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No place like home ownership - tips in buying a house

Men's Fitness, Oct, 1998 by Stacy Kravetz

These days, buying a house is a lot easier than you think

Picture this: Best-buddy barely employed Bill brags that he just bought the last great house in America. He dangles the low, low interest rate in your face, taunts you with the fact that he's building equity, and makes you view the shag carpet and cottage-cheese ceiling in your apartment with disdain.

You hop in the shower to clear your head and hear your neighbor's toilet flush; you're hit by a scalding blast. Spirit broken, you collapse in front of the TV, just as the guy next door flips on his dishwasher and the woman upstairs gets on her treadmill. The walls shake, the lights flicker, and you vow, once again, to ditch apartment life if it kills you.

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Home ownership certainly has its benefits, namely that you own the joint and don't have that dismal recurring feeling of pouring money down the drain. On the other hand, a house also carries a load of new responsibilities. How do you decide whether to rent or buy?

We're here to help. Many people have convinced themselves that home ownership is an impossible dream. But while it isn't for everyone, buying a house can be easier than you think. As we dispel the following myths, you'll see why.

Four words: I can't afford it ...

If the numbers don't add up the first time, don't give up. You probably wouldn't buy the first car stereo you saw without shopping around first. The same 'goes for home loans: Not all lenders will offer the same rates, so you'd be crazy not to explore the differences between banks, credit unions and mortgage companies. The key number to look for is the APR (annual percentage rate), which is a combination of all the expenses you'll pay computed as an average annual rate. Many newspapers run tables comparing local lenders' APRs, and plenty of mortgage banks advertise in local papers.

You might want to ask about adjustable-rate mortgages, which allow you to pay a lower APR in your early home-owning years and a higher rate later, when you're presumably more able to afford it. But rates are pretty favorable these days anyway, so chances are you'll find a pretty reasonable fixed rate.

Yeah, but a good deal is so hard to find ...

Contact a local mortgage broker familiar with your area; he or she can probably provide valuable leads and advice. The Web, meanwhile, is home to several mortgage databases containing information about hundreds of lenders; try Mortgage Market Information Services, Inc. (www.interest.com) or the 1st AAA Commercial Mortgage Lender Databank (www.blackburne.com). Other websites, such as FinanCenter (www.financenter.com), are chock full of general home-finance info.

Other options: Call a national lender and see what they can offer; two big ones are Countrywide Home Loans (800-570-9888; www.countrywide.com) and Chase Manhattan Mortgage (800-678-1051; www.chase.com). Many large corporations offer plans to help employees purchase a home; ask around the office. And military veterans may also qualify for good deals; check with your local VA office.

I don't have enough for a down payment ...

Don't count yourself out. It's true that in general, the greater the down payment you're able to make, the lower your interest payments will be. But a down payment might be anywhere between 3 and 20 percent of a home's value, and state and local housing agencies will typically give first-time home buyers a break. Generally, in order to qualify, your income must be below the county or state median, and the home you're buying must cost less than the average price in the region.

Federal agencies like Freddie Mac (the Federal Home Loan Mortgage Corporation; www.freddiemac.gov) and Fannie Mae (the Federal National Mortgage Association; www.fannie mae.gov; 800-732-6643) have programs through which lenders can offer you loans, provided you have good credit. Each agency has an interactive website that will walk you through the process.

You can also borrow money from yourself: If you have a 401(k) retirement savings plan through work, you can withdraw money from it to make your down payment, then simply repay yourself later,

I have terrible credit. I'll never qualify for a loan ...

Guess again. The Federal Housing Administration (www.hud.gov/fha) has a loan program geared toward people with spotty credit, though the interest rates are generally higher than you'll find through Freddie Mac or Fannie Mae. The FHA will insure your mortgage, covering any payments you're unable to make; in return, your monthly payments will be slightly higher, and you must pay back any money you borrow, plus interest, at the end of the mortgage term.

A private lender may also lend you money at a higher interest rate - these days, many banks are willing to take on higher-risk clients whom they might not have accepted 20 years ago. If you can afford to make high payments for a while, you may be able to buy now and refinance once your credit improves.

Another thing to consider is private mortgage insurance. The insurer will cover your house payments if you're unable to; in return, you pay the insurer a small percentage of your loan - less than 1 percent in most cases. Often, you can include the insurance premium in your mortgage payment each month.

No place like home ownership - tips in buying a house

Men's Fitness, Oct, 1998 by Stacy Kravetz

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