Costco Connection - August 2012

; CONSUMERconnection New-home buying tips

Horowitz

DESPITE THE COUNTRY’S continued economic woes, the housing market in America may be showing signs of recovery. If you are looking for a new home or your first one, this may be a good time to buy. Home prices are low, and interest rates are still very good, hovering around 3. 5 percent [at press time] for a 30-year fixed-rate mortgage. You are likely to find a great deal in this market, and if you follow these tips you can make smart decisions and find the right house for the right price.

course. A rule of thumb is to budget 1 percent of the home’s purchase price per year for upkeep.

Avoid a prepayment penalty on your mortgage. If the mortgage has a prepayment penalty, borrowers face hefty charges if they pay it off early. This provision also can be triggered by refinancing down the road. Review the Truth in Lending disclosures that your loan officer sends you prior to signing your loan.

Check your credit scores. Your credit score is incredibly important toward a home purchase. These range from 300 to 850, with the median U.S. credit score about 725. A score below 660 usually results in a higher interest rate or denial of credit. Check your credit score before making home-buying decisions. If your score is poor, wait a few months and work to rebuild it by paying every bill on time, paying down as much debt as possible and disputing any erroneous information on the report. (For more information on credit scores, see www.costcoconnection.com and search “credit scores.”)

Get a home inspection. Some of the lowest prices on homes are for “fixer-uppers” or homes sold “as is” because of foreclosure. Invest in a home inspection (typically costing less than $400) before agreeing to purchase any home. An inspection informs buyers of any faults and helps determine the approximate cost to remedy those problems.

I AM A LOYAL customer of a major cellphone company that I have been ;ghting with over the poor 4G network service I have been getting on my phone. Something is faulty in the handset, and I have been requesting a new one for some time. They have told me they will send me a “certi;ed like new” phone, but I feel that I should get a brand-new one. Either way, this has taken three months of negotiating and I have had terrible cellphone service in that time. What can I do?

Shirley Dallas, Texas

Make sure you have enough saved up. Whether or not you’re a first-time home buyer, a down payment is essential, and the more the better. Ideally, put down 20 percent of the purchase price. If not, talk to a mortgage lender about options.

Understand private mortgage insurance. Mortgages with less than 20 percent equity (which means a 20 percent down payment for those purchasing a home) require private mortgage insurance in case the owner defaults on the loan. When the homeowner pays a conventional mortgage down to 80 percent or less of the home’s value, the homeowner can ask the lender to cancel the private mortgage insurance and, if the lender agrees, stop paying the additional amount.

Don’t stretch your financial budget too far. Standard guidelines call for keeping housing expenses below 35 percent of total income. If you are uncertain, wait to buy.

Know the real costs of being a first-time home buyer. The principal and interest on a mortgage payment are only the beginning of home-related costs. Escrow payments—the funds withdrawn to cover home insurance and taxes—and private mortgage insurance can add a few hundred dollars (or more) a month to a mortgage payment. Also, homeowners must pay for repairs and maintenance, of

Homeowner’s bonus: mortgage interest. For most people, the biggest ax break from owning a home comes from deducting mortgage interest. You can deduct interest on up to $1 million of debt used to acquire your home. In January your lender will send you Form 1098 listing the mortgage interest you paid during the previous year. That is the amount you deduct on Schedule A. If you’re in the 25 percent tax bracket, deducting the interest basically means the gov- ernment is paying 25 per- cent of it for you. A $1,000 deduction will reduce your tax bill by $250. If you have the money for a home, now is a great time to get a real bargain. C

AMY CAN TRELL

David Horowitz is a leading consumer advocate. Visit his blog at www.fight back.com or email him at david@fightback.com. He is a frequent guest on radio and television stations. Consult your local listings for dates and times.

Unfortunately, you may not
be able to receive a brand-
new phone. This issue
depends on the details of the
warranty you purchased,
or the speci;c policy
of the company.

However,
because you
have been
dealing with
the company
for a while and
during that
time you have
had poor service,
speak to a manager
about getting the last
three months credited
to your account. While
they don’t have any
wiggle room in regard
to providing you with a
brand-new handset, the
company’s representa-
tives can make adjust-
ments to your bill, and
you should demand that
they do so. C

Costco offers a program featur-
ing mortgage services for
members. Go to Costco.com
and click on “Services,” then
“Mortgage & Refinancing.”
—Ed.

More in archives
On Costco.com, enter
“Connection.” At Online Edition,
search “David Horowitz.”

AUGUST 2012 ;e Costco Connection 13

Do you have a question for David?

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