Home of your own workbook [July 2010]

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Home of Your Own Workbook
Department of Community Affairs
60 Executive Park South, N.E. Atlanta, Georgia 30329-2231
(404) 679-4940 www.dca.state.ga.us If you are disabled and would like to receive this publication in an alternative format, please contact the Georgia Department of Community Affairs at 404-679-4915 (TDD) or 1-800-736-1155 (TDD)
Equal Housing Opportunity

Introduction

This workbook is designed to outline the process of purchasing a home. Educating yourself about the details of purchasing a home will be time well spent because owning a home involves a significant financial investment. By reading this workbook, you are empowering yourself to make sound decisions towards your home purchase.
The Georgia Department of Community Affairs (DCA) has developed this workbook to provide basic information about the purchase of a home and the responsibilities of homeownership. This workbook may be used to explore your options as a home buyer during a home buyer education seminar or an individual housing counseling session.
Additionally, through the Georgia Dream Homeownership Program, DCA provides affordable mortgage financing and closing cost assistance to low and moderate income homebuyers. Guidelines for the Georgia Dream Program are provided in this workbook.

Prepare
Decision to Purchase Budget Awareness Setting Goals Credit Awareness
Purchase
Finding Your Home What Does Owning a Home Cost? Housing Professionals The Purchase Process Mortgage Options Fair Lending Shopping for Your Home Home Inspection Loan Application and Processing Closing on Your Home
Protect
Caring for Your Home Avoiding Foreclosure

The Georgia Dream Homeownership Program
DCA's Georgia Dream Homeownership Program provides Georgia's low and moderate income homebuyers with below market fixed interest rate mortgage financing options with terms up to 35 years to assist in purchase of a home.
Georgia Dream Homeownership Program Options:
The Georgia Dream First Mortgage Program provides affordable, low cost mortgage financing for first-time homebuyers throughout the state of Georgia.
Affordable First Mortgage Loan Financing Options:
Flexible approval guidelines for Conventional, FHA, VA or USDA-RD mortgage loans
Up to 100% financing
Low fixed interest rate
Very low closing costs
35 year interest only conventional loans
Involuntary unemployment, accidental disability, and accidental death and dismemberment insurance available.
The Georgia Dream Second Mortgage Program provides first-time homebuyers with a deferred payment subordinate mortgage which may be used for principal reduction, down payment, closing costs, and prepaid expenses associated with their home purchase.

Second Mortgage Financing Options:
$5,000-$20,000 available for eligible borrowers
No interest charged for the life of the loan
No monthly payments
No payment due until home is sold, refinanced or no longer used as the borrower's principal residence.
It's easy to qualify for a Georgia Dream Homeownership Program mortgage loan.
1)Applicants must meet the annual household income limits based on the number of people living in the home and the location of the home.
2)Applicants must be first time homebuyers or not have owned a home in the past three years or purchase a home in a targeted area.
3)The purchase price of the home that will be financed by the Georgia Dream Homeownership Program mortgage loan may not exceed the purchase price limits established for the county where the property is located.
4)Applicants seeking Second Mortgage Financing must complete homebuyer education training and contribute a minimum of $500 towards the purchase transaction.
The Georgia Dream Homeownership Program is available through participating lenders throughout the state of Georgia. For additional information or to obtain a Georgia Dream Homeownership Program brochure call 1-800-356-HOME or visit our website at www.dcaloans.com.

Part 1

1: Decision to Purchase

Decision to Purchase
Review the advantages and disadvantages of homeownership and decide whether renting or owning is a good match for your current lifestyle and financial situation.
Advantages
Predictable Monthly Mortgage Payments With a fixed rate mortgage, each month for the life of your loan you will know the amount of your mortgage payment that covers principal and interest. Escrow payments for property taxes and hazard insurance may vary over time.
Appreciated Value of Home In most cases, the value of the home increases over time, especially if you make improvements to your home.
Tax Benefits The mortgage interest and real estate taxes, also known as property taxes, you pay are deductible, allowing you to reduce your taxable income for the purpose of federal and state income taxes. Some of the closing costs you pay may also be deductible in the year you purchase your home.
Privacy Homeowners tend to have more privacy than renters. They also have more control over their surroundings. A homeowner can change things like paint colors and landscaping and make other improvements to the home.
Stability Homeowners have a sense of pride in their surroundings and develop strong ties to their community.

Disadvantages
Up front cost of homeownership Home buyers usually must make a down payment and cover some or all of the closing costs at the time they purchase their home. Be sure to investigate programs from the state, county and non-profit organizations in your area that might cover some of these costs.
Increased Monthly Costs Your monthly mortgage payment includes your principal, interest, property or real estate taxes and hazard insurance (PITI), and some loans also have mortgage insurance (MI). The total payment may be higher than your rent payments, and very little of the payment goes to principal in the early years of a mortgage.
Decreased Mobility Homeowners must sell or rent their homes before they can move, while renters are free to move once their lease expires.
Repairs, Maintenance and Yard Work Homeowners are responsible for all regular maintenance to their homes and yards. They must also be prepared for both periodic and emergency repairs such as plumbing or roof leaks.
Decision to Rent
If, after you weigh the advantages and disadvantages of homeownership, your decision is to postpone purchasing and to rent a house or apartment, be aware that renting also requires planning and preparation.
Many landlords and management companies require that prospective tenants submit to a credit check, so you need to be sure your credit is in good standing prior to completing a rental application.
Review any lease carefully to know your rights and responsibilities and insist on a walk-through with the landlord or rental agent prior to moving in. Be sure to note the condition of the property in writing, so that you will not be held responsible for existing problems when you vacate the premises.
Prepare a living expense budget so that you will not overestimate your ability to pay housing expenses and get locked into a lease for an unaffordable property. If you will have a roommate, be sure he or she is also responsible on the lease and is a dependable person.

Be sure that utilities are in good standing at the time they are transferred into your name and keep good records of your payments. Also keep good records of your rent payments and don't depend on the landlord or management company to have this information for you. This will be an important reference when you are ready to purchase a home
The State of Georgia maintains a database of affordable rental properties with available rental units throughout the state. If you need assistance in locating a rental unit, go to www.GeorgiaHousingSearch.org to access this database.
If you are convinced that purchasing a home in the near future is the appropriate goal, it's time to determine how much home you can afford and decide what specific features and amenities are important to you and your family.

Part 2
Budget and Credit
Budget Awareness As a renter, your primary housing cost is the amount of your rent payment. As a homeowner, your housing costs will include your mortgage payment (which includes principal, interest, property taxes, homeowners or hazard insurance, and mortgage insurance, if required), utilities, and home maintenance. You may also need to pay a monthly or annual condominium or homeowner's association fee. When setting up your budget, focus on meeting your monthly living expenses first, plan for emergencies second, and allow for discretionary expenses last. A Household Budget will help you: Take control of your financial future Identify wasteful spending Establish savings goals and patterns Save money towards a down payment and clos-
ing costs Prepare for unexpected or large expenses for
your house Anticipate increased expenses related to home-
ownership Steps to Developing a Household Budget Identify household income Salary Child support and/or alimony received

Social Security Payments Unemployment compensation Other income Identify household expenses
Fixed expenses or costs of living are necessary living expenses that cannot be avoided. Examples of fixed expenses are: Rent or mortgage payment Basic water and sewer, trash removal Transportation expenses (car payments, mass
transit) Flexible expenses are costs you have on a regular basis but you have some control over the amount you spend on them. Although some utilities might not seem controllable, you can spend less on your gas or electric bill by adjusting the thermostat and putting on more or less clothing. Examples of flexible expenses are: Groceries Telephone Day care Gasoline Cable Gas and/or electricity payments Water and sewer usage costs Insurance Discretionary expenses are expenses that you can determine what to spend each month. Examples of discretionary expenses are: Entertainment Cellular phone service Internet service Dining out Personal expenses Gifts
By developing a budget, you develop a spending plan that enables you to take control of your money.

2: Budget & Credit

Set Up Your Household Budget
Use these guidelines when establishing a family spending plan. To estimate your current spending, complete the Monthly Spending Plan worksheet at the end of this booklet. Be sure to use pencil because you may need to make changes after you track your true spending habits for at least 60 days.
1. Begin to write down all of your daily expenses, regardless of how big or small. Carry a small notebook with you every day to record all of your expenses. All family members need to be involved, so have everyone write down what they spend for at least 60 days. This will be your family's "spending diary."
2. Don't forget your periodic expenses that occur yearly or every few months, such as insurance premium payments. Calculate the average monthly expense by dividing the payment by the months it covers to add to your monthly expenses.
3. Establish a realistic monthly savings goal to work into your budget. Begin to pay yourself first by having money from your paycheck automatically deposited into a savings account.
4. Subtract your total monthly expenses (including your savings) from your total monthly income. Are your monthly expenses exceeding your income? If so, look at the expenses over which you have control and reduce them as much as possible. If this doesn't "balance your budget," you may need to consider options for additional income. It often takes a combination of cutting expenses and increasing income to reach a savings goal.
5. Periodically review your monthly budget and compare it to your spending diary to make sure your estimated amounts are valid and meet your household needs. Set priorities and stick to them.
Budget Tips
Open a checking account to pay your bills. Look for a bank or credit union that offers free checking.
Use direct deposit, if your payroll department offers it.
Pay for items with cash, a check, or a debit card instead of a credit card.

Carry as little cash as possible.
Identify "wants" versus "needs." First, buy only those items you need, then set aside the amount you calculated for periodic expenses. Save and reduce debt according to your goals and the remaining money can be used for "wants."
If available, use "budget billing" for your utility accounts. Each month you will know how much to budget for your utility accounts.
Carry written reminders of your budget goals. Always carry your spending diary with you and write down what you spend each day.
Purchase items with a credit card only if you can afford to pay off the balance each month. Large items such as plane tickets may take several months to completely pay off, so the expected cost must be planned in your budget under periodic expenses such as travel or vacation before you make the purchase.
When you become a homeowner, three major areas of your budget may change from the amounts you were paying as a renter. The three items are your housing payment due to increases in property taxes or homeowner's insurance, your utilities, and the amount you will save or spend for home maintenance. Although a fixed rate mortgage helps give you a predictable payment, a mortgage payment is often more than you were paying for rent. Homeowners pay all their utilities, including water, and you might need to care for a lawn, monitor a security system, and save a significant amount for regular and emergency repairs. Be sure to add these items to your budget to be sure it will still balance after your mortgage loan closing. That way, you can make necessary adjustments to your discretionary expenses before you purchase your home.
Setting Goals
Research shows that people who write down their goals are much more likely to achieve them. Writing down goals and sharing them with your family will help everyone create a specific plan of action to help reach your goals. Homeownership can be a short or long term goal, but it can include meeting other goals along the way, such as becoming debt free or reestablishing your credit. A lifetime

goal might be to complete your education. Estimate a timeframe and think of some actions that you can take to reach your goal successfully. Use the Goal Setting Worksheet to write down some goals for yourself and your family. It's important to keep your goals both simple and realistic.
Credit Awareness
Check Your Credit Report
To avoid any surprises concerning your credit, order a copy of your credit report from all three credit reporting agencies. The mortgage lender will have access to a three-file merged document from each one of the major reporting agencies. Federal law now ensures one free credit report annually for everyone, but Georgia residents may obtain two free credit reports in a 12-month period from each of the following agencies:

Equifax Credit Information P.O. Box 740241 Atlanta, GA 30374-0241 (800) 997-2493 www.equifax.com

TransUnion Corporation Consumer Relations Division P.O. Box 390 Springfield, PA 19064-0390 (800) 916-8800 www.tuc.com

Experian P.O. Box 2104 Allen, TX 75013-2104 (888) 397-3742 www.experian.com

Access all three credit reporting agencies without charge through www.annualcreditreport.com or by calling 1-877-322-8228.

Correcting mistakes on your credit report
After you review your credit report, contact the reporting agency if you find inaccurate information. By law, the credit agency listing the information must provide personal telephone assistance to answer your questions, investigate your concerns, and remove any incorrect information within 30 days. They are also required by law to explain your report to you if there is something you do not understand. If there are mistakes on your report, you are responsible for explaining the error in a written statement to the credit reporting agency. Often a form to do this is included with your report. The reporting agency, in turn, will contact the creditor who reported the information for validation. The creditor will modify your credit report with the credit reporting agency if the creditor acknowledges the error. If the information is not verified by the creditor, the inaccurate information must be removed from your report. If the creditor states the information is correct, you must work directly with the original creditor to prove that their records are not correct. Be sure to keep written records of all your efforts and the creditor's responses.

If the information on your report is accurate, no one can require the reporting agency to remove it unless it's outdated. If you have been late paying your bills during the last seven years, the law permits the credit reporting agencies to tell creditors about your history of late payments. However, Chapter 7 or "liquidation bankruptcy" will be reported for 10 years. That is the law. If anyone tells you that they can remove negative but accurate information from your report, don't believe it. Never pay anyone to "repair" your credit.
Only the original creditor has the power to change reported information on your credit report!
Establishing or Re-establishing Credit
After you review your credit report and correct any errors, you may still find credit problems or a lack of credit. This situation must be addressed before you can get a market rate mortgage or take advantage of many down payment assistance programs or special mortgage products.

Use the Make a Plan to Re-establish Your Credit worksheet to list any accounts that are delinquent or have been sent to a collection agency. These are your most important barriers in obtaining a mortgage or other market rate credit. It is very important that you create a realistic plan to repay these accounts in a timely manner prior to contacting your creditors. If you contact a creditor regarding a debt without a reasonable proposal to repay it, that may prompt further collection or even legal action against you. Use your monthly spending plan to calculate how long it will be before you can save enough to offer a settlement on old collection accounts or offer a repayment plan on a monthly basis.
When you are ready to make an offer to a creditor, always make contact in writing and ask for all responses in writing. If you call and speak with a representative, they will almost always agree to accept money on the account, especially if you are offering a lump sum as a settlement. If you send money based on a telephone conversation, you have no proof of any agreement to improve your credit report or accept what is sent as full payment for a settlement or as a monthly repayment amount. Make your offer in writing and include a request for a written response from the creditor either agreeing to mark your account as "paid in full" or "paid in full settlement" or accepting the agreed upon amount on a monthly basis until the account is paid in full.

If you find that a creditor has listed a court judgment on your credit report but has not taken action to enforce it, it is even more important to be prepared prior to contacting the creditor. A creditor who has been granted a judgment does not need to take any further action prior to placing a garnishment. Unless you are able to pay a large sum as a settlement (often only the full amount will be accepted), the creditor is likely to follow up with legal action against your wages and bank accounts. If you reach an agreement and satisfy the judgment, you may have to take proof to the Clerk of Courts in order to have it removed. Check to be sure the creditor has followed up to note that the judgment has been satisfied at the courthouse, or the status may show on your report as "open" or "unknown."
If you find no or very few accounts listed on your credit report, be aware that you will have a difficult time demonstrating a good credit history to a lender because you have no credit score or your application can't be automatically underwritten. Many lenders will now accept "non-traditional" credit to underwrite a loan. Records or receipts of accounts such as utilities, cell phone records, even life insurance payments can demonstrate your history of paying your bills on time. You can create your own non-traditional credit record using cancelled checks, statements, or "letters of reference" from various utility companies.

Of course, your most important record is how you have paid your rent.

Part 3

Finding Your Home

How Much Home Can You Afford?
You need to have a price range in mind before you begin to look for a home. Use the following calculations to determine a price range for your household.
What are your current non-housing obligations?
Use the space below to list your monthly obligations. This amount would include monthly payments you make to your creditors. Include deferred loan or credit card payments that will come due within two years, and of course, they should also be included in your monthly budget.

Non-Housing Obligations

List all creditors

Monthly payments

1. Car Payment

$

2. Credit Cards

$

3. Student Loans

$

4. Loan Payment

$

5. *Deferred Interest Loans

$

6. Other Debts $

$

7. Non-debt Obligations (child support, etc.)

$

$

$

3: Finding Your Home

Total Non-Housing $

*Interest and payment waived for up to two years

What do you have left for housing?
The affordability calculation in this section is designed to help you estimate your allowable mortgage payment, considering the total of your debts and obligations calculated above.
First, determine your gross monthly income (before deductions) by adding your wages, any long-term part-time or second job income, and any other regular, continuing income, such as child support and alimony payments. Next, multiply your gross income (include income of all persons who will be on the loan application) by 45% (current FHA guidelines) to calculate your allowable total monthly mortgage payment, debt, and other obligation payments. This combination of total

monthly debt and mortgage payments is also known as your "back" or "back end" ratio.
From this amount, subtract your current monthly payments total (above), to calculate the money you have remaining to make your housing or mortgage payment. In general, lenders allow approximately 30% of your monthly gross income for your entire mortgage payment, including principal, interest, taxes and insurance (PITI), which is called your "front end ratio." The amount of debt and other obligations in your back end ratio (percentage of gross income allowable for debt and housing payment) has a direct effect on what remains for your front end ratio (percentage of gross income allowable for housing payment alone). Since the difference in the

amount allowed for the payment of all obligations and outstanding debt (including mortgage) and the amount allowed for mortgage alone is only about 10%, any percentage above 10% begins to reduce the amount of income you have to pay a mortgage. Reducing your debt can have a dramatic effect on the amount you have available to pay a mortgage.
Next, subtract your estimated monthly property taxes and homeowners insurance. To estimate, choose a general price range for the home you would like to purchase, such as $100,000. Property tax amounts vary across the state. Urban area taxes will be higher than rural areas. Annually, metropolitan Atlanta

property taxes average 2% of the home's price. A $100,000 home in the city of Atlanta might be taxed $2,000 a year or approximately $160 per month. Homeowner's insurance might cost $600 a year or $50 a month. In this example, you would subtract $210 from your total allowable housing amount. In a rural area, taxes might be less than $1,000 a year or approximately $80 per month. If homeowner's insurance also costs $50 a month, you would subtract $130 from your total allowable housing amount. The remaining number is the monthly mortgage payment for principal and interest for which you may qualify.

Monthly Gross Income
Allowable monthly amount for payments on all obligations Current monthly payments on debt and non-housing obligations Mortgage Payment Estimate (PITI) Estimated Monthly Taxes and Insurance (TI) Monthly Mortgage Payment Estimate (PI)
EXAMPLE:
Monthly Gross Income
Allowable monthly amount for payments on all obligations Current monthly payments on debt and non-housing obligations Mortgage Payment Estimate (PITI) Estimated Monthly Taxes and Insurance (TI) Monthly Mortgage Payment Estimate (PI)

X

.45

=

-

=

-

= $

3000.00

X

.45

= 1350.00

- 500.00

= 850.00

- 130.00

= $ 720.00

This example assumes a $400 car payment, a $75 student loan payment and a $25 minimum payment on a credit card balance for a total of $500 in debt and non-housing obligations each month. The house is in a rural area, so less money goes to property taxes. If the same homebuyer waited until the car was paid in full, he or she would have an additional $400 available to apply towards mortgage payments.
The Impact of Interest Rates
Current interest rates are another important factor in determining your price range. Look at the Monthly Mortgage Payment Chart in the worksheets

section to determine the loan amount you can afford at various interest rates with your estimated monthly mortgage payment. If you have not already spoken with a lender, look in your newspaper's real estate section or on the Internet to determine the current average market interest rate. You may also call the Georgia Department of Community Affairs or check on their website to find out their current interest rate and whether or not you are eligible to apply for their low cost Georgia Dream programs. You may learn more about the Georgia Dream Homeownership Program by calling 1-800-359-4663 or visiting the website at www.dcaloans.com.

A fixed rate mortgage will keep your housing payment for principal and interest the same over 30 years, but keep in mind that property taxes and homeowner's insurance can rise over time, which will increase your payment by adding to the amount needed for your "escrow" account. Escrow is the portion of your monthly mortgage payment held in reserve for you by the company servicing your loan in order to pay your property taxes and insurance when due.
The Monthly Mortgage Payment Chart will match your estimated amount available for a principal and interest payment (PI) for a mortgage loan amount at various interest rates. Most mortgage products require a 3% to 5% down payment, so your loan amount will be slightly lower than the house price. If you discover that the mortgage payment you calculate is insufficient to purchase the home you want, your options are:
Increase Your Income by working a second job or returning to school for additional education or training that may help you qualify for a higher paying job.
Decrease Your Debt by paying off debts listed in your current obligations total. Eliminating debt payments will increase the income available to apply towards your mortgage.
Decrease Your Expenses by preparing a budget and adhering to it. Do your best to reduce discretionary expenses. Doing so even for a short period of time will increase savings and your ability to reduce debt.
What Does Owning a Home Cost?
Your monthly mortgage payment is only one of the expenses you need to be aware of when making your home buying decision. Let's examine the various costs involved with purchasing and owning a home.
Up-front Costs:
Your up-front costs will include the down payment, various closing costs, and expenses incurred when moving and settling into your new home.
Earnest Money - This money is normally paid to the seller by the buyer when an "offer" on a property is accepted. The amount is typically $500 to $1,000. These funds are applied towards your down payment at loan closing.

Down Payment The down payment is the amount you contribute towards the home purchase. Help with the down payment is available from the Georgia Department of Community Affairs (DCA), some local governments, nonprofit organizations, and some lenders. Buyers need to understand the terms and conditions of receiving down payment assistance funds and whether the funds must be repaid.
Buyers can pay as little as 3% down, provided their loan has mortgage insurance, which protects the lender in case the borrower fails to repay the loan. You may be eligible for an even lower down payment by qualifying for a special mortgage product, such as the Georgia Dream Homeownership Program, Rural Development (RD) or the Veterans Administration (VA), which require no down payment.
Points - Lenders may charge fees known as points. Each point is equal to one percent of the loan amount, i.e. one point on a $50,000 loan would equal $500. Origination fees, expressed in points, are used to compensate the lender for originating the loan and discount points are paid to reduce the loan interest rate. Origination fees and discount points are usually paid as a onetime expense at closing.
Closing Costs - In addition to the down payment, the buyer or seller must be prepared to pay various expenses called "closing costs." These expenses usually range from 3% to 6% of the mortgage amount. If you are purchasing a $60,000 house with a 3% down payment, you can expect to pay between $1,700 and $3,500 in closing costs on a $58,200 mortgage loan. Within three days of your application for a mortgage loan, the lender is required by federal law to provide you with a Good Faith Estimate of closing costs. This document shows the expected

costs to be paid at closing, what you can expect your monthly mortgage payment to be (including estimates of taxes, homeowners insurance and mortgage insurance) and how much cash you will need at closing. Your lender will issue you a revised Good Faith Estimate if costs significantly change before the loan closes.
Closing costs can include the loan origination fee, appraisal, credit report, underwriting, and document preparation fees charged by the lender. Other fees may include tax service, attorney, title insurance, recording, intangible taxes, survey, termite inspection, and flood hazard certification, according to the area.
Pre-paids - Pre-paids are costs to set up the escrow account required by the lender, which include interest that accrues from the closing date to the first of the following month, homeowner's insurance and property taxes. Pre-paids are paid at closing, usually by the buyer, and provide reserves for the escrow account balance as payments are made for taxes and insurance.
Moving-in costs - Expenses for moving into and establishing a new home can add up fast. You do not want to spend all of your cash reserves on the purchase of the house. You should have enough cash reserves to establish utility accounts, make urgent repairs, purchase major appliances, buy lawn and garden equipment, improve security, and begin purchasing window coverings for bathroom and kitchen areas.
Unexpected costs - Plan ahead for unexpected costs. Although you can use your inspection report to plan for appliance and system replacement, other unexpected repairs may come up after you move in. A special savings reserve will help you meet these expenses without going into debt.
Ongoing Costs
As a renter, your primary housing cost is the amount of your monthly rent payment. When you become a homeowner, your housing costs will include your mortgage payment (which includes principal and interest, property taxes, homeowner's or hazard insurance, and mortgage insurance, if required), utilities, and home maintenance. You may also be required to pay a condominium owner's fee or a monthly or annual homeowner's association fee.

Mortgage - Every mortgage payment includes the repayment portion of the "principal" (the amount you actually borrowed) and the "interest" (the fee for using the lender's funds). Lenders refer to payments of principal and interest as "P&I."
Taxes and Insurance - Your monthly mortgage payments may also include amounts for property taxes, homeowner's insurance, and mortgage insurance (when required). With most types of mortgage loans, the lender holds these added amounts in a separate "escrow" account and then pays the tax and insurance bills as they come due. This process assures that these important annual expenses will get paid on time. If you pay your own homeowner's insurance premium, you must keep the premiums and policy current. If it's cancelled, the loan servicer will be notified. If you don't provide evidence of a new policy for the servicer, the servicer will obtain "forced placed" homeowner's insurance, and pay for it out of your escrow account. This will usually be more expensive then your previous homeowner's insurance.
Flood Insurance - If the property is in a flood hazard zone, you will be required to pay the cost of this insurance as part of your regular monthly mortgage payment.
Other Costs of Homeownership - Ongoing expenses for homeowners include utilities, which could include gas, electricity, water, sanitation fees, an annual termite contract and maintenance costs. The cost of utilities can vary greatly depending on the season. Repairs usually represent an unexpected expense and should be planned for in your monthly budget as you save for emergencies. Your private inspection report should include an estimated "life expectancy" on appliances and major systems, which will be useful for long term planning for repair and replacement. Condominium and homeowner's association fees are included in this category of basic housing costs.
Focus on meeting monthly expenses first, planning for emergencies second, and decorating or purchasing furniture third.

Housing Professionals
As you go through the purchase process, you will meet or hear references to the following people or agencies:
Real Estate Agent A real estate agent can show you available houses in your price range that meet your personal needs. The agent may represent the seller or the buyer.
State and Local Housing Finance Agency Government agencies that provide low-interest loans and down payment assistance loans or grants for low to moderate income homebuyers.
Lender or Mortgagee A bank, savings and loan, credit union, or mortgage company that makes mortgage loans. Lender staff roles include:
Loan Originator A loan originator is responsible for your loan application and your initial interview. The originator is responsible for your loan from the time the application is taken until the loan is closed.
Loan Processor A loan processor verifies all pertinent information found on your application. The processor is responsible for obtaining the market value of the property by ordering an appraisal.
Underwriter An underwriter approves or denies your loan, based on the information you have provided and the requirements of the mortgage insurer (FHA, VA, Rural Development or the private mortgage insurance company), as well as other industry requirements.
Appraiser Lenders order an appraisal from a state-licensed appraiser to determine an estimate of the fair market value for the house that you

want to purchase. Generally, the buyer pays for the appraiser's services at the time of applying for the loan.
Home Inspector A home inspector evaluates the structural and mechanical condition of the house before your purchase. Getting this professional inspection before you make an offer on the house may give you peace of mind, but generally a contract with an inspection contingency must be in place before the inspector will be allowed to freely inspect the property. The inspector will check the foundation, roof, doors, windows, ceilings, walls, floors, plumbing, electrical systems, air conditioning, insulation, ventilation, and septic tanks or sewer lines.
Surveyor A surveyor confirms the property's boundaries. A surveyor will review historical property records and make sure that the property boundaries correspond with the property records. The seller or the buyer pays the surveyor or the mortgage company for the survey.
Closing Attorney An attorney who specializes in real estate transactions. The closing attorney represents the lender, but should explain each document to you and provide you copies of everything you are required to sign. If you have extensive legal questions about the transaction, you may want to consult your own attorney.
The Purchase Process
Loan pre-qualification/ pre-approval
Before looking for the house you want to purchase, you should first be pre-qualified for a mortgage loan. This takes the "guess work" out of deciding exactly how much house you can afford. Lenders sometimes call this preliminary paperwork a pre-approval and will issue a letter stating that you have been conditionally approved up to a certain amount. Take your current pay stub, other income documentation, names and addresses of creditors, information about any court-ordered support payments and information about bank

account balances, etc., to your meeting with the lender. Be aware that some information may have to be reverified or updated prior to a final approval of your loan application, depending on the length of time it takes you to find a property you would like to purchase.
Research all of your financing options, including special financing programs offered by the state or local government and nonprofit organizations. Read newspapers, listen to radio and television consumer housing reports, and compare interest rates. Many real estate firms and mortgage lenders offer access to computerized databases with mortgage loan information. Look at "targeted" areas where you may be able to use special programs and down payment assistance. Use the Mortgage Comparison Chart to write down and compare products and programs described to you by lenders. You should ask for information about down payment requirements, underwriting criteria, origination and discount points, interest rate lock-ins, and other fees associated with the mortgage application and processing. When you make a decision and complete an application with a lender, you will receive a more accurate Good Faith Estimate (GFE) of your specific loan costs.
Although you cannot apply for many down payment assistance and special mortgage programs until you place a contract on a property in a "targeted" area, it is worthwhile to be as sure as possible which lender or program you want to use prior to searching for a home. Carefully research income and eligibility guidelines and "interview" several lenders who work with the programs by obtaining the "approved lender" list published by the program administrator. Once you place a contract, your mortgage application process will move more quickly if you and your lender are well-prepared. Please refer to the First-Time Homebuyer's Checklist at the end of this booklet and be sure you have easy access to all the documents listed that will have to be submitted to the lender at the beginning of the application process.
Mortgage Options
There are four basic loan types, all named for the entity that provides the mortgage insurance (which protects the lender if the borrower doesn't repay the loan). Your lender will look at your financial situation and the condition of the property you want to

purchase and then recommend to you the loan that is best for your situation:
FHA Loans - Loans insured by the Federal Housing Administration (FHA) require that the property being purchased meets certain minimum standards. With FHA insurance, you can purchase a home with a very low down payment (from 3% to 5% of the appraised value or the purchase price, whichever is lower). FHA mortgages have a maximum loan amount that varies, depending on the average cost of housing in a given region. FHA allows generous qualifying ratios and flexibility related to credit and down payment.
VA Loans - The Veteran's Administration (VA) guaranteed loan allows qualified veterans to buy a house within certain purchase price limits with no down payment. If you are a veteran, contact your regional VA office if you do not have a Certificate of Eligibility (D0214).
Rural Development Loans - Rural Development, a branch of the U.S. Department of Agriculture, provides loans with no down payment. They are available in rural areas and in some suburban locations.
Conventional Loans Conventional loans are insured by private mortgage insurance (PMI) companies and have various terms and requirements.
Types of Mortgage Loans
Fixed rate mortgage - Usually 30, 20, or 15 years in length. The shorter the term, the lower the total cost to repay the loan due to reduced overall interest charges, but the monthly payment will be higher.
Adjustable rate mortgage (ARM) - With an adjustable rate mortgage, the interest rate paid by the borrower is adjusted at certain times to bring it in line with changing market rates. Some loan rates are fixed for a number of years, such as three, five or seven, and then become adjustable for the remaining term.
The Georgia Fair Lending Act
The Georgia Fair Lending Act became law on October 1, 2002, and was amended in March 2003. It was passed by the Georgia General Assembly to protect consumers from unscrupulous lending

practices and prohibits certain practices for all home loans. Under the law:
Credit life insurance cannot be financed as part of the loan.
Late fees cannot be more than 5% of the monthly mortgage payment (PITI).
The creditor cannot encourage default.
The creditor cannot charge a fee for a payoff quote.
"High cost loans," which are loans with points and fees above a certain APR or which exceed a certain percentage of points and fees to the loan amount, have further restrictions:
Prepayment penalties are restricted during the first 24 months of the loan.
No balloon payments are allowed.
Buyer counseling is required on the terms and conditions of the loan by a non-profit agency approved by DCA.
Lenders cannot make loans without regard to repayment ability.
"Flipping" without "tangible net benefit" to the consumer is not allowed.
"Flipping" occurs when a creditor makes a loan that refinances an existing home loan, often repeatedly, in order to charge high fees or interest rates without benefit to the buyer. If you are applying for a loan that has very high fees and costs associated with it or a higher than market interest rate, it may be a "high cost home loan" as defined by the Georgia Fair Lending Act. If so, you may be required to have "high cost home loan" counseling in addition to your first time homebuyer education. The Georgia Fair Lending Act in requires counseling for certain "high cost home loans" to make sure borrowers understand their financing decisions and options, and prevent what is called "predatory lending" practices on any home loan made to a Georgia resident.
Shopping for Your House
After estimating your current price range, fill out the Home Buyer's Wish List in the worksheets section. Some of the items you "would like to have" may not fit your current price range. Often, you must make important choices about what you

can give up. Most first time home buyers stay in the home less than seven years, so this is probably not the only home you will ever buy.
A housing design concept you may want to consider is "visitability" which ensures access by people with mobility impairments. Visitable homes also provide convenient, safe entry even when your arms are full of groceries or small children. They also improve the safety and ease of transporting luggage, carriers, and strollers. Some of the features that make a home visitable are:
A step-free entrance from a driveway, sidewalk or other firm route
A bedroom, kitchen, living area and bathroom located on the main level with sufficient maneuvering room for a person using a wheelchair or a stroller.
Widened doors and hallways (32") for clear passage and maneuvering
Accessible closets, counters, climate controls, electrical outlets, and door handles
These designs will give your home universal access, increasing its appeal for resale and enabling you to remain in your home without extensive renovations if a family member develops a disability.
Another important factor in housing design is energy efficiency. Ask the builder or seller about energy saving features or previous usage levels so that you may estimate your future utility bills in that property.
You may already know the area in which you want to purchase, but factors that most strongly influence housing choices are:
Location (proximity to work, place of worship or family)

School quality Parks and recreation facilities Proximity to public transportation or commuting
routes Community and public services There are many resources and leads for finding the house that's right for your family. Word of mouth: Tell friends and co-workers that
you are house hunting "For Sale" and "Open House" signs Newspaper ads and real estate booklets
Fair Housing Act
All parties involved in the home buying process must abide by the Fair Housing Act. Discrimination in housing refers to unfairly denying anyone the right to own a home. The Fair Housing Act of 1975 prohibits discrimination because of race, color, religion, sex, national origin, handicap (disability), familial or marital status, age, or receipt of income from public assistance programs. Real estate professionals and lenders must comply with all Fair Housing requirements in dealing with customers. If you feel you have been discriminated against in your housing search, complaints about fair housing issues should be directed to the Georgia Commission on Equal Opportunity at 1-800-493-6736.
Finding a Real Estate Professional Real estate professionals use several different titles:

A real estate broker is a person licensed to carry out real estate transactions and receive a fee for those activities.
Real estate agents, like brokers, are trained and licensed to conduct real estate transactions, but must operate under the supervision of a broker and their training is not as extensive.
Professionals who are members of the National Association of Realtors are called REALTORS. Members of the National Association of Real Estate Brokers use the term Realtist.
Referrals are very important in finding a real estate professional. Ask friends and family about the service they received in purchasing their homes. If you are interested in a specific area, see if a particular agent's name is on many of the "For Sale" signs, which may indicate knowledge of that area. Be careful to be clear that you are seeking a buyer's agent and that the agent is not showing you only his or her own listings.
A real estate sales professional can provide you with numerous services, including:
Match your "wish list" to a computer listing service to find homes that meet your needs
Give you information about neighborhoods, schools and specific homes on the list
Make appointments to view houses that interest you
Perform a "Fair Market Analysis" to determine if the asking price is fair
Advise you on how to present and negotiate your offer to purchase a home
Real estate professionals act on behalf of and are paid by different people in the transaction. There should be a specific contract outlining the terms of the agent's representation and how he or she will be paid. As a buyer, you should use a buyer's agent who represents your interests in the transaction. If you attend an open house or talk to a seller who is not represented by an agent, be sure to inform the seller or agent that you are represented by your own agent. A seller's or listing agent MUST represent the seller's interests. Although dual agency does exist as a legal form of representation, the agent will be unable to advise you if it might compromise the seller's interests.

The seller pays the real estate commission and your agent should receive an agreed upon percentage of that commission. When you contract with a buyer's agent, be sure to clarify from the beginning how the agent will be paid, especially in the case of a "For Sale by Owner" transaction. A good buyer's agent will allow termination of your contract and relationship to be immediate if the notification is in writing, but you must wait an agreed upon time period before purchasing anything that was shown to you by that agent.
The Sales Contract
The Sales Contract legally outlines your offer or purchase proposal and should document:
A full legal description of the property
Price and amount of earnest money (a deposit to indicate the seriousness of the offer)
Contingencies (conditions that must be met before the purchase can be completed such as an inspection and a loan application)
Amount of down payment
A timeframe within which the offer is good
An anticipated closing date
Once you select a home you want to buy and determine how much you want to pay for the home, you will make an offer by completing a sales contract. The sales contract includes the purchase price, who will pay for closing costs, contingencies concerning the home inspection and financing process, a record of earnest money, and any negotiated agreements between you and the seller about items such as window coverings, the refrigerator, etc. Be sure the contingencies allow you sufficient time to arrange for the inspection and complete your loan application and that all the items you want are clearly described in the contract. Your real estate agent will help you complete the contract, then deliver the contract to the seller or seller's agent. Once you and the seller have both signed the contract, you are legally obligated to take specific steps to purchase the home. If you withdraw your offer for a reason not stipulated in the contract as a contingency, you will forfeit your earnest money.
The seller can accept the offer, reject the offer, or

make a counteroffer. The real estate professional can advise you during this process of negotiation and help you reach a binding contract with the seller. Your next steps will be to arrange your home inspection and to begin or complete a mortgage loan application.
Home Inspection
You can do a first level inspection yourself. As you look at properties, pay close attention to the walls, ceilings and floors. Cracks may indicate possible structural damage. Water stains and other obvious problems should be listed for discussion with the real estate agent and seller. The seller is required to fill out a disclosure form about problems of which he or she has knowledge, and other detailed information, such as when the chimney was last cleaned. The home inspection identifies health, safety, structural and cosmetic issues in the home. Although it is not required by the lender, it is strongly encouraged. It is very different from an appraisal, which is done mainly to assure the lender that the home is worth the amount of the loan. A home inspection should be performed by a qualified inspector. When you hire an inspector, ask for referrals and carefully check them. A good way to find a qualified inspector is through the recommendations of people you know. You can also look in the yellow pages under Building Inspection Service. You can ask the service for referrals to check the quality of the inspector's work. The inspection takes place after you have made an offer and signed a contract on the house. You should make sure that your sales contract contains a contingency that states that the final contract

agreement can change if problems are discovered during the home inspection.
The contract should clearly stipulate the number of days allowed to obtain an inspection and another timeframe to present a list of problems found and repairs needed to the seller. If any major problems with the structure or the systems of the house are discovered, contingency language should give you the right not to purchase or to re-negotiate the terms of the purchase. The seller's responsibility to correct these items is governed by the sales contract, but a seller may prefer to reduce the contract price, offer money from the sale proceeds to be held in escrow for the buyer to make the repairs, or refuse to make any repairs and offer the house "as is." If a re-negotiation of the contract does not result in an agreement satisfactory to both buyer and seller, the buyer may void the contract and have his earnest money refunded.
As the buyer, you are responsible for finding and paying the home inspector. Although you can usually expect to pay $200 to $300 for the service, it is well worth the cost to make sure your home is structurally sound before the purchase. If you are buying a newly constructed home or one in the process of being constructed, you still need an inspection and may want to have the inspector check for problems at different stages of completion.
With the inspection report, you will have a guideline for the time frame and approximate cost for repairs if problems are found. A complete report should estimate the age of major systems and when replacement will be needed. You can use the report to plan your savings for major repairs once you are in the home. For example, if the expected life of the water heater is two years, saving $25 a month will allow you to pay to replace it when needed. The inspection is not an appraisal and you will not be able to determine the value of your home through a home inspection report.
PROTECTING YOUR FAMILY FROM LEAD-BASED PAINT
Many homes built before 1978 have paint that contains high levels of lead (called lead-based paint).

Lead from paint, paint chips, and dust can cause serious health hazards if not properly handled.
Sellers have to disclose known information on lead-based paint and lead-based paint hazards before selling a house. Sales contracts must include a disclosure form about lead-based paint. When arranging for the inspection, buyers should make sure any inspector hired has taken an Environmental Protection Agency (EPA) course or is certified in their area and can provide a report on the condition of any existing lead based paint. The buyers should never attempt to remove leadbased paint themselves.
Get your home and children tested if you think your home has high levels of lead. In general, the older the home, the more likely it has lead-based paint.
Check your home for lead
Hire a trained, certified professional who will use a range of reliable methods when checking your home and removing lead-based paint. A paint inspection tells you the content of every different type of painted surface in your home. This is not usually part of your basic home inspection and must be done by a specially qualified inspector.
A risk assessment tells you if there are any sources of serious lead exposure (such as peeling paint and lead dust). It will also tell you what action to take to address these hazards.
Warning! Do not peel paint off of any surface in order to have it tested.
Contact your local lead poisoning prevention program for more information, or call 1-800-424-LEAD for a list of contacts in your area.
If you suspect lead hazards, here are some things you can do to protect your family:
Have paint chips removed immediately.
Clean floors, windowsills and frames, and other surfaces weekly.

Thoroughly rinse sponges and mop heads after cleaning dirty or dusty areas.
Keep play areas clean. Regularly wash bottles, pacifiers, toys and stuffed toys.
Keep children and babies from chewing on windowsills and other painted surfaces.
Clean and remove shoes before entering a home to avoid tracking in lead from soil.
Make sure children eat nutritious, low-fat meals high in iron and calcium.
Other Environmental Hazards
In addition to lead-based paint, there are other environmental hazards you may need to be aware of when purchasing a home. You can ask your real estate professional and home inspector if there is a chance that your home may be exposed to certain environmental hazards. You can also contact your local public health department or regional Environmental Protection Agency (EPA) office if you have any questions concerning environmental hazards in your area.
Here are some important hazards you should know about:
Radon: Radon is a natural odorless gas that can seep into houses and cause health problems. For this reason, many homebuyers insist that the house be tested for radon. For more information about radon in your area, call your state or county public health department.
Asbestos: Asbestos is a material that was once used in housing insulation. Today, it is considered a health hazard and is no longer in use. If you are purchasing a home built prior to 1978, you should ask about asbestos and get a professional inspection if you suspect it might be present.
Formaldehyde: Formaldehyde is a colorless, gaseous chemical compound that was an ingredient in foam used for insulating homes built prior to 1978. It can cause irritation of the eyes, nose and throat and is suspected of causing cancer. A qualified building inspector can examine your home for formaldehyde-emitting materials.
Hazardous waste sites: The EPA has identified more than 30,000 potentially contaminated waste sites in the United States. If you think you may be living near one of these sites, you should contact

your regional EPA office for more information. Your neighbors may also be able to tell you of community organizations that have more information about the problem.
Loan Application & Processing
The loan application form is lengthy and specific. It is designed to provide the lender with information needed to evaluate the risk involved in loaning you money. You will be required to pay for an appraisal and credit report at time of application. The lender must present a preliminary Truth-inLending statement (TIL) and Good Faith Estimate (GFE) of closing costs to the buyer within three days of receiving the loan application. The TIL discloses the annual percentage rate (APR), reflecting the cost of your mortgage as an annual rate. This rate may be higher than the interest rate stated in your mortgage documents because it includes any points, fees and other costs of credit financed in your mortgage. The GFE is an itemized estimate of the costs to close or settle the loan, including pre-paid items such as property taxes and hazard insurance. Property Appraisal One of the first steps in moving toward loan approval is the appraisal, ordered by the lender once a property has been placed under contract. The lender will arrange to have the property you are buying appraised by a professional appraiser who will estimate the market value of the house, based on a comparison of recent sales in the area and the general appearance of the home. It is not a detailed assessment of the state of repair of the home or its systems and should not be relied upon in negotiating repairs with the seller.

If the appraised value is less than the purchase price you have agreed upon, you will be unable to get financing for more than the appraised amount and the sales contract usually will be void under the financing contingency. Whoever pays for the appraisal is entitled to a copy.
Underwriting and Loan Decision
The purpose of the underwiting process is to review the file and determine the risk involved for the lender. The underwriter will consider all letters of explanation for any credit descrepancies. The underwriter will review the file for the following:
Capital - Does the homebuyer have enough cash for the down payment and closing costs?
Credit - Does the applicant have a credit history?
Collateral - Is the home worth the price the buyer is paying for it?
Capacity - Is the buyer's income sufficient to cover the costs of the mortgage and other monthly debts?
Approval Process
It is very important to respond promptly to the lender's requests for information while your loan is being processed and underwritten. Advise your employer or others who may need to provide documents or other information to the lender about your application process.
Closing on Your Home
The mortgage loan closing or settlement is the meeting in which your loan is finalized. The closing date is set after your loan has been approved and a binding contract has been signed by all parties. The final days and weeks prior to closing can be a stressful time for both buyer and seller. The signed sales contract and the signed loan commitment letter do, however, obligate both buyer and seller to complete the transaction. If you fail to do so, the seller will keep your earnest money and may take legal action. There are numerous documents to sign at the closing table including the HUD-1 Settlement Statement. The HUD-1 Settlement Statement is required by federal law and itemizes the services provided and lists the charges to the buyer and the seller. Here are the things that need to be done prior to closing:
Title Search: A title search on the property should

be ordered and completed by the closing attorney's office prior to closing. The lender requires this to ensure that any liens attached to the property, such as an IRS debt, are taken care of at closing. You will see the title search fee listed under the closing costs.
Title Insurance: The lender will require that the borrower protect the lender's interest by purchasing title insurance. This is a one-time payment for a policy to protect the value of the lender's security in case there is a flaw in the title. A buyer will also be given the opportunity to purchase an owner's title insurance policy, if desired, but it is not required. If a problem is discovered in the title after the closing, only an owner's title insurance policy, if you elect to purchase it, will protect your equity in the property.
Survey: The lender may require a survey to make sure the property boundaries are the same as described in all mortgage documents. The buyer will normally pay for the survey.
Termite Certification: It is also standard practice to require the seller to pay for a termite inspection and to provide a written certification ("termite letter") stating that the property is free of termite infestation and that any damage from past infestation has been repaired. The letter must be dated within 30 days of closing. The inspection is not a guarantee that there will never be termites, but if the house is under a termite bond, it may be transferable to you. If not, you need to consider purchasing a termite bond, as Georgia ranks as the number two state in the nation for termite infestations.
Homeowner's Insurance: Lenders typically want the borrower to pay the first year's homeowner's

insurance premium in full before or at the closing. Homeowners insurance usually includes both personal liability insurance and property damage coverage. Increasing the deductible amount for each occurrence will save a small amount on the annual premium, but it will not have as large an impact as it does with automobile insurance.
Homeowner's Warranty: It is customary to receive a homeowner's warranty when you purchase a newly constructed home. A homeowner's warranty can also be purchased by the seller or the buyer on a re-sale property. This warranty protects the buyer against certain defects in the home. Some areas also require a certificate of occupancy at closing provided by the builder or developer. This should not be a cost to the buyer.
Final Walk-Through Inspection: Your contract should include a clause allowing you to examine the property within 24 hours of closing. This is your last chance to make sure that everything is as it should be and that everything works. During the walk-through, all deficiencies should be noted and brought to the seller's attention. If they cannot be corrected, you have the right to delay the closing or to put some money aside out of the seller's funds to be used to make the corrections.
Settlement Statement Review: You also have the right to review the HUD 1 Settlement Statement 24 hours prior to closing. It is completed by an attorney who conducts the closing, and both the buyer and seller must sign it. Be sure to notify the lender and closing attorney well ahead of time that you want to exercise this right so that the paperwork will be prepared and available to you within this timeframe. Inspect the HUD-1 Settlement Statement carefully and be sure you understand the final closing costs.
Closing Day: During the closing you will sign a number of forms, including a HUD 1 Settlement Statement, Truth in Lending statement, the mortgage note, affidavits, and the warranty and security deeds. These are complicated documents, and you should be prepared to ask questions about anything you don't understand. Be sure you receive copies of all the papers you sign prior to leaving the closing and keep them in a safe place. Many of the documents signed at closing deal with the loan itself and not with the transfer of ownership of the property. Have the

attorney explain each document to you before signing and don't be afraid to ask questions. After your closing, keep copies of all closing documents in a safe place. Make several copies of your warranty deed as you will need them to file your Homestead Exemption.
Homestead Exemption: Most Georgia counties have a property tax exemption on property used as a primary residence, or "homestead." This homestead exemption is a reduction in the valuation of your home for the purpose of property taxes, which reduces your annual property tax assessment. Therefore, it can also reduce the monthly amount needed for property taxes in your mortgage payment. It should be filed at your county courthouse the first year that you own the home on January 1st of that year, but the timeframes and methods to file vary from county to county. Most require that you bring a copy of the warranty deed in person to the courthouse, but some will allow filing by certified mail. Call to find out the process where you are buying and be sure not to miss the deadline. The exemption remains in place without refiling until the property is no longer your primary residence.
Loan Servicing: It is very common for a mortgage loan to be sold to another company after closing. It is also common for the servicing to be transferred. "Servicing" describes the role of the company that accepts your monthly payments, pays taxes and insurance out of your escrow account, and works with you on a monthly basis. Servicers usually supply the borrower with a coupon book including monthly coupons or with a monthly statement indicating the amount of each future monthly payment.

PART 4
After you move in!
Caring for your Home Use the checklist below as a guide for caring for your home. There are many types of maintenance and repairs that you can take care of yourself, but in the case of a major repair or system breakdown, call a professional. LOCATE IMPORTANT CONTROLS Find the electrical service panel or fusebox It contains circuit breakers or fuses for
different areas of your house A large breaker (usually at the top) shuts off
power to your entire house Label each breaker or fuse so you know what
area it covers Trip circuit breakers every six months and
ground fault interrupters monthly Check exposed wiring and cable for wear or
damage Keep a flashlight near the service panel Find the valve to shut off the gas There are small valves behind or near each gas
appliance The main valve is just to the left of your gas
meter Turning gas valves may require an adjustable
wrench

Find the valve to shut off the water
Individual shutoff valves are under sinks, toilets and near washers
The main valve for your home is near where the water line enters the house
Turning the water off at the street requires a special tool or wrench; keep your water utility's emergency number close to your phone
Check faucets, hose bibs and valves for leakage
Check for leaks at sinks, tubs, hose traps and sewer cleanouts
During your inspection, accompany the inspector if possible and ask him or her to show you these valves. If you can't find any of them, call the appropriate utility company. IN AN EMERGENCY
If you smell GAS
DO NOT light any flame in the area where you smell gas
Open windows in the area where you smell gas until the smell is gone
Call your gas utility company
Have the gas leak checked immediately
Use extreme caution when dealing with gas
If you have a serious WATER leak
Shut off the water under the sink, toilet or washer
Shut off the water to your house, if necessary
Call your water company
Repair the problem quickly -- water leaks cost money and can seriously damage your home
If you have no ELECTRICITY
Check the plug for the appliance that is not working
Check the circuit breaker or fuse for the affected room
Check other parts of the house for electricity
Ask a neighbor if they have electricity
Be sure you are current with your electric bill
Call your electric utility company
Use extreme caution when dealing with electricity

4: After You Move In

If you have a BREAK-IN at your home
DO NOT enter your home alone
Go to a neighbor's house or a store and call 911 for help
When help arrives, check your house for missing items
Keep photos or a videotape of your possessions
File a formal police report
Notify your homeowner's insurance company
Avoiding Foreclosure
Your mortgage payment is due on the first of each month. Even though late fees don't accrue until after the 15th, it is very important to pay on time. Your mortgage payment is your most important credit account and keeping it current can strongly improve your credit rating. Lenders generally do not accept partial payments, and after the 15th of the month, you must pay a late fee. If you do not pay by the last day of the month, the lender will report this delinquency to the credit bureaus, impacting your future credit history or record. The lender may refer a loan with payments more than 90 days past due to an attorney for legal action. Generally, foreclosure starts when the mortgage payments are 90 days late, and in Georgia, this process is non-judicial -the lender does not need to take you to court.
If you are going to be late, immediately contact the lender and explain the reason for the late payment. If you have been current prior to the problem and promptly contact the lender, the lender will be more likely to work with you. There are work-out and loss mitigation programs available, and a HUD approved counselor can help you submit a realistic proposal to bring your mortgage current as quickly as possible.
What Can You Do? There are steps you can take in the event you find you're having trouble paying your mortgage:
Contact your mortgage lender before you miss a payment. When a homeowner falls behind on his or her mortgage payment, the lender has the legal right to foreclose or take legal ownership of the house.
Consider refinancing your mortgage loan. Reducing your interest rate can lower the payment to a level that you may now be able to

afford more comfortably. Investigate possibilities for refinancing before you have problems making your payment, as your options will be severely limited once you are behind on your current mortgage.
Consider consolidating your other bills. You may be able to free up some cash by consolidating your higher interest credit cards and other debts onto lower interest rate cards or a loan from your bank or credit union. Do this only if it will allow you to pay off existing debt at a lower interest rate, not if the new loan or credit card simply lengthens the term required to pay off the debt. Be sure to close the existing high interest rate accounts and destroy the cards so that you will not continue to increase your debt load. Do not endanger the equity in your home by using it as security to pay off unsecured debt, even though the interest rate may be lower.
Cut back on your spending and do not obtain any additional debt. When you feel that you may fall behind on your mortgage, cut back on discretionary spending. Do not make any additional purchases on credit.
Identify means of bringing in extra income. You may find that you can increase your income by checking with government agencies to see if you qualify for federal or state benefits, stopping all voluntary deductions taken out of your paycheck or considering a part-time job.
Determine which bills you will pay first in the event of a financial crisis. Special attention should be paid to those creditors who can take quick action against your home and other necessary possessions of the family. These payments include mortgage, utilities and cars.
Establish a "priority" family budget to deal with financial crisis. Budgets provide a visual tool that enables a family to identify their expenses and their income. During a crisis, a priority budget provides a guide to which bills should be paid and which should be postponed until the family's financial situation is more stable. The goal of your priority budget is to decrease the deficit between your expenses and your income if your income is reduced.

Seek budget, credit or housing counseling from a qualified counselor. Many non-profit housing counseling agencies offer free default and delinquency counseling for families that are having problems meeting their mortgage payment and other debt. The HUD and DCA websites maintain a list of approved housing counseling agencies. Please contact one of the agencies in your area in the event you find you are having trouble making your mortgage payment.

CHARTS, CHECKLISTS & WORKSHEETS

Monthly Spending Plan

Monthly Income Sources

Net Income Available

Income from salaries and wages

Child support, etc.

Interest, dividends

Social security, disability, alimony, etc.

Total Net Income

Monthly Expenses

Expenses SHELTER Rent Electricity, gas, water, sanitation Telephone Mobile phone, pager FOOD Groceries Household supplies (cleaning, paper supplies) Eating out Lunches at work and school TRANSPORTATION Public transportation/ car payment Gasoline, oil changes Car insurance Repairs, maintenance OTHER BASIC EXPENSES Child care, after school care, child support School expenses, special lessons Student loan payments Medical and dental payments, prescriptions Insurance: life, medical , renter's Beauty shop, barbershop, personal care Laundry, dry cleaning Clothes, shoes, accessories Cable TV, newspaper, magazines, internet access Entertainment, sports, hobbies, movies Club, health, union dues, associations Contributions, charities, church offerings/tithes Gifts for birthdays, weddings, graduation, holidays, other Vacations, family visits Debt payments (credit cards or other loans) Savings
TOTAL EXPENSES

$ Plan

$ Spent

$ Difference

CHARTS, CHECKLISTS & WORKSHEETS
Goal Setting Worksheet
Remember that a goal is just a dream written down. Research shows that people who write down their goals are more likely to achieve them.
What are your household goals? 1. Where are you now?_ ____________________________________________________________________________ ________________________________________________________________________________________________ ________________________________________________________________________________________________ 2. Where do you want to be?_________________________________________________________________________ ________________________________________________________________________________________________ ________________________________________________________________________________________________ 3. What do you need to do to get there?_ ______________________________________________________________ ________________________________________________________________________________________________ ________________________________________________________________________________________________
Short term goals - goals that can be achieved in a year: 1._______________________________________________________________________________________________ 2._______________________________________________________________________________________________ 3._______________________________________________________________________________________________ 4._______________________________________________________________________________________________ 5._______________________________________________________________________________________________
Long term goals - goals that will take longer than a year: 1._______________________________________________________________________________________________ 2._______________________________________________________________________________________________ 3._______________________________________________________________________________________________ 4_ ______________________________________________________________________________________________ . 5._______________________________________________________________________________________________
Lifetime goals goals for your long-term future: 1._______________________________________________________________________________________________ 2._______________________________________________________________________________________________ 3._______________________________________________________________________________________________ 4._______________________________________________________________________________________________ 5._______________________________________________________________________________________________

CHARTS, CHECKLISTS & WORKSHEETS

Make a Plan to Re-Establish Your Credit
In the spaces below, record the companies to which you owe money. If there has been legal action or an attempt by a collection agency to collect a debt, indicate it in the column labeled "Legal Action." Record the yearly interest rate if there is one currently accumulating. If someone else cosigned on the loan or your property can be taken for the debt, put that in the "Debt Secured" column. The information chart below will help you decide which debts should be paid off first. High interest rates, secured debts or impending legal action should be a high priority for repayment. In the last column, number each debt in the order to be paid off, using number 1 for the debt you will pay off first. This is your payment priority and the order you will use to list your debts to work out a debt repayment plan.

Company

Total $$ Owed Legal Action? Interest Rate

Debt Secured?

Priority for Repayment

It is important to check your credit report to see that the information you have entered above matches what the companies have reported to you. If the amounts listed above cause you to pay out more than you bring in, you may need to consider increasing your income or decreasing your expenses. Tracking your expenses with the spending plan chart will help you determine how to decrease expenses and/or increase income in order to reduce and eventually pay off your debt.

CHARTS, CHECKLISTS & WORKSHEETS

Monthly Mortgage Payment Chart

Loan Amount

Interest Rates

$ 30,000 $ 35,000 $ 40,000 $ 45,000 $ 50,000 $ 55,000 $ 60,000 $ 65,000 $ 70,000 $ 75,000 $ 80,000 $ 85,000 $ 90,000 $ 95,000 $100,000 $105,000 $110,000 $115,000 $120,000 $125,000 $130,000 $135,000 $140,000 $145,000 $150,000 $155,000 $160,000 $165,000 $170,000 $175,000 $185,000

5.00%

5.25%

5.50%

5.75%

6.00%

6.25%

6.50%

6.75%

7.00%

7.25%

7.50%

7.75%

8.00%

$161.05 $165.66 $170.34 $175.07 $179.87 $184.72 $189.62 $194.58 $199.59 $204.65 $209.76 $214.92 $220.13

$187.89 $193.27 $198.73 $204.25 $209.84 $215.50 $221.22 $227.01 $232.86 $238.76 $244.73 $250.74 $256.82

$214.73 $220.88 $227.12 $233.43 $239.82 $246.29 $252.83 $259.44 $266.12 $272.87 $279.69 $286.56 $293.51

$241.57 $248.49 $255.51 $262.61 $269.80 $277.07 $284.43 $291.87 $299.39 $306.98 $314.65 $322.39 $330.19

$268.41 $276.10 $283.89 $291.79 $299.78 $307.86 $316.03 $324.30 $332.65 $341.09 $349.61 $358.21 $366.88

$295.25 $303.71 $312.28 $320.97 $329.75 $338.64 $347.64 $356.73 $365.92 $375.20 $384.57 $394.03 $403.57

$322.09 $331.32 $340.67 $350.14 $359.73 $369.43 $379.24 $389.16 $399.18 $409.31 $419.53 $429.85 $440.26

$348.93 $358.93 $369.06 $379.32 $389.71 $400.22 $410.84 $421.59 $432.45 $443.41 $454.49 $465.67 $476.95

$375.78 $386.54 $397.45 $408.50 $419.69 $431.00 $442.45 $454.02 $465.71 $477.52 $489.45 $501.49 $513.64

$402.62 $414.15 $425.84 $437.68 $449.66 $461.79 $474.05 $486.45 $498.98 $511.63 $524.41 $537.31 $550.32

$429.46 $441.76 $454.23 $466.86 $479.64 $492.57 $505.65 $518.88 $532.24 $545.74 $559.37 $573.13 $587.01

$456.30 $469.37 $482.62 $496.04 $509.62 $523.36 $537.26 $551.31 $565.51 $579.85 $594.33 $608.95 $623.70

$483.14 $496.98 $511.01 $525.22 $539.60 $554.15 $568.86 $583.74 $598.77 $613.96 $629.29 $644.77 $660.39

$509.98 $524.59 $539.40 $554.39 $569.57 $584.93 $600.46 $616.17 $632.04 $648.07 $664.25 $680.59 $697.08

$536.82 $552.20 $567.79 $583.57 $599.55 $615.72 $632.07 $648.60 $665.30 $682.18 $699.21 $716.41 $733.76

$563.66 $579.81 $596.18 $612.75 $629.53 $646.50 $663.67 $681.03 $698.57 $716.29 $734.18 $752.23 $770.45

$590.50 $607.42 $624.57 $641.93 $659.51 $677.29 $695.27 $713.46 $731.83 $750.39 $769.14 $788.05 $807.14

$617.34 $635.03 $652.96 $671.11 $689.48 $708.07 $726.88 $745.89 $765.10 $784.50 $804.10 $823.87 $843.83

$644.19 $662.64 $681.35 $700.29 $719.46 $738.86 $758.48 $778.32 $798.36 $818.61 $839.06 $859.69 $880.52

$671.03 $690.25 $709.74 $729.47 $749.44 $769.65 $790.09 $810.75 $831.63 $852.72 $874.02 $895.52 $917.21

$697.87 $717.86 $738.13 $758.64 $779.42 $800.43 $821.69 $843.18 $864.89 $886.83 $908.98 $931.34 $953.89

$724.71 $745.47 $766.52 $787.82 $809.39 $831.22 $853.29 $875.61 $898.16 $920.94 $943.94 $967.16 $990.58

$751.55 $773.09 $794.90 $817.00 $839.37 $862.00 $884.90 $908.04 $931.42 $955.05 $978.90 $1,002.98 $1,027.27

$778.39 $800.70 $823.29 $846.18 $869.35 $892.79 $916.50 $940.47 $964.69 $989.16 $1,013.86 $1,038.80 $1,063.96

$805.23 $828.31 $851.68 $875.36 $899.33 $923.58 $948.10 $972.90 $997.95 $1,023.26 $1,048.82 $1,074.62 $1,100.65

$832.07 $855.92 $880.07 $904.54 $929.30 $954.36 $979.71 $1,005.33 $1,031.22 $1,057.37 $1,083.78 $1,110.44 $1,137.34

$858.91 $883.53 $908.46 $933.72 $959.28 $985.15 $1,011.31 $1,037.76 $1,064.48 $1,091.48 $1,118.74 $1,146.26 $1,174.02

$885.76 $911.14 $936.85 $962.90 $989.26 $1,015.93 $1,042.91 $1,070.19 $1,097.75 $1,125.59 $1,153.70 $1,182.08 $1,210.71

$912.60 $938.75 $965.24 $992.07 $1,019.24 $1,046.72 $1,074.52 $1,102.62 $1,131.01 $1,159.70 $1,188.66 $1,217.90 $1,247.40

$939.44 $966.36 $993.63 $1,021.25 $1,049.21 $1,077.51 $1,106.12 $1,135.05 $1,164.28 $1,193.81 $1,223.63 $1,253.72 $1,284.09

$993.12 $1,021.58 $1,050.41 $1,079.61 $1,109.17 $1,139.08 $1,169.33 $1,199.91 $1,230.81 $1,262.03 $1,293.55 $1,325.36 $1,357.46

CHARTS, CHECKLISTS & WORKSHEETS

Mortgage Comparison Chart

COMPANY NAME Phone number Loan Officer's name MORTGAGE TERMS Type of Mortgage Allowable housing expense ratio Allowable debt to income ratio Required down payment % Available down payment assistance Estimated closing costs Term of mortgage Private mortgage insurance required Prepayment penalty Average loan processing time INTEREST RATE Interest rate quoted Application fee Points Lock in costs Annual percentage rate (APR)

Lender 1

Lender 2

Lender 3

Most lenders offer multiple loan options for home buyers. Ask questions about the total loan costs. It is wise to weigh all of your options carefully before deciding what loan is best for you.

CHARTS, CHECKLISTS & WORKSHEETS

Home Buyer's Wish List

To have a clearer picture of your housing needs, review your options and weigh their importance.

1. What type or style of home do you want to have?

Ranch

0 Split level 0 Two story

0 Condo

0 Townhouse

2. What type of construction would you want to have?

0 Brick

0 Wood

0 Stucco

0 Siding

0 Masonry 0 Other: ___________________________________________

Rooms 3. number of bedrooms 4. number of bathrooms 5. basement 6. eat-in kitchen 7. other: ______________________________________ Inside Features 8. wall-to-wall carpet 9. fireplace 10. ceramic tile 11. hardwood floors 12. other: _____________________________________ Outside Feature 13. garage 14. deck 15. patio 16. other: _____________________________________ Systems 17. shower 18. garden tub 19. ceiling fans 20. air conditioning 21. gas heating 22. electric heating Visitability/Accessibility 23. lowered cabinets 24. wider doorways 25. outside ramp or step free entry 26. other: _____________________________________

Must Have
_____________ _____________ _____________ _____________ _____________
_____________ _____________ _____________ _____________ ____________
_____________ _____________ _____________ ____________
_____________ _____________ _____________ _____________ _____________ _____________
_____________ _____________ _____________ _____________

Would Like to Have
_____________ _____________ _____________ _____________ _____________
_____________ _____________ _____________ _____________ _____________
_____________ _____________ _____________ _____________
_____________ _____________ _____________ _____________ _____________ _____________
_____________ _____________ _____________ _____________

CHARTS, CHECKLISTS & WORKSHEETS
First Time Homebuyer's Checklist
Partial list of items the buyer may need to provide in order to complete a mortgage application. All applicants on the loan must provide this information.
0 Employers' names and addresses for the last two consecutive years 0 W-2s for the last two years and pay stubs for the last 30 days 0 The most recent bank statements of each of your accounts
0 Checking and savings accounts 0 Credit union 0 Security accounts (Stocks, bonds, life insurance, IRAs, 401Ks, etc.) 0 Three years' federal tax returns 0 If self-employed, the following financial statements: 0 Year-to-date profit and loss statement and balance sheet prepared and signed by an accountant and you 0 Signed tax returns for the last three reporting years 0 Supporting documents for any other income 0 Evidence of source of down payment (gift letter, if applicable) 0 An original sales contract for the house 0 Name and address of landlord for at least two years 0 Names and addresses of all creditors 0 Car loans 0 Retail charge cards 0 Credit cards 0 Other 0 Student loans 0 Judgments/Collections - provide copy of release/satisfaction (if applicable) 0 Bankruptcy - provide copies of (if applicable): 0 Petition of Bankruptcy (debtors' petition) 0 Schedule of Bankruptcy 0 Discharge of Bankruptcy 0 Other delinquent credits of record (provide explanation) 0 Legal separation or divorce decree (if applicable)
For VA applicants, the following will also be needed: 0 Certificate of Eligibility 0 Name and address of nearest relative Your lender may require other items not listed.

CHARTS, CHECKLISTS & WORKSHEETS
HOME MAINTENANCE AND INSPECTION CHECKLIST
0 Roof and Gutters Check for curling, damaged, loose or missing shingles Check for shingles that have lost their color Check flashings around the chimney, roof stacks, vents and other vertical surface areas that are above the roof Check for leaking, misaligned or damaged gutters Clean gutters, leaders, strainers, window wells and drains on a regular basis, especially in the fall Direct downspouts away from the foundation
0 Foundation Check basement for water penetration, dampness or leakage Check foundation walls, steps, retaining wall, patios, driveways and garage floors for cracks, heaving or crumbling Maintain grading sloped away from foundation walls
0 Siding/Exterior Check siding and painted surfaces for flaking, peeling or cracking Check wood, metal, vinyl siding, shingles and trim for damage, looseness, warping and decay Check masonry walls for cracks, looseness and missing or broken mortar
0 General Maintenance Change or clean furnace filters, air conditioning filters and electronic filters twice a year Check interior walls and ceilings for possible roof leaks Check smoke alarms and fire extinguishers twice a year Install smoke alarms on each floor of your home Do not store anything in front of your furnace or water heater Clean around heating and cooling units, removing leaves, fallen branches, dust and overgrown shrubbery Do not use light bulbs with wattages above the recommended level for a fixture Do not overload extension cords Check condition of lamp cords, extension cords and plugs. Replace when there are any signs of damage or wear.
Energy Conservation 0 Use low flow showerheads 0 Insulate the water heater and first two feet of water pipes 0 Set the water heater temperature at 120F to 140F 0 Insulate your attic and crawl space or basement