New-home buying tips
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
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
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?
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
© 2012 FIGHT BACK! INC. ALL RIGHTS RESERVED.
AMY CAN TRELL
David Horowitz is a leading consumer advocate. Visit his blog at
back.com or email him at
email@example.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.
for a while and
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
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.”
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?
Just log on to
www.fightback.com and “Ask David.” For a fee, he will personally
respond to your problem if you follow the instructions printed on his website.
(Costco members receive a rebate off the normal fee.) Questions and answers of the
greatest interest to Costco members will be used in this column (with the permission
of the contributor) and will be posted on