1. The Home-Buying Process Finding and Selecting a Home

2. Finding a Home You can look by yourself or work with a real estate agent. Agents are trained to know the market, help you find the right home, and assist you with the purchase, financing, and closing. They earn a commission for their work. The seller pays the commission

3. Finding a Home – Cont. You can find a home for sale –Online –Newspapers –Special print booklets –Real estate agent Use multiple listings: is a real estate marketing service in which agents agree to share commissions on their sales.

4. Home Buying Market Value –The highest price that the property will bring on the market. The price in which the property could be bought and sold on the market. Appraisal –The estimate of the market value of your home by comparing it to similar homes that have sold recently.

5. Making an Offer Offer –A formal document that expresses interest in entering into a contract with someone else. Explains the terms of the purchase Explains what price you are offering The down payment Mortgage amount Dates you will close the deal and take possession

6. Making an Offer – cont. Earnest Agreement/Money –A portion of the purchase price that the buyer deposits as evidence of good faith to show that the purchase offer is serious. –Counted as part of the total offer amount –Takes home off the market –Set aside in a separate account until closing –Make offer contingent on obtaining financing and property passing inspection.

7. Making an Offer – cont. Acceptance –Formal agreement to the terms of an offer, forming a contract between two parties. –If offer is not accepted they may make a counteroffer. They may make a new offer below the asking price, but higher than the previous offer.

8. Terms You Should Know Mortgage (home loan) –Is a loan to purchase real estate Principal –Amount you borrow. Equity –The difference between the value of your home and the amount you owe. Title –Legal right to ownership of property Liens –Claims against property for a debt.

9. Types of Mortgages Fixed Rate Mortgage –Usually last 15 - 30 years. Same interest rate. Payment does not change. Adjustable Rate Mortgage –Rate can move up or down with the economy. –ARM specifies how often and how much. Assuming rates will not go up too much, usually lower at first.

10. Types of Mortgages – Cont. FHA Mortgage –For first time home buyers offered by the Federal Housing Administration. –Can get this loan through a bank, savings and loan or other financial institution. –Offer low down payments. VA Mortgage –If you are a military veteran. Graduated Payment Mortgage –Small payments at first and much larger ones later.

11. Looking At The Costs Down Payment –Percentage of the purchase price, 5-10% Closing Costs –Fees and services required to transfer ownership of the property Title search – investigation to see if the property has debt Moving Expenses –Can you haul yourself or need a u-haul? Other Expenses –Repairs? –Utility installations –Appliances (replacement of old)

12. Looking At The Costs – Points When you pay "points," you are paying interest upfront. You pay this in a lump sum and in exchange, you get a lower interest rate on a fixed rate mortgage. Basically, each mortgage loan point will cost you 1% of the total mortgage amount. For example, on a home that costs $100,000 one mortgage point would cost $1,000. Obviously, the more points you purchase, the lower your final mortgage rate. Most mortgage lenders offer up to 3 points for purchase. Additionally, each point that your purchase will generally lower the interest rate on your mortgage by 0.25%.

13. Looking At The Costs – cont. Homeowners Insurance – paid every 6 months –Lenders require you to carry it. Helps protect you against loss, fire, theft and other hazards. Property Taxes – paid once a year –Taxes based on the value of your property.

14. The Home Buying Process Rule of Thumb – you can afford a house that costs up to 2.5 times your annual gross income. Large debts will reduce this amount Example: if your annual income is $50,000 and you have little debt, you should be able to afford a $125,000 home. (50000 x 2.5)

15. Closing Costs Type of CostTypical AmountWho Pays Credit Report$50Buyer Appraisal Report$300 - $500Buyer Pest/Damage Inspections$150 - $300Buyer Elect./Plumb./Water Inspet.$150 - $300Buyer Mortgage Loan FeesVariesBuyer Documentation Fees$150 - $750Buyer and Seller Notary Fees$ 25 - $100Buyer and Seller Title Search$300 - $750Seller Survey$250 - $750Seller Real Estate Commision5% - 7%Seller Interest and Taxes Owed$50Buyer and Seller