If you’re thinking about buying your first home, here are some key points to consider:

• If you can’t stay long, don’t buy. If you can’t commit to living in the house for a few years at least, don’t buy. Between transaction and closing costs and the volatile home market, you might wind up losing money if you wind up selling in just a few years.
• Get your credit shored up before you buy. You need to start this process today, even if you’re not thinking about buying for another year. Get your free annual credit report and start looking for two things: errors and areas for improvement. If there are errors, you can contact the credit reporting agencies and try to get those cleared up. If you have old collections that need cleared up, you can do that too.
• Buy a home you can afford. Don’t buy something that the bank tells you that you can afford. Look at your budget in a realistic way, and make sure you have a real handle on all of your other financial obligations, your debts and your expenses.
• Look at the schools. Even if you don’t think you’re going to want to have kids, you should know what the schools are like in the area. You may find you want to have kids down the road. At the very least, good schools will generally help to increase your property value, so in some ways it’s just a good investment.
• Consider points, but make sure it’s worth it. When you get a mortgage you can usually pay down your interest rate by buying points. If you’re going to be in the house for five years, points are a good idea. If you’re not sure, go ahead and take the higher interest rate.
• Know the market. Figure out what homes are really selling for in your area, that way you can make a reasonable offer on a home you like. Look at several homes, and make sure you always sleep at least one night on it before you decide to go ahead with the offer process.

What is mortgage fraud?

So, let’s get a handle on what mortgage fraud is. It’s defined by the federal government as “any material misstatement, misrepresentation or omission relied upon by an underwriter or lender to fund, purchase or insure a loan.”

This can mean, for example, undisclosed kickbacks. If you get a seller to put on a new roof before you close without the lender knowing about it, that qualifies as mortgage fraud.

Having a silent or unrecorded second mortgage also constitutes mortgage fraud. This is if you borrow the down payment from your seller, and don’t disclose this to your lender.

Plenty of other things qualify as mortgage fraud, too. Falsifying your employment income counts. A non-owner occupying the home instead of the owner counts too, because that’s part of the reason the borrower gets the rate they get. An inflated purchase price, false deposits, and other activities count, too.

Why it matters

It’s like this. If you falsify any part of your home loan application, or if you do any of the above and your lender figures it out after the fact, you’re really at their mercy. They can demand you pay off the loan or get the hell out, and they can turn you in to the federal government. The last thing you want is to have the FBI knocking in your door because you fudged some numbers on a mortgage application.

How to avoid it

The way to avoid mortgage fraud is just to not do it. Be honest with your lender. Follow the rules. Err on the side of caution. If you’re not sure whether or not something might fall into the area of a kickback, talk to your lender. Make sure that you get everything you do in writing so that you can prove your innocence, and that you were diligent in attempting to follow the law. There are few things that will help you more than a solid paper trail to prove your innocence.

30-year fixed mortgages are, by far, the more popular between the two. 30-year home loans have a lower monthly payment than a 15 year home loan. Among other things, this means you can get a bigger loan (and therefore a house that’s more expensive) with a 30-year mortgage than you can with a 15-year mortgage. In addition, a 15-year mortgage can be harder to qualify for, and isn’t an option for every borrower.

The benefit that a 15-year home loan has over a 30-year home loan is that you’ll pay less in interest charges over the course of the loan, even though you’ll pay more per month.

Let’s look at some real-world numbers. Let’s assume that you’re going to buy a home at a price of 200,000. We’ll say you get a decent interest rate of 6 percent, just for the sake of the example. On a 15-year loan, you’re going to pay $1681.96 a month. On a 30-year home loan, you’re going to pay $1,197.91 per month. You’re looking at a difference, then, of just under $500 per month in your mortgage payment.

Now, let’s look at that same loan over the course of the loan. On the 15-year loan, you’re going to pay a total of $302,753, of which $102,753 is interest. On the 30-year mortgage, you’ll pay a total of $431,249, of which $231,249 is interest. As you can see, you’re looking at a significant difference in the amount of interest you pay over the course of the loan.

Now, the question remains which is better. If you’re able to get the amount of home you want for a 15-year mortgage, you will pay less in interest. However, there’s always the possibility that you could instead invest the extra money you save each month and make a profit on it. If you can make a decent return on your investment, it may well be worth taking the longer term home loan.

Still, you need to make sure you’re pacing yourself, here. Making your offer and having it accepted is only one part of the process. After the offer is accepted, you’re going to need to do some specific things.

Here’s what to expect once your offer is accepted:

• You’ll make a deposit in earnest. This demonstrates you are willing to buy the house. An earnest money deposit typically is not refundable, so don’t put more down in earnest than you’re required to.
• Next, you should start making arrangements for moving. You’ll want to pick a moving company, get change of address forms from the post office, and start letting your friends and family know that you’re going to move.
• An inspection should follow soon. You’ll need a professional to inspect the property. The inspection should be able to identify any potential problems with the property, and identify areas that may need repair. You’ll also want to request repairs after you have the home inspected.
• Get your homeowners insurance. Talk to your agent and get a quote. Make sure to ask about discounts for things like multiple policies and about discounts for alarm systems or other safety features.
• Arrange for utilities. You’ll want to contact the phone company as well as any other utilities such as water and power. If there is cable service offered at the new house, you may want to get that set up, as well. If not, you can consider satellite service.
• Stage a walk-through. Before you close on the home, try to arrange a walk-through to make sure everything is in line and looking the way you expect for it to be.
• Close your loan. At the closing, make sure that the terms and conditions stated in the loan agreement match with what you’ve understood them to be all along. Read everything carefully before you sign it.

While the obvious answer to this question would seem to be “yes,” that you should always pay cash rather than going into debt, the fact of the matter is that it’s not always quite so simple. There are some circumstances in which you’re actually better of getting a home loan and investing your cash somewhere else.

The basic calculation

Like many things in life, the answer to this question lies in a rather simple formula. Will you have more money, in the long term, if you invest your cash and take out a mortgage than if you pay cash for the house?

Let’s suppose that you can get a mortgage at a rate of 5.5 percent. That’s a relatively low rate, and right now mortgage rates are near an all-time low. While you can’t count on that rate forever, it is what it is for now.

The first question is how much you’ll be able to earn on your cash if you invest it. Will you be able to earn 9 percent? 2 percent? Somewhere in between? The difference between what you can earn and what you pay for your mortgage is the amount of additional profit you’ll make over time.

Other important factors

Interest rate isn’t the only factor, however. When you have a mortgage, there are usually certain tax advantages. The interest that you pay on your mortgage is, generally speaking, a tax deduction. Obviously, you should check with your accountant or tax attorney for specifics.

You also need to recognize that you’ll pay taxes on the profits if you invest your cash. Those taxes can eat into your margin, so you need to know what they’ll be, too.

No guarantees

You can’t be sure that any given investment is going to get a certain rate of return. Even the safest, soundest investments can, as the recent financial crisis has shown, wind up losing you money. There is always the possibility that, if you invest your money instead of using it to pay cash, you’ll come out behind.

Photo via rysac1

No, this Arizona man didn’t bare it all. Instead, he did what a lot of folks do when their home loan is being foreclosed: he stripped his home of anything and everything of any estimable value.

I’m not talking about regular possessions. The man had every right, of course, to take his couch, his TV, and his collection of 1920s-era magazine advertisements for ladies’ undergarments. That is, assuming he actually owned some of those items.

No, this man removed things like the bathroom sinks, the water heater, air conditioning units, doors, cabinets and even the garage door opener.

This practice, also known as “stripping,” isn’t all that uncommon. Sometimes, when a bank forecloses on someone’s property, they’ll even go so far as to remove a furnace or even pipes and wiring from the home.

Stripping (of this kind, anyways) is also highly illegal. The fixtures in a house are considered part of the house itself. Even if you’ve installed, let’s say, a new faucet in your kitchen, it’s now part of the house. You could, of course, go buy a cheap faucet, remove your expensive one and replace it with the cheap one. In most cases, that’s not going to be worth the time and trouble involved, however.

These stripping crimes often go unreported. The Arizona man was caught when a neighbor noticed the man taking items from the home. The man had actually hired or brought several people to help him move things from the home.

It’s worth noting, too, that in this case the stripping took place after the home had already been foreclosed. It wasn’t in danger of foreclosure or about to be foreclosed, it was already through the process.

Photo via pinguino

Here are some of the latest trends in kitchen design to think about when you’re buying a new home or just remodeling:

Let’s Go To The Islands

Large kitchen spaces that have an island in the center are hot right now. The island gives the cook a place to prep food and store a variety of kitchen essentials. Try to get an island with a granite countertop, if at all possible.

Save the Earth

Like everything else, kitchens are going green. The kitchen is probably the one room in the house that just constantly sucks natural resources. Keeping the fridge running, warming things up in the microwave, and even washing dishes all use power, and plenty of it. Consider getting energy efficient appliances. Consider kitchens with smaller windows, too, because those larger windows are going to let out plenty of heat into the outside.

Watch out for recycled materials, however. Recycled and synthetic kitchen materials have proven to be, in general, a bit substandard.

Just Grab It

If Alton Brown has taught us anything, it’s that the tools you need in the kitchen should be readily accessible. Whether it’s the dreaded “unitasker” or whether it’s something you’ll use frequently like your pots and pans, don’t store the things you use back in a dark and dank section of a cabinet. If you have an island in the kitchen, the natural thing is to have either a cabinet on top of the island or a rack that is suspended from the ceiling that dangles over the island.

Paying For It

Obviously, if you’re buying a new home, you’ll have a home loan to pay for the kitchen. Otherwise, you might consider a home equity loan, or even a personal loan. In the long run, you’ll help increase your home’s value, as well.

Photo via Dru Bloomfield

However, there’s another source of funding that you might think about using. If you’re having trouble getting a home loan to make your improvements, you might look at your retirement account as a source of funding.

Now, we’re not talking about cashing in your 401(k), of course. After all, if you’re like most folks your retirement accounts have probably taken a hit over the past couple of years during the financial crisis and recession. In addition, you’ll get hit pretty hard on the taxes on that money you get during next year’s income tax filing. You also reduce your overall retirement savings, which is just generally a bad idea.

Instead, you may have the option of borrowing against that retirement account. Borrowing against a 401(k) is a pretty common thing, and most retirement accounts allow you to borrow against it.

When you borrow money against your retirement account, you don’t have to worry about a credit check. In fact, that’s one of the reasons folks generally turn to this kind of borrowing. You may have less-than-stellar credit, and this is a way for you to get cash to make improvements without having to deal with higher interest rates or with explaining to a bank why your credit score isn’t as high as they might like it to be.

Before you take out this kind of a loan, be sure to talk to the company that holds your 401(k). Find out how much you can borrow, and how much you’ll need to pay back each month. In most cases, the payment on this loan can be drawn directly from your paycheck, in the same way that your 401(k) investments are automatically drawn from your paycheck.

Finally, it’s worth mentioning that borrowing on your retirement account isn’t a measure of last resort, but it shouldn’t be your first choice, either. Find out all of your borrowing options before you make that final decision.

Photo via rezlab

There are a number of factors that should go into how you evaluate a given neighborhood. While your real estate agent can help you work through many of these issues, the more you research them on your own the more likely you are to find a neighborhood that fits your needs and your lifestyle.

Here are some of the most important factors to consider when picking a neighborhood:

1. 1. School Quality. If you plan on having kids at all, you want to know what kind of schools the area has. Specifically, you should ask questions about graduation rates, funding and even curriculum.
2. 2. Property Value. You don’t want your home to drop in value the day you move in. You want to find a neighborhood where property values seem to, over the long haul anyways, rise. It’s hard to tell right now whether a neighborhood will have decent property values, largely due to the housing crisis. However, if you go back a decade or so, you’ll find fairly reliable statistics for most neighborhoods.
3. 3. Crime Rate. You want to be safe. You want to be secure. You want to choose a neighborhood that has a relatively low crime rate. You especially want to choose a neighborhood that has a low rate of violent crime.
4. 4. Future construction. Some neighborhoods are part of a growing area. For example, if you live in the outskirts of a given city in an area that used to be primarily farmland, you can count on plenty of new construction. This will affect your home value for quite some time, so be aware of it.
5. 5. Location. You need to choose a neighborhood that’s in relatively close proximity to the places you need and want to be. It should be near the schools, places of employment, hospitals, freeways, airports and other amenities that you’re most likely to use.

While there certainly are other factors to consider, balancing these five concerns out is the biggest challenge when it comes to picking the right neighborhood.

Photo via pnwra

So, line up your new home loan and get talking to your builder today. Here are some of the hottest home design trends out there right now:

• Health-Conscious Homes. New home builders are now, more than ever, aware of the danger of certain products such as lead-based paints or asbestos. Synthetic materials, as well, are known to cause health issues. More and more homes are built today using materials that are more natural and rely less on things like laminates and plastics.
• Environmentally-Friendly Housing. This is one of the fastest-growing areas right now. People want homes that are sensitive to the environment. Some of these homes utilize ancient building methods and more earth-friendly building materials.
• Factory Built Housing. Prefab homes are much more than the double-wide trailers of yesteryear. These houses use modular building components made of quality materials like glass and steel. You’ll find factory built homes in all shapes and sizes now, too.
• Accessible Housing. As medical technology advances and as we become more aware of and concerned about those around us with physical challenges, these trends are reflected in our homes. High cabinets and spiral staircases are disappearing in favor of more accessible design choices.
• Adaptive Reuse Housing. More and more, people are finding ways to deal with the fallout from urban blight. Buildings that were designed for other purposes, such as warehouses and churches, are being repurposed and reused for regular housing.
• Flexible Housing. As your family grows and changes, so do your space needs. Many new homes are being designed with some flexibility in mind in terms of layout. Pocket doors, movable partitions or walls, and multipurpose rooms are replacing many of the old architectural choices of yesteryear. Many new homes even feature a “bonus” room that can be used for just about any purpose.
• Storage-friendly Housing. As people gather more and more possessions, they need more and more places to put them. From a kitchen full of “unitaskers” to linen choices, new homes have more and more storage space available to keep your things.

Photo via pnwra