Are you thinking of buying a home in the Louisville, Ky metro area? Look here for answers to some questions that you might have. To read the articles, simply rollover the questions to the left. Can't find the information that you need here? Contact Freddie. Your questions are very important, and Freddie will be able to assist you with up-to-date information relevant to the Louisville area market.

What should I do before I begin the homebuying process?

Before you begin the home buying process you should do the following:

1. Determine Your Objectives - Why do you want to buy a home? Need more room? Downsizing? Tired of paying rent?

2. Determine Your Needs - Prioritize what is most important to you in a home (style of home, size of home, neighborhood, schools, cost, etc.) Keep in mind, there is a difference between what you need and what you want. So be realistic.

3. Become Informed - If you re a first-time buyer, learn everything you can about the process. Research the market by looking at classified ads and Homes magazines to get a feel for what is available, drive around neighborhoods you are interested in, scan the Internet and maybe even talk to a real estate agent, if you decide you want their help.

4. Get Your Financing in Order- This is not the time to make any major purchases on a credit card. Do not change types of work.

Why should I buy instead of rent?

Credit - Just having a mortgage that is paid on time every month vastly improves your credit rating

Investment- a home will appreciate in value and help you to build equity. Real estate is one of the most solid investments that you can make.

Pride - owning a home gives you a feeling of accomplishment like no other.

Tax Advantages- the interest on your home is tax deductible. In addition, there may be other deductions that you can take as a homeowner, depending on your situation. Consult your accountant for details.

How can I prepare for financing?

1. Credit Report - Contact a credit bureau and get a credit report on yourself, just to make sure your report is accurate. If you do not like what you see, it is time to try to clean up any problem items or clear up any mistakes. You may also want to consider contacting a consumer credit counselor for help.

2. Save Money - Skip a vacation, movie or dinner out to save money for a down payment and closing costs. Try not to buy anything on credit and if you do, pay it off quickly. Try to avoid taking on another large credit expense or even applying for another credit card.

3. Get Pre-Approved for a Mortgage - It pays to get pre-approved for a mortgage early in the process. Some think pre-qualifying for a loan is enough, but it is not. Pre-approval gives you more power when you have found that perfect house. You know in advance how much you can afford to spend on a home. You have the negotiating power of a cash buyer when you can prove that you have financing in place. You can close in as little as 15 days compared to the 60 days if you are not yet approved. You can lock in an interest rate early for a faster closing and better rate. (Ask your lender about a 30-day rate lock instead of the normal 60 days.)

Why should I use an agent to buy a home?

Generally, having someone who knows the market negotiating for you is a plus. They know the area and can tell you the pros and cons of any particular community. They have access to most of the homes on the market through the Multiple Listing Service (MLS). They can handle the negotiating, contract and closing for you. And the seller typically pays the buyer agent commission.
If you decide to use an agent, you can expect them to do the following for you:

- Help you get pre-approved for a loan
- Recommend a specific price range
- Suggest different communities that fit your needs.
- Screen homes for you
- Show you properties
- Negotiate the offer and contract
- Set up inspections
- Help to clear contract contingencies
- Oversee the closing, escrow and settlement
- Provide you information on securing a home warranty

Tips for making the offer

As you go through this process, remember that everything is negotiable.

Everything should be in writing. You should be very specific when you prepare your purchase offer, and the seller should be equally specific when they issue their counter offer. Don't make a verbal offer.

Don't offer full price unless the home is a real steal. You need room to negotiate.

Make sure the contract includes an out in the event that you cannot secure financing.

Earnest money is typically between 6-10% of the purchase price, but less is possible. The money should be held by an attorney or title company in escrow. Such a deposit does not mean you're bound to the contract. Your full deposit is credited toward the down payment and closing costs.

Once your offer is accepted, it becomes a binding contract, so be sure to include the necessary contingencies. Contingencies are clauses that, if not met, will render the contract null and void. Common contingencies are the sale being subject to approved financing, the sale of an existing home and/or a satisfactory home inspection.

Licensed home inspectors inspect homes to determine what, if anything, needs repairing or replacing. Typical inspections may include:

Termites - signs of termites in the home or foundation
Plumbing - checks for leaks, dripping faucets, toilet tank leaks, etc..
Electrical - up to code? Check that all light switches and wall sockets are working
Exterior - settling cracks, paint peeling
Interior - signs of leaks in walls or ceilings, general condition
The Roof - checks for leaks or damage
Windows- good condition and sealed?
Appliances - check that they work along with heating and air conditioning units
Radon Gas - an odorless and colorless gas that is sometimes found in the earth's rock and soil.
Lead-Based Paint - some older homes may still have lead-based paint that can be hazardous if ingested.
Asbestos - homes built in the early 1970s and before often had asbestos tile floors and asbestos ceiling tiles. This substance poses a health risk and must be removed.

Good inspectors will find minor flaws in nearly any home. It's up to you to decide how important they are. Inspectors often provide you tips on the maintenance and upkeep of the home and its systems.

Closing and Escrow

The escrow agent conducts the closing and is often affiliated with the title insurance company. The escrow agent prepares a closing statement that outlines what the required funds are, who's paying and where the funds are going. They will not disburse funds until they can guarantee that the above noted items have been taken care of. Closing costs usually run between 3-8% of the purchase price.

Utilities - Water, gas and electric meters will be read on the day of closing and the seller will owe for the utility usage up until that day.

Service Contracts - If you are taking over any service contracts from the seller, you will owe the seller for the unused portion of those contracts that have been pre-paid. These could include pest control, pool and/or lawn services, home maintenance contracts, etc.

The Check - Your closing agent should tell you how much you need to bring to closing. Personal checks are not accepted, so bring a cashier's check.

Home Warranty - This will cover the repair or replacement costs in case items such as appliances break down after you purchase the home. The peace of mind is worth the expense.