HOME BUYING CASE STUDY JOHN BERKA

49 years old wife passed away a few years ago Lives in a bigger home worth owes Car payment , child support Puts month into a 403b plan Many years has lived beyond his means Able to pay of 100, of consumer debt with life insurance policy coverage from wife's death. Net worth of 353, Makes 60, from teaching, and 12, from a small business yearly

CONDO $119,000 Pros: Close to city Tennis court, pool, parking garage, storage. Nice area Cons: Close to other people Not a lot of space expensive

APARTMENT $585 a month Pros: Convenient walking distance to theatre, park and stores. Lots of storage, and included storage shed. Washer and dryer hook-ups. Private complex. No apartment above or below. Private parking Old people community Cons: Not able to purchase. Limited storage. Small space. Live by old people. One level.

FAMILY HOME $100, Lovely Salt Lake City Rambler 5793 S 4580 W Salt Lake City, UT | Oct 16, 2013 M 80, , Pros: Nice neighborhood and safe Close to mall, golf courses and hospital Over 800 sq ft Heating and cooling Newer and better condition Pros: 3 bedroom Bigger yard Over 1000 sq ft Heating and cooling Good location Cons: Older house, needs work Stores not in walking distance Possibly dangerous area Cons: smaller space and yard Ugly paint

RENTING VS. BUYING Renting: Lower cost Mobility Less keep up on property Always have to pay Monthly price may change Close to other people Unable to build assets Buying: Able to build asset No more payments after its paid off Set mortgage payment

NEEDS FROM WANTS Johns needs: Lower priced house Lower payment 2 bedrooms Small yard and space Parking Johns wants: Big house and yard Space for lots of toys 3+ bedrooms Nice neighborhood Conveniently located close to work and amenities

ESTIMATED INITIAL COST Down payment needed $16, it would take john 4 1/2 months to save enough for the down payment with the money he earns after expenses. With the money in his checking and saving he will only have to wait about 3 months. With additional costs it will take him longer. Estimated initial cost Down payment16000 Points640 Loan origianation fee640 loan application fee200 appraisal fee200 title search fee200 title insurance500 attorney's fee400 recording fee20 credit report50 termite and radon inspection fee150 notory fee50 Total initial cost19050

MORTGAGE LOAN John qualifies for a $102, mortgage loan at 8.5 percent. John should get a 15 year loan because he is 49 he will be retired and still paying the loan if he gets a longer loan Fixed rate mortgage will be beneficial so that his rate won’t rise. John will be purchasing a $65, dollar loan.

PAYING OFF THE MORTGAGE It will take him 15 years to pay off the complete mortgage unless he pays extra then he can cut the time by many years or if he sales his current house and pays off the house completely. With his high interest rate he will pay $ a month which is half of what he pays now but he will end up paying $50, in interest if he goes the whole 15 years making minimum payments. $65, will go to the mortgage. Makes a month in income

BEST CHOICE FOR JOHN Small single family home. Home with a smaller monthly payment. Use the money he receives from selling his home to pay of the new home, pay off his car, and invest the rest into his retirement plans. He is likely to live in the small house until he dies.