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- Herausgeber: John Wiley & Sons
- Kategorie: Ratgeber
- Sprache: Englisch
- Veröffentlichungsjahr: 2020
Your turn-key guide to crucial information about buying a new home before you take the plunge Home Buying Kit For Dummies, 7th Edition simplifies and explains the home-buying process to new home buyers everywhere. Authors Eric Tyson, MBA and Ray Brown inform and educate readers in the simple, straightforward and incisive style the For Dummies series is known for across the world. This book covers all the topics necessary to tackle the purchase of a home with confidence, including: * Complete coverage of new US tax rules and strategies * What's happening with home financing given the high home prices and fluctuating economies found in many markets * How to compare renting and buying in light of new rules regarding mortgage interest and property tax write-offs * Updated coverage of internet resources and how to best utilize them as a buyer The 7th Edition of Home Buying Kit For Dummies offers brand new content of particular interest to millennial homebuyers, as well as freshly updated online companion content.
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Home Buying Kit For Dummies®, 7th Edition
Published by: John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030-5774, www.wiley.com
Copyright © 2020 by Eric Tyson and Ray Brown
Media and software compilation copyright © 2020 by John Wiley & Sons, Inc. All rights reserved.
Published simultaneously in Canada
No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning or otherwise, except as permitted under Sections 107 or 108 of the 1976 United States Copyright Act, without the prior written permission of the Publisher. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at http://www.wiley.com/go/permissions.
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Wiley publishes in a variety of print and electronic formats and by print-on-demand. Some material included with standard print versions of this book may not be included in e-books or in print-on-demand. If this book refers to media such as a CD or DVD that is not included in the version you purchased, you may download this material at http://booksupport.wiley.com. For more information about Wiley products, visit www.wiley.com.
Library of Congress Control Number: 2020932608.
ISBN: 978-1-119-67479-5
ISBN 978-1-119-67481-8 (ebk); ISBN 978-1-119-67482-5 (ebk)
Home Buying Kit For Dummies®
To view this book's Cheat Sheet, simply go to www.dummies.com and search for “Home Buying Kit For Dummies Cheat Sheet” in the Search box.
Table of Contents
Cover
Introduction
About This Book: The Eric Tyson/Ray Brown Difference
Icons Used in This Book
Beyond the Book
Where to Go from Here
Part 1: Getting Started with Buying a Home
Chapter 1: Deciding Whether to Buy
Weighing the Advantages of Owning versus Renting
The Pitfalls of the Rent-versus-Buy Decision
Chapter 2: Getting Your Financial House in Order
Surveying Your Spending
Reckoning Your Savings Requirements
Protecting Yourself, Your Dependents, and Your Assets
Invest in Yourself
Chapter 3: What Can You Afford to Buy?
Lenders Can’t Tell You What You Can Afford
The Cost of Buying and Owning a Home
Closing Costs
Accumulating the Down Payment
Chapter 4: Why Home Prices Rise and Fall
What Drives Real Estate Markets and Prices?
How to Get a Good Buy in Any Market
Part 2: Financing 101
Chapter 5: Understanding and Improving Your Credit Score
The Record You Can’t Ignore: Your Credit Report
The Most Popular Kid on the Block: FICO Scores
Getting Hold of Your Report and Score
Chapter 6: Selecting a Mortgage
Getting a Grasp on Mortgage Basics
Fixed or Adjustable? That Is the Interest(ing) Question
Finding a Fixed-Rate Mortgage
Arriving at the Absolute Best Adjustable
Locating the Best, Lowest-Cost Lenders
Chapter 7: Mortgage Quandaries, Conundrums, and Forms
Overcoming Common Mortgage Problems
Dealing with Appraisal Problems
Those Darn Mortgage Forms
Part 3: Property, Players, and Prices
Chapter 8: Where and What to Buy
Location, Location, Value
Fundamental Principles for Selecting Your Home
Defining Home Sweet Home
Finding a Great Deal
Pooling Your Resources: Ad Hoc Partnerships
Chapter 9: Assembling an All-Star Real Estate Team
The Team Concept
Reeling in a Real Estate Agent
Bagging a Broker
Landing a Lender
Procuring Property Inspectors
Electing an Escrow Officer
Finding (or Forgoing) Financial and Tax Advisors
Looking for Lawyers
Chapter 10: What’s It Worth?
Preparing to Tour an Endless Parade of Homes
The Three Elusive Components of Worth
Fair Market Value
Determining Fair Market Value: Comparable Market Analysis
Getting a Second Opinion: Appraisals versus CMAs
Why Buyers and Sellers Often Start Far Apart
Chapter 11: Tapping the Internet’s Best Resources
Finding Useful Information
Doing Some Preliminary Shopping
The Drawbacks of Searching for Houses in Cyberspace
Part 4: Making the Deal
Chapter 12: Negotiating Your Best Deal
Understanding and Coping with Your Emotions
The Art of Negotiating
The Negotiating Process
The Finer Points of Negotiating
Chapter 13: Inspecting and Protecting Your Home
Conducting Thorough Inspections
Insuring Your Home
Chapter 14: It Ain’t Over till the Weight-Challenged Escrow Officer Sings
An Escrow Is a Good Thing
How You Take Title Is Vital
Getting Possessive
Coping with Buyer’s Remorse
Part 5: The Part of Tens
Chapter 15: Ten Financial “To Do’s” After You Buy
Stay on Top of Your Spending and Saving
Consider Electronic Mortgage Payments
Rebuild Your Emergency Reserve
Ignore Solicitations for Mortgage Insurance
Ignore Solicitations for Faster Payoff
Consider Protesting Your Tax Assessment
Refinance if Interest Rates Fall
Keep Receipts for All Improvements
Ignore Solicitations to Homestead
Take Time to Smell the Roses
Chapter 16: Ten Things to Know When Investing in Real Estate
Real Estate Is a Solid Long-Term Investment
Real Estate Investing Isn’t for Everyone
REITs Are Good if You Loathe Being a Landlord
Don’t Invest in Limited Partnerships
Avoid Timeshare Condos and Vacation Homes
Residential Properties Are Your Best Investment Option
Consider Fixer-Upper Income Property
Consider Converting Small Apartment Buildings to Condos
Consider the Property’s Cash Flow
Your Rental Losses Are Limited for Tax Purposes
Chapter 17: Ten Things to Consider When Selling Your House
Why Are You Selling?
Can You Afford to Buy the Next Home?
What’s It Worth?
Have You Done Your Homework to Find a Good Real Estate Agent?
Do You Have the Skills to Sell the House Yourself?
Have You Properly Prepared the House for Sale?
Do You Understand the House’s Hot Buttons?
What Are the Financial Ramifications of Selling?
Do You Know the Rules for Capital-Gains Taxes on the Sale of a House?
Part 6: Appendixes
Appendix A: Sample Real Estate Purchase Contract
Appendix B: Sample Short-Sale Addendum plus Short-Sale Information and Advisory
Appendix C: Example of a Good Inspection Report
Appendix D: Glossary
Index
About the Authors
Advertisement Page
Connect with Dummies
End User License Agreement
List of Tables
Chapter 1
TABLE 1-1 Figuring Future Rent
Chapter 2
TABLE 2-1 Your Spending, Now and After Purchasing a Home
Chapter 3
TABLE 3-1 Monthly Mortgage Payment Calculator
TABLE 3-2 2020 Federal Income Tax Brackets and Rates
Chapter 10
TABLE 10-1 Sample CMA — “Recent Sales” Section
TABLE 10-2 Sample CMA — “Currently for Sale” Section
List of Illustrations
Chapter 1
FIGURE 1-1: The skyrocketing cost of renting.
Chapter 3
FIGURE 3-1: It takes many years into a mortgage to begin making real progress a...
FIGURE 3-2: Itemize mortgage interest and property tax deductions on Schedule A...
Chapter 4
FIGURE 4-1: Median existing home sale prices in the United States since 1975.
Chapter 5
FIGURE 5-1: How a credit score breaks down.
Chapter 7
FIGURE 7-1: These documents may be waiting for you in the lender’s loan papers ...
FIGURE 7-2: This type of form grants permission to your mortgage lender or brok...
FIGURE 7-3: Here’s an estimated closing costs worksheet.
FIGURE 7-4: The first part of Section I summarizes your personal information.
FIGURE 7-5: The middle part of Section I details your employment.
FIGURE 7-6: The last part of Section I details your other (nonemployment) incom...
FIGURE 7-7: Section II asks for what you have and what you owe.
FIGURE 7-8: Section III has you list real estate you already own.
FIGURE 7-9: Section IV details the purpose of your loan and how you plan on usi...
FIGURE 7-10: Declare yourself in Section V; watch out for the red flags.
FIGURE 7-11: Honesty counts in Section VI.
FIGURE 7-12: Section VII is used to track discrimination.
FIGURE 7-13: Exercise your right to your property’s appraisal — ask for a copy.
Chapter 10
FIGURE 10-1: How buyers and sellers approach fair market value.
Chapter 12
FIGURE 12-1: A typical buyer counteroffer form.
Chapter 13
FIGURE 13-1: An example of the type of superficial inspection report that you d...
Chapter 14
FIGURE 14-1: TRID Loan Estimate. When your escrow closes, you will get a TRID C...
Guide
Cover
Table of Contents
Begin Reading
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Introduction
Welcome to Home Buying Kit For Dummies, 7th Edition!
For about the cost of a couple of movie tickets or your monthly Netflix subscription, you can quickly and easily discover how to save thousands — perhaps even tens of thousands — of dollars the next time you buy a home.
How can we make such a claim? Simple. Each of us has spent decades personally advising thousands of people like you about home purchases and other important financial decisions. We’ve seen how ignorance of basic concepts and practices translates into money-draining mistakes. And we know that many of these mistakes are both needless and avoidable.
No one is born knowing how to buy a home. Everyone who’d like to buy a home must learn how to do it. Unfortunately, too many people get a crash course in the school of hard knocks — and learn by making costly mistakes at their own expense.
We know you’re not a dummy. You’ve already demonstrated an interest in discovering more about home buying by selecting this book, which can help you make smart moves and avoid financial land mines.
In the event that you’re still wondering whether to buy this book, consider that buying a home may well be the largest purchase that you ever make. Buying a home can send shock waves through your personal finances and may even cause a sleepless night or two. Purchasing a home is a major financial step and a life event for most people. It certainly was for us when we bought our first homes. You owe it to yourself to do things right.
About This Book: The Eric Tyson/Ray Brown Difference
We know that many home-buying books are competing for your attention. Here are several other compelling reasons why this is the best book for you:
It’s in plain English.
Because we work with real people and answer real questions, our information is current, and we have a great deal of experience in explaining things. This experience can put you firmly in control of the home-buying process (rather than having it control you).
It’s objective.
We’re not trying to sell you an expensive newsletter, seminar, or some real estate product you don’t need. Our goal is to make you as knowledgeable as possible before you purchase a home. We even explain why you may
not
want to buy a home. We’re not here to be real estate cheerleaders.
It’s holistic.
When you purchase a home, that purchase affects your ability to save money and accomplish other important financial goals. We help you understand how best to fit your home acquisition into the rest of your personal-finance plan.
It’s a reference.
You can read this book from cover to cover if you want. However, we know you’re busy and you likely don’t desire to become a real estate expert, so each portion of the book stands on its own. You can read it piecemeal to address your specific questions and immediate concerns.
Icons Used in This Book
Sprinkled throughout this book are cute little icons to help reinforce and draw attention to key points or to flag stuff that you can skip.
This bull’s-eye notes key strategies that can improve your real estate deal and, in some cases, save you lots of moola. Think of these as helpful little paternalistic hints we would whisper in your ear if we were close enough to do so!
Numerous land mines await novice as well as experienced home buyers. This explosive symbol marks those mines, and then we tell you how to sidestep them.
Occasionally, we suggest that you do more research or homework. Don’t worry: We tell you exactly what you need to do.
“If I’ve told you once, I’ve told you a thousand times… .” Remember good old Mom and Dad? From time to time, we tell you something quite important and perhaps repeat ourselves. Just so you don’t forget the point, this icon serves as a little nag to bring back those childhood memories.
Some of you are curious and have time to spare. Others are busy and just want to know the essentials. This geeky icon points out tidbits and information that you don’t really have to know, but understanding this stuff can make you more self-confident and proud!
Want to calculate your monthly expenses? Or have a handy-dandy list available when you interview Realtors and home inspectors? Wanna see what your bank may include on a mortgage application? These along with lots of other important stuff can be found online at www.dummies.com/go/homebuyingkit7e.
Beyond the Book
In addition to the material in the print or e-book you’re reading right now, this product also comes with some access-anywhere goodies on the web. Check out the free Cheat Sheet at www.dummies.com/cheatsheet/homebuyingkit for 20 home-buying tips and a monthly mortgage payment calculator.
Also, go online to www.dummies.com/go/homebuyingkit7e to access the “kit” part of this book. You’ll find a variety of useful forms, including many of the lists and applications that we show in the book. You can print out the application forms and fill them in, just to ensure you have all the information you need. And you can also print out the lists of questions for potential Realtors and property inspectors so you’re prepared when interviewing them.
Here’s a list of what you’ll find at www.dummies.com/go/homebuyingkit7e:
Table 1-1
Figuring future rent
Table 2-1
Your spending, now and after purchasing a home
Table 3-1
Monthly mortgage payment calculator
Chapter 3
Estimated homeownership expenses
Chapter 3
1040 Schedule A
Chapter 7
Request for Copy of Tax Return (Form 4506)
Chapter 7
Tax Information Authorization (Form 8821)
Chapter 7
Release of Authorization grants permission to your mortgage lender or broker to verify and document the financial facts of your life
Chapter 7
Good faith estimate form
Chapter 7
The Uniform Residential Loan Application, Parts I through X
Chapter 7
Right to receive appraisal form
Chapter 9
Agent activity list
Chapter 9
Agent references
Chapter 9
Interviewing agents
Chapter 12
Sample counteroffer form
Chapter 13
Interviewing property inspectors
Chapter 14
TRID Loan Estimate
Appendix A
California Association of Realtors’ Purchase Contract
Appendix B
Short-Sale Addendum
Appendix B
Short-Sale Addendum and Advisory
Appendix C
Sample Inspection Report
Appendix C
Buyer’s Inspection Advisory
Where to Go from Here
Odds are you’re not quite ready to bolt over to the nearest bank and take out a mortgage — and we don’t suggest that you blindly call the first Realtor you find online. It’s up to you where you go from here, but if you’re just beginning to think about buying your first home, we recommend that you read this book straight through, cover to cover, to maximize your home-buying savvy. But the A-to-Z approach isn’t necessary — if you feel pretty confident in your knowledge of certain areas, pick other ones that you’re most interested in by either skimming this book’s table of contents or by relying on the well-crafted index at the back of the book.
Part 1
Getting Started with Buying a Home
IN THIS PART …
Compare the pros and cons as well as the economics of renting versus buying and owning your own home.
Get your personal finances in order before buying.
Determine how much you can afford to spend on a home.
Understand the drivers of home prices in your local market.
Chapter 2
Getting Your Financial House in Order
IN THIS CHAPTER
Assessing your budget and spending
Determining your savings requirements to achieve your goals
Protecting yourself and your assets with insurance
Remembering what’s most important in life
When you’re shopping for a home, you’re the person best suited to look out for your overall interests. The people involved in typical real estate deals (such as real estate agents, bankers, loan brokers, and the like) are there to get their jobs done. It’s not within their realm of responsibility to worry about how the real estate purchase fits with the rest of your personal finances and how best to arrange your finances before and after purchasing a home. This chapter explains how you can address these important issues.
In the great history of home buying, many people have bought real estate without first getting their finances in order, setting some goals, and dealing with problems — and they’ve often paid dearly for this oversight. What are the consequences of plunging headlong into a home purchase before you’re financially ready? For starters, you can end up paying tens of thousands of dollars more in taxes and interest over the years ahead. In the worst cases, we’ve witnessed the financial ruin of intelligent, hardworking people who end up over their heads in debt (and in some situations, even in foreclosure and bankruptcy). We want you to be happy and financially successful in your home — so please read this chapter!
Surveying Your Spending
Even if your income and spending fluctuate, you may have developed a basic spending routine. Every month, you earn a particular income and then spend most of, all of, or perhaps even more than what you earn on the necessities (and the not-so-necessary things) of life.
When you want to buy a home, saving is one area where it pays to be above average. Consistently saving more than 5 to 10 percent of your income can help turn you from a renter into a financially able and successful homeowner. Why? For two important reasons:
To purchase a home, you need to accumulate a decent chunk of money for the down payment and closing costs. True, wealthy relatives may help you out, but counting on their generosity is foolhardy. The attached strings may make such a gift or loan undesirable. If you’re like most people, you probably don’t have any wealthy relatives anyhow.
After you buy a home, your total monthly expenses will probably increase. So if you had trouble saving before the purchase, your finances are really going to be squeezed postpurchase. This will further handicap your ability to accomplish other important financial goals, such as accumulating money for retirement. If you don’t take advantage of tax-sheltered retirement accounts, you’ll miss out on thousands (if not tens of thousands) of dollars in valuable tax benefits. We discuss the importance and value of funding retirement accounts later in this chapter.
Gathering the data
One of the single most important things that you can and should do before you head out to purchase a home is to examine where (and on what) you’re currently spending your money. Completing these financial calisthenics enables you to see what portion of your current income you’re saving. Having a handle on your current budget also enables you to see how a given home purchase will fit within the budget or destroy it!
Review your spending data from at least a three-month span to determine how much you spend in a typical month on various things — such as rent, clothing, income taxes, haircuts, cellphone and streaming plans, and everything else (see Table 2-1; you can access Table 2-1 online at www.dummies.com/go/homebuyingkit7e). If your spending fluctuates greatly throughout the year, you may need to analyze and average for 6 (or even 12) months to get an accurate sense of your spending behavior.
TABLE 2-1 Your Spending, Now and After Purchasing a Home
Item
Current Monthly Average ($)
Expected Monthly Average with Home Purchase ($)
Income
__________
__________
Taxes
Social Security
__________
__________
Federal
__________
__________
State and local
__________
__________
Housing Expenses
Rent
__________
n/a
Mortgage
n/a
__________
Property taxes
n/a
__________
Homeowners/renters insurance
__________
__________
Gas/electric/oil
__________
__________
Water/garbage
__________
__________
Phone/cellphone
__________
__________
Cable/satellite TV/streaming plans
__________
__________
Furniture/appliances
__________
__________
Maintenance/repairs
__________
__________
Food and Eating
Supermarket
__________
__________
Restaurants and takeout
__________
__________
Transportation
Gasoline
__________
__________
Maintenance/repairs
__________
__________
State registration fees
__________
__________
Tolls and parking
__________
__________
Bus or subway fares
__________
__________
Appearance
Clothing
__________
__________
Shoes
__________
__________
Jewelry (watches, earrings)
__________
__________
Dry cleaning
__________
__________
Haircuts
__________
__________
Makeup
_________
__________
Other
__________
__________
Debt Repayments
Credit/charge cards
__________
__________
Auto loans
__________
__________
Student loans
__________
__________
Other
__________
__________
Fun Stuff
Entertainment (movies, concerts)
__________
__________
Vacation and travel
__________
__________
Gifts
__________
__________
Hobbies
__________
__________
Pets
__________
__________
Health club or gym
__________
__________
Other
__________
__________
Advisors
Accountant
__________
__________
Attorney
__________
__________
Financial advisor
__________
__________
Healthcare
Physicians and hospitals
__________
__________
Drugs
__________
__________
Dental and vision
__________
__________
Therapy
__________
__________
Insurance
Auto
__________
__________
Health
__________
__________
Life
__________
__________
Disability
__________
__________
Educational Expenses
Courses
__________
__________
Books
__________
__________
Supplies
__________
__________
Kids
Day care
__________
__________
Toys
__________
