TEN STEPS TO BUYING A HOME

You're ready to take the leap and buy a home. If this is your first time, you may want to know what to do to make the process go more smoothly. Here are ten steps you'll be going through to buy your next home.

Check Your Credit Reports and Scores - You get one free look at your credit reports annually. Go to AnnualCreditReport.com and see how easy it is to get credit reports from the three major credit bureaus, Experian, Transunion, and Equifax. You'll need all three because they each report differently, so you may find an error at one bureau but not the other two. You don't know which credit bureau your lender will use so you want all three bureau reports to be accurate. If you see a mistake, contact the bureau and alert them to the error. Send a copy of your proof, such as the paid balance.

Get prequalified - Your lender will "run your credit" to look at your credit reports and evaluate you for risk. Your income, credit scores, payment history, revolving debts, obligations such as child support as well as the type of loan you choose are all factors in determining your interest rate and other terms of the loan. The lender will also consider how much home you can buy based on your down payment; smaller down payments mean higher monthly payments. Last, the interest rate and terms (30-year, fixed or adjustable rate) will determine what you can afford in monthly payments.

Make your wish list - Decide where you want to live and how many bedrooms and baths you'll need. Consider lifestyle -- condominiums offer shared amenities, with little responsibility. Single-family homes offer more space and privacy, but much more exterior and yard maintenance. Think about how far you're willing to commute to work. Make a list with five must-haves and five deal-breakers that you absolutely don't want. Be willing to compromise if you find a home with most of the things you want.

Hire a real estate professional - Your real estate professional should be expert in the area where you want to live and familiar with the type of home you want to buy. Your agent has house-by-house experience in your neighborhood and can offer the best advice on homes in your range. Ask for referrals from people you know who have recently bought or sold a home or choose an agent in the neighborhood who is less than five minutes from the neighborhood you want.

Select your home - No home is perfect, so expect to find a few things that are disappointing. Try to see past minor flaws such as bad paint colors or old carpet. Think long-term. Is this the house you would want if it were painted and recarpeted? Which home best suits the activities and needs of your household now and in the years ahead? Don't buy more than you need or can comfortably afford.

Make an offer - You're either in a buyer's market or a seller's market, so your offer depends on the current market conditions. If a home has been on the market a long time, you can ask the seller for a price reduction, repair concessions, and help with closing costs, but if it's new on the market, the seller is unlikely to accept an offer lower than 95 to 97 percent of the asking price. Ask your real estate professional for advice and a CMA so you can determine a fair offer price. Be sure to make your offer contingent on a satisfactory inspection.

Get an inspection - A home inspection is a professional third-party opinion of the home's condition. The inspector works for you, so it is his job to point out problems big and small. He will check age of all systems, note large and small repairs that are needed, code violations, and so on. Some inspections are not included, so you will have to hire a separate experts to look for pests, or inspect the septic tank. You need to know what problems and expenses you'll be facing as the next owner.

Renegotiate Terms - If the inspection reveals a problem that is more severe or is not noted on the seller's disclosure of the property, you should renegotiate terms. Either ask the seller to fix the problem or ask for a price reduction if you prefer to fix it yourself.

Get an appraisal - The bank appraisal determines market value. If the home doesn't appraise for the purchase price, the bank will refuse to make the loan unless you increase the size of your down payment or renegotiate a lower price with the seller. If the home meets the appraisal comparables, the lender will move toward closing. Pay close attention to the comparables that the appraisal uses -- they may skew the value in a different direction than you might be expecting.

Go to closing - Once final negotiations are complete, and you've done a final walk-through of the property to make sure all repairs have been made, the parties to the transaction meet at the escrow office. This office could be a title company, real estate attorney, or whatever is customary in your area. All paperwork is signed by both parties. The lender pays the seller, minus any liens against the home such as the seller's mortgage. Once all the disbursements have been made, you get the keys to your new home, according to your agreement.

Congratulations! You're ready to move into your new home.

A Comprehensive Market Analysis Is Not An Appraisal

As part of the home buying process, your real estate agent

may create a comprehensive market analysis or CMA. Later, when you apply for a mortgage, a bank appraisal is conducted by a licensed appraiser. Are CMAs and appraisals the same thing?

While both CMAs and appraisals help determine a home's market value, their purposes are not the same. The CMA is a sales tool to help you find an offer price for the home you want to buy. The homes in the CMA include the home you want to buy plus similar nearby homes. This helps you see how the home you want compares to other homes so you have an idea what to offer.

A real estate professional may prepare a CMA for their sellers to help them choose a listing price. The CMA includes recently sold homes and homes for sale in the seller's neighborhood that are most similar to the seller's home in appearance, features, and general price range.

Although the CMA is used to help determine current market value, the seller's home is typically not even featured in the CMA. The CMA is merely a guide to help the seller learn what's happening in their local market, so they can better understand where their home fits in term of price ranges, based on location, features, size, condition and other factors.

The CMA offers the same advantages to you as a buyer. They help you better understand the local market. You can expand the search and get different results in a CMA simply by changing the zip code or the price range or the number of bedrooms and baths.

Appraisals are all about risk retention for banks and their customers. If the buyer is receiving financing through a bank, the bank will order an appraisal.

Unlike the CMA, a bank appraisal is a professional determination of a home's value. It's performed by a licensed appraiser, using guidelines established by the Federal Housing Finance Agency, which regulates federal housing loan guarantors such as FHA, VA and housing loan purchasers Fannie Mae and Freddie Mac.

An appraisal is a comprehensive look at a home's location, condition, and eligibility for federal guarantees. For example, the home you want may have porch steps but no handrail. If you want to buy the home with an FHA or VA-insured loan, your seller will have to repair or install a handrail. The FHA or VA appraiser will look at the home a second time to make sure the steps were made safe.

Appraisers use the same data in their market research to find comparable homes as Realtors do. They are also members of the MLS, but they have additional guidelines from the bank to follow to minimize risk to the bank and to the borrower. If home prices are falling, the appraiser takes the number of days a home has been on the market far more seriously.

When the appraisal is finished, the bank makes the decision to fund the loan, or it may require the seller to fix certain items and show proof that the repairs have been made before letting the loan proceed. If the loan doesn't meet federal lending guidelines, the bank will decline the loan.

Despite stricter lending and appraisal standards, most buyers' loan applications go through to closing. One reason the system works so well is that real estate agents are preparing CMAs that are better tuned to lending standards as well as market conditions. As a buyer, it's in your best interest to understand how lenders approach risk and to learn what the market is doing.

Simply put, you need both a CMA and an appraisal to determine market value. A CMA helps you decide what you should offer the seller. An appraisal determines what the lender is willing to lend to help you purchase a home.