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Tip: HUD homes offer a great opportunity for purchasing real estate. You can find HUD homes available in Amarillo by visiting this Web site. Choose "Texas" from the state menu, then click the box next to "Amarillo" and click the "Selected Cities Only" button at the bottom of the page. If you have any questions about HUD homes, please contact us.

Buyer's Tips

Getting Started

Before you start looking for a home you should ask yourself a few questions.

Where do you want to live? Do you want to be close to schools, shopping, or work?

What kind of house would you like (need)? Are you looking for a particular style? How many bedrooms and bathrooms do you want? Do you want a yard?

How much house can you afford? Have you consulted a REALTOR or mortgage lender to determine the size of the mortgage you would qualify for?

Here are a few tips to help you get organized:

  • Pull a credit report on yourself and make sure the information is accurate. If you find any errors take steps to correct them immediately.
  • Browse through real estate advertisements in the newspaper and Homes magazines. This will give you a good feel for the types of homes that are on the market and what they cost.
  • In many communities, REALTORS may have television programs or interactive phone systems which will allow you to find out information.
  • Visit open houses on the weekend. It doesn't cost anything to look, and looking at a few different homes might give you some ideas for things you'd like in a house but haven't considered.
  • Start saving money - you'll need to have cash on hand for a down payment and closing costs.
  • Don't incure any additional debt. Pay down your credit cards - and don't apply for any new ones. Don't make any major purchases on credit - buy the furniture or car later.
  • Contact a REALTOR. Your REALTOR can help you determine how much you can afford, and they can provide you with information on homes that may interest you. The REALTOR will also help you complete all of the necessary forms when it comes time to make an offer.
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How much house can you afford?

Simply put, you can afford a house that costs as much as the largest monthly mortgage payment you qualify for.

A quick way to estimate the size of mortgage you qualify for is to take your gross monthly income (that's before taxes and other deductions) and multiply it by .28. This works out to just over 1/4 of your gross income.

Mortgage companies use something called qualifying ratios to determine how much they'll lend you. Most mortgage companies use either a 28/36 ratio or a 25/33 ratio. The first number in each pair is the percentage of your gross income that the lender would consider acceptable as a monthly mortgage payment (i.e. if you make $3,000 per month, 28% of that is $840 per month).

The second number in each pair is used when all debt payments are considered, not just the mortgage. (i.e. if you make $3,000 per month, but also have a $250 a month car payment, 36% of $3,000 is $1,080, minus the $250 car payment equals $830).

As you can see, in this example the numbers work out to be almost the same.

Obviously if you have more debt you would qualify for less.

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Why you should work with a REALTOR

Working with a professional REALTOR to buy your home is a good idea for several reasons:

  • They'll analyze your financial situation to help you determine how much you can afford.
  • They're familiar with the process of buying a home and can explain things to you.
  • They can easily access information on all properties listed for sale by REALTORS in your area.
  • They can set up appointments for you to see homes that interest you.
  • They'll help you complete all the necessary paperwork when it comes time to make an offer.
  • They'll help you arrange financing.
  • They'll be there at closing to answer your questions and make sure everything runs smooth.
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Choosing a REALTOR

Searching for your dream home can be a time consuming experience. Working with a professional REALTOR will make the process much more efficient. Since most people spend a fair amount of time with their REALTOR, it's important to choose a REALTOR you feel comfortable with, and one who is responsive to your needs. The following questions will help you decide if a particular REALTOR is right for you:

  • Do they return your phone calls?
  • Do they ask you questions to determine what you want/need in a house?
  • Do they perform a financial analysis to help you determine how much you can afford?
  • Do they explain things clearly?
  • Do they suggest financing methods?
  • Do they seem knowledgable about the community?
  • Do you feel comfortable spending time with them?
If the answer to most of these questions is "Yes" - you've found yourself a great REALTOR.

If you find yourself answering "no" to many of these questions, or to any individual questions that are important to you, you should keep looking until you find a REALTOR you feel comfortable with.

Find someone you feel comfortable with. If you don't feel you can ask questions or go to your Realtor, you have the wrong Realtor.

Your Realtor should show you research to back up any recommendations. This includes information about recent sales, current listings and recent expired listings in your neighborhood.

Choose a local Realtor. He or she will know your area better than an outsider, will be seen as a source for people looking to relocate in your neighborhood, and will get better co-operation from other agents. It is likely that any amount you might save by having a friend or relative from outside the area serve as your Realtor, will be lost in their lack of knowledge about the very specific local market. Ask for references from the Realtor. He or she should be willing to give you names of previous clients.

Ask your friends and acquaintances for recommendations, but make your final choice based on your needs.

Ask the Realtor to show you what will be done to market your home. Consider the office and company support available to him or her as well as the initiative and professionalism shown by the individual.

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Home Buying Glossary

Agent - A person acting on behalf of another, called the principal.

Appraisal - An expert judgment or estimate of the quality or value of real estate as of a given date.

Assessed Value - The valuation placed upon property by a public tax assessor as the basis for taxes.

Bill of Sale - An instrument which transfers title to personal property (chattels); a "Deed" transfers' real property.

CC& R's: Covenants, conditions and restrictions - A document that controls the use, requirements and restrictions of a property.

Certificate of Reasonable Value (CRV) - A document that establishes the maximum value and loan amount for a VA guaranteed mortgage.

Certificate of Title - A document signed by a title examiner or attorney stating that the seller has a good marketable and insurable title.

Closing Statement (Settlement) - The computation of financial adjustments between buyer and seller as of the day of closing a sale to determine the net amount of money which buyer must pay to seller to complete purchase of the real estate and seller's net proceeds. Also, "settlement sheets," "HUD-1."

Commission - Payment to a real estate broker for services performed.

Condominium - A form of real estate ownership where the owner receives title to a particular unit and has a proportionate interest in certain common areas. The unit itself is generally a separately owned space whose interior surfaces (walls, floors and ceilings) serve as its boundaries.

Contingency - A condition that must be satisfied before a contract is binding. For instance, a sales agreement may be contingent upon the buyer obtaining financing.

Deed - A formal written instrument by which title to real property is transferred from one owner to another. Also, "conveyance".

Deed of Trust - Like a mortgage, a security instrument whereby real property is given as security for a debt. However, in a deed of trust there are three parties to the instrument; the borrower, the trustee, and the lender (or beneficiary).

Due-On-Sale Clause - An acceleration clause that requires full payment of a mortgage or deed of trust when the secured property changes ownership.

Earnest Money - The portion of the down payment delivered to the seller or escrow agent by the purchaser with a written offer as evidence of good faith.

Equity - The interest or value which owner has in real estate over and above the debts against it. (Sales Price - Mortgage Balance - Equity).

Escrow - A procedure in which a third party acts as a stakeholder for both the buyer and the seller, carrying out both parties' instructions and assumes responsibility for handling all of the paperwork and distribution of funds.

Federal National Mortgage Association (FNMA) - Popularly known as Fannie Mae. A privately owned corporation created by Congress to support the secondary mortgage market. It purchases and sells residential mortgages insured by FHA or guaranteed by the VA, as well as conventional home mortgages.
Fee Simple - An estate in which the owner has unrestricted power to dispose of the property as he wishes, including leaving by will or inheritance. It is the greatest interest a person can have in real estate.

Fixture - What was formerly personal property, which is now permanently attached to real property and goes with the property when it is sold.

Graduated Payment Mortgage - A residential mortgage with monthly payments that start at a low level and increase at a predetermined rate.

Hazard Insurance - Protects against damages caused to property by fire, windstorms, and other common hazards.

Home Inspection Report - A qualified inspector's report on a property's overall condition. The report usually includes an evaluation of both the structure and mechanical systems.

Home Warranty Plan - Protection against failure of mechanical systems within the property. Usually includes plumbing, electrical, heating systems and installed appliances.

Joint Tenancy - An equal undivided ownership of property by two or more persons. Upon the death of any owner, the survivors take the decedent's interest in the property.

Lien - A legal hold or claim on property as security for a debt or charge.

Listing Contract - Between a home owner (as principal) and a licensed real estate broker (as agent) by which the broker is employed to market the real estate within a given time for which service the owner agrees to pay a commission. Also, "listing agreement".

Loan Commitment - A written promise to make a loan for a specified amount on specified terms.

Loan-To-Value Ratio - The relationship between the amount of the mortgage and the appraised value of the property, expressed as a percentage of the appraised value.

Market Value - The highest price which a buyer, ready, willing and able but not compelled to buy, would pay, and the lowest price a seller, ready, willing and able but, not compelled to sell, would accept. Basis for "listing price', or "asking price".

Mortgage - A lien or claim against real property given by the buyer to the lender as security for money borrowed.

Mortgage Life Insurance - A type of term life insurance often bought by mortgagors. The coverage decreases as the mortgage balance declines. If the borrower dies while the policy is in force, the debt is automatically covered by insurance proceeds.

Mortgage Note - A written agreement to repay a loan. The agreement is secured by a mortgage, serves as proof of indebtedness, and states the manner in which it shall be paid. Also, "deed of trust note."

Negative Amortization - Negative amortization occurs when monthly payments fail to cover the interest cost. The interest that isn't covered is added to the unpaid principal balance, which means that even after several payments you could owe more than you did at the beginning of the loan. Negative amortization can occur when an ARM has a payment cap that results in monthly payments that aren't high enough to cover the interest.

Origination Fee - A fee or charge for work involved in evaluating, preparing, and submitting a proposed mortgage loan. The fee is limited to 1 percent of FHA and VA loans.

PITI - Principal, interest, taxes and insurance.

Planned Unit Development (PUD) - A zoning designation for property developed at the same or slightly greater overall density than conventional development, sometimes with improvements clustered between open, common areas. Uses may be residential, commercial or industrial.

Point - An amount equal to 1 percent of the principal amount of the investment or note. The lender assesses loan discount points at closing to increase the yield on the mortgage to a position competitive with other types of investments.

Prepayment Penalty - A fee charged to a mortgagor who pays a loan before it is due. Not allowed for FHA or VA loans.

Principal - This word has several meanings:
a) to denote the most important;
b) a capital sum lent on interest;
c) one who appoints an agent to act on their behalf;
d) either party to a contract.

Private Mortgage Insurance (PMI) - Insurance written by a private company protecting the lender against loss if the borrower defaults on the mortgage. Prorate - To allocate between seller and buyer their proportionate share of an obligation paid or due. For example a prorate on real property taxes, fire insurance, or condominium fee.

Purchase Agreement - A written document in which the purchaser agrees to buy certain real estate and the seller agrees to sell under stated terms and conditions. Also called a sales contract, earnest money contract, or agreement for sale.

Realtor - A real estate broker or associate active in a local real estate board affiliated with the National Association of Realtors®.

Regulation Z - The set of rules governing consumer lending issued by the Federal Reserve Board of Governors in accordance with the Consumer Protection act.

Survey - A map or plat made by a licensed surveyor showing the results of measuring the land with its elevations, improvements, boundaries, and its relationship to surrounding tracts of land. A survey is often required by the lender to assure a building is actually sited on the land according to its legal description.

Tenancy in Common - A type of joint ownership of property by two or more persons with no right of survivorship.

Title Insurance - Protects lenders and homeowners against loss of their interest in property due to legal defects in title.

Title Search or Examination - A check of the title records, generally at the local courthouse, to make sure the buyer is purchasing a house from the legal owner and there are no liens, overdue special assessments, or other claims.

Transfer tax - State tax, local tax (where applicable) and tax stamps (in some areas) required by law when title passes from one owner to another.

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