1. Personal Finance Garman/Forgue Ninth Edition
Chapter 9: Buying Your Home
PPT slide program prepared by Amy Forgue and Ray Forgue.

2. Learning Objectives
Decide whether rented or owned housing is better both financially and personally.
Explain the up-front and monthly costs of buying a home.
Describe the steps in the home-buying process.
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3. Learning Objectives
Distinguish among the conventional and alternative ways of financing a home and list the advantages and disadvantages of each.
Identify the important aspects of selling a home.
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4. Introduction
Mortgage Loan: Loan to purchase real estate in which the property itself serves as collateral.
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5. Rented Housing Rent, deposit, and related expenses
Rent: Cost charged for using an apartment or other housing space.
Security Deposit: Ensures that you do not move without paying your rent.
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6. Rented Housing Lease agreement and restrictions
Lease: Contract specifying both tenant and landlord legal responsibilities.
Periodic Tenancy: Lease agreement can be terminated by either party if they give proper notice in advance.
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7. Rented Housing Lease agreement and restrictions
Tenancy for a Specific Time
Subleasing
Add items from bulleted list on text p233? ALSO, do you want to add a slide with info from box on p232?
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8. Owned Housing
Single-Family Dwelling: Housing unit that is detached from other units.
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9. Owned Housing Condominiums and cooperatives
Condominium (or Condo)
Homeowner’s Association
Homeowner’s fee
Manufactured housing and mobile homes
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10. Renting vs. Buying Who pays more: Renters or Owners?
What does it cost to buy a home?
Consider the tax consequences of buying your home.
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11. Up-Front Costs Most up-front costs are due at the closing.
Closing costs
Down Payment: Portion of the purchase price that is not borrowed.
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12. Up-Front Costs
Point (or Interest Point): Fee equal to 1 percent of the total mortgage loan amount.
Attorney fees
Title search and insurance
Miscellaneous fees: Home inspection, appraisal fee, etc.
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13. Monthly Costs Monthly costs include both principal and interest.
Mortgage principal and interest.
PITI
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14. Monthly Costs Loan-to-Value (or LTV) Ratio Mortgage Insurance
Private mortgage insurance (or PMI)
Federal Housing Administration (FHA)
Department of Veterans Affairs (VA)
Home warranty insurance
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15. Misc. Fees Some fees are paid both up-front and then monthly
Taxes (T) and Insurance (I)
Escrow account
Real estate property taxes
Homeowner’s insurance
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16. The Steps of Home Buying
Get your finances in order.
Prequalify for a mortgage.
Front-end ratio
Back-end ratio
Mortgage broker: Individual or company that acts as an intermediary between borrowers and lenders.
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17. The Steps of Home Buying
Search for a home online and in person.
Agree to terms with the seller.
Make an offer to buy.
Purchase offer (or offer to purchase): Written offer to purchase real estate.
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18. The Steps of Home Buying
Respond to a counteroffer.
Negotiate and sign a purchase contract (or sales contract).
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19. The Steps of Home Buying
Apply for a mortgage loan.
Good-faith estimate
Mortgage lock-in
Loan commitment (or loan preapproval)
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20. The Steps of Home Buying
Prepare for the closing.
Hire your own inspector.
Hire an attorney.
Sign your name on closing day.
Uniform Settlement Statement: Lists all of the costs and fees to be paid at the closing.
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21. Financing a Home Items to consider: The amount borrowed
The mathematics of mortgage loans
Lien
Foreclosure
Principal
Amortization schedule
The amount borrowed
The interest rate
Length and maturity of the loan
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22. Financing a Home The conventional mortgage loan
The adjustable-rate mortgage loan
Teaser Rate
Payment Caps
Negative Amortization
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23. Financing a Home Alternative mortgage loans Interest-only mortgage
Graduated-payment mortgage
Lender buy-down mortgage
Rollover (renegotiable-rate) mortgage
Growing-equity mortgage
Assumable mortgage
Land contract (contract for deed)
Reverse mortgage (or home-equity conversion loan)
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24. Selling a Home Should you list with a broker or sell a home yourself?
Fizbo: For sale by owner (FSBO)
Selling carries its own costs
Brokers Commission
Prepayment Fee
Be wary of seller financing!
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25. The Top 3 Financial Missteps When Buying Housing
People slip up in when they do the following:
1. Fail to search for and negotiate for the lowest mortgage interest rate possible.
2. Fail to request that private mortgage insurance be canceled when their loan-to-value ratio drops to 80 percent.
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26. The Top 3 Financial Missteps When Buying Housing
People slip up in when they do the following:
3. Pay off a mortgage early when carrying credit card debt or not saving regularly through a qualified tax- sheltered retirement plan.
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27. Good Money Habits in Buying Your Home
Read your leases and all other real estate contracts before signing.
Save the funds for a down payment in a tax-sheltered Roth IRA account.
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28. Good Money Habits in Buying Your Home
Get your finances in order before shopping for a new home by reducing debt, budgeting better, and clearing up anything that keeps you from having a high credit score.
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29. Good Money Habits in Buying Your Home
Buy a home as soon as it fits your budget and lifestyle so you can take advantage of special income tax deductions and the likelihood of substantial price appreciation over time.
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30. Good Money Habits in Buying Your Home
Thoroughly explore mortgage loan sources and options to determine which one best fits your needs.
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31. Good Money Habits in Buying Your Home
If you make a down payment of less than 20 percent on a home, cancel private mortgage insurance as soon as the equity in your home pushes the loan-to-value ratio to 80 percent.
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