fuel or chemical storage tanks and contaminated soil or water are other potential conditions which would warrant inspections.

Heating Systems
All heating and cooling systems eventually have to be replaced. Long before the need for a new heater becomes obvious, however, the heating system may become dangerous. Consider having carbon monoxide detectors installed near the heater and in the bedrooms.

Plumbing
Distribution piping, waste lines and fixtures make up the plumbing system in a house. Distribution piping deteriorates over time and is a common problem in older homes. Iron pipes last approximately forty-five years, and the norm is to replace them as needed. Replacement pipes are usually copper. At the joints between iron and copper pipes, look for rust and mineral deposits. This is evidence of deterioration due to galvanic action resulting from the lack of electrolytic coupling at the joints. In the case of brass pipes, over time the zinc in the brass dissolves into the water, leaving small holes in the pipe. The minerals in the water may eventually seal these holes, but pipes with this condition should be replaced.

Roof
An asphalt shingle roof can be expected to last from seventeen to twenty-two years; a wood-shake roof--approximately forty years. Look closely for newly painted ceilings (especially in closets) which might cover telltale stains caused by roof leaks. Leaks often occur next to flashing around vent pipes and chimneys.

Ventilation and Insulation
Attics are often uninsulated or not completely insulated. A well-insulated attic will reduce heat loss in winter and heat gain in summer. Ventilation helps prevent moisture build-up.
Crawl spaces, like attics, should be insulated and ventilated for the same reasons. Crawl spaces usually have dirt floors, and plastic sheeting is sometimes recommended to help control moisture build-up.

Wiring
Make sure circuit breakers are designed for the circuits they are protecting. It is not unusual to find twenty- and thirty-amp circuit breakers or fuses protecting circuits with fewer amps. This condition can lead to an overload. Overloaded circuits are a fire hazard.
Many homes built between 1965 and 1973 contain aluminum wiring. Aluminum wiring is a fire hazard, according to the Consumer Product Safety Commission. An electrician can pigtail (attach) short copper strips to the ends of the aluminum wires and secure them with special safety connectors to correct the problem. This should only be attempted by an electrician.

Other common problem-areas include:

• Damaged exterior steps and paths:  A physical safety hazard found in 9 out of 10 homes.
• Wet Basement:  Found in one of every two homes with basements.
• Fire safety hazards:  Found in almost one in three homes.
• Termites:  Found in almost one in four homes in areas with termites.
• Hazardous steps and stairs:  Found in more than one in five homes.
• Water heater--missing controls and improper installation:  Found in one in five homes.
• Windows with damaged sash cords:  Found in one in five homes.
• Garage problems:  Found in almost one in five homes.

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Congratulations

Settling into your new surroundings can be thought of as a two-step process. 1) moving into your home and, 2) moving into the neighborhood.

Moving into your home consists of the activities related to making your new home habitable (unpacking, furnishing rooms, etc.). Unpacking can be accomplished in such a way as to provide life's necessities as you need them, while reducing the stress associated with moving.

Moving into the neighborhood consists of the activities associated with becoming familiar with and taking advantage of the important services your community has to offer. When undertaken in an orderly manner, discovering your neighborhood can be an adventure.

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Unpacking

"An oak is not felled at one stroke."

It is a rare person who enjoys moving and unpacking; or who can be convinced that something "fun" can be made of it. If you discover how to make it enjoyable, please let us know. Most people recognize a daunting task when they see one, and moving into your new home is one such task.

The good news:

• This is where planning your move pays off. When your moving boxes are clearly marked and contain related items, the job of making your new house your home can be accomplished with a minimal amount of inconvenience.
• Don't attempt to unpack everything in one day or one week. By unpacking the most important items first, the distress of moving can be quickly relieved. (You'll be amazed how many things can remain in boxes for months without being missed.)

Unpacking Made Easy:

A.  Gather together boxes and items based upon the room in which they belong.

B.  Unpack boxes and furnish rooms in this order:

1. Kitchen
   Before long you'll need to feed hungry mouths. A kitchen table is also a good meeting place.
2. Bathrooms
   After a long day and a hearty meal, a warm bath or shower will do wonders.
3. Bedrooms / Clothes closets
   At the end of the day, you'll need a place to rest your weary head. In the morning you'll need a change of clothes. If you don't want to spend time assembling your bed now, you can at least toss the mattress on the floor.
4. Family Room / Living Room
   Take your time and discuss where you want the heavy furniture. You want to place heavy objects just once.

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