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The hunt
Now it's time to hit the pavement, or the Web, in search of a home
In Lesson 8
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| 30 yr fixed mtg | 4.38% |
| 15 yr fixed mtg | 3.86% |
| 30 yr fixed jumbo mtg | 5.50% |
| 5/1 ARM | 3.38% |
| 5/1 jumbo ARM | 4.18% |
| $30K HELOC | 5.05% |
| $50K HELOC | 4.79% |
| $30K Home Eq | 7.48% |
| $50K Home Eq | 7.37% |
| $75K Home Eq | 7.40% |
Money 101 Lessons
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Your first step here is to figure out what city or neighborhood you want to live in. (Remember the old saw about "location, location, location.")
For overall demographics and data on metropolitan areas, you can visit a city site like CNNMoney.com's annual Best Places to Live list. For more detailed neighborhood information, check out sites like Yahoo! Real Estate, Trulia.com, Zillow.com or NeighborhoodScout for comprehensive school and demographic information on a number of communities. Look for signs of economic vitality: a mixture of young families and older couples, low unemployment and good incomes.
Pay special attention to districts with good schools (high teacher-student ratios and graduation rates are among the hallmarks), even if you don't have school-age children. When it comes time to sell, you'll find that a strong school system is a major advantage in helping your home retain or gain value.
Try also to get an idea about the real estate market in the area. For example, if homes are selling close to or even above the asking price, that shows the area is desirable. Try Homegain.com, which is free, or Dataquick.com, which is available only to paid subscribers, to check out recent home sales.
Your real estate agent may also be able to show you listings. Incidentally, if you have the flexibility, consider doing your house hunt in the off-season -- meaning, generally, the colder months of the year. You'll have less competition and sellers may be more willing to negotiate.
Next, take your search to real estate sites like Realtor.com or Yahoo Real Estate, which let you search for property that fit your requirements.
Be wary of choosing search criteria that are too restrictive. For example, select a price range 10 percent above and 10 percent below your true range. Add a 10-mile cushion to the location you specify. If you see a house you are interested in, save it, print it, add it to your bookmark or favorites list, and take note of the MLS code; your agent will want that code to arrange to show you the home in person.
If you're a first-time buyer, pay special attention to condominiums and cooperatives, or co-ops. Condos generally sell for 15 percent to 20 percent less than the cost of comparable detached homes in the same neighborhood, so you get much more space for your money.
What's the difference between the two? In a condo, each owner has absolute ownership of his own unit, which may be an apartment or townhouse. Owners pay a monthly fee to maintain shared areas like the lobby, the pool, or the laundry room. The chief financial risk to a condo owner is that the common charges can rise, or, in the event of a major problem such as a roof repair or boiler replacement, the condo board can assess fees to cover expensive repairs.
It's a good idea, when considering a condo, to find out how much the common charge has changed over the past five years, and whether there have been major assessments during that time. Also ask what percentage of the residents actually own their units as opposed to just renting them (many condos include both). A complex with lots of renters has fewer owners who care about the upkeep, and it may be harder to get a loan on such a property.
A co-op is a rarer animal limited to major metropolitan areas, especially New York City. Essentially, the complex is run by a corporation where each owner is a shareholder. In other words, a co-op owner is a partner in a building, rather than an outright owner of his or her specific unit within that building.
The monthly maintenance fees are generally higher than those of a condo because they include property taxes (condo owners pay their own separately, but prices tend to be lower. Their chief downside is that the co-op board usually has to approve new owners and may discourage you from renting your unit if you move out without selling. As with a condo, check on the group's financial health, whether shareholders have been hit with special assessments recently, and whether the unit includes many renters.
When you actually start touring homes, bring a notebook and a digital camera to help you remember details. Your real estate agent should supply you with a description of each house and the lot it sits on, the property tax assessment, the asking price, and sometimes a diagram of the rooms. Your camera and notebook are there to record other details, ranging from the cost of heating to the view out the rear window.
One note: Don't automatically reject a house just because it doesn't measure up to your desires, either in features or price. You can always add a deck, for instance, or update a kitchen. Since the asking price is just a starting point for negotiation, you will be making offers and counteroffers as both parties seek an acceptable price.
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