ON YOUR WAY HOME A little about buying and owning a Home

Main advantages of renting are: Ease of mobility Fewer responsibilities Lower initial costs

Common disadvantages of renting your housing are: Few financial benefits in the form of tax deductions Restricted lifestyle, decorating, having pets, and other activities Legal concerns Nothing to show at the end of the ownership period.

Key benefits of buying your housing are: Tax savings Pride of ownership Flexibility in using the property

Disadvantages of buying your housing may include: Financial risks Limited mobility Higher living costs due to repairs and maintenance

A few important terms MORTGAGE A loan for a house or property DOWN PAYMENT The amount you pay up front for a house or other major purchase

A few important terms DEED / TITLE Written proof of ownership CLOSING COSTS Charged when you close the deal on your house, includes insurance, taxes, etc.

REALTOR The person who helps you buy a house They work on commission They can be very helpful, but be careful Don’t be rushed into anything If you do use a realtor, USE your realtor!

A few important terms EQUITY Difference between the value of the house and how much is owed. P.M.I./M.R.I. Private Mortgage Insurance OR Mortgage Redemption Insurance. Covers the bank if you screw up on your payments Earnest Money Money you put up to show that you are interested in a house

A QUICK LOOK AT SOME HOUSING STYLES

CAPE COD

BUNGALO

COLONIAL

RANCH

SPLIT LEVEL

The home buying process PHASE ONE - DETERMINE YOUR NEEDS What type of home should I (we) buy? How much can we afford? –How much you make –Your credit rating –Current rates

The home buying process PHASE TWO - Find some houses you like in your price range –Make sure you Set your priorities –(Neighborhood, How close to work, Shopping Convenience) Take your time –It’s a long process! Drive by, maybe some visits to open houses

The home buying process PHASE THREE - Decision Time –Narrow your choices –Visit lots of houses! –Use your realtor

The home buying process PHASE FOUR - Get Financing –How much down payment do you have? –Two months of bank statements –Two months of pay stubs PHASE FIVE - Closing the Deal –Offers and Counter-offers –Funds Needed –Documentation (closing = signing)

Costs of Buying a Home DOWN PAYMENT Mortgage Payment Closing Costs P.M.I./M.R.I. Moving Expenses Repairs Appliances

TYPES of MORTGAGES Different Types of Mortgages are Available. –LENGTH OF MORTGAGE PAYMENT 30 year 15 year –TYPE OF RATE Fixed ARM (Adjustable Rate Mortgage)

Mortgage Questions What would the difference be between a 30-yr. and 15 yr. mortgage payment? Why would you want a 15-yr. mortgage? What rate will be initially lower an ARM or a FIXED? What is riskier, an ARM or FIXED?

Closing Costs May be as much as $5,000 - $7,000 Closing costs are fees associated with getting a mortgage.

Closing Costs May Include: Property Taxes Attorney’s Fees Loan Origination Fee Title Search Recording Fee Appraisal Fee Termite Inspection

GUESS THE PRICE! $74,900 Estimated Monthly Payment: $467.50

GUESS THE PRICE $334, Estimated Monthly Payment: $2,200.05

Guess the Price, Part 2 Colonial 4 Bed, 2 Bath 1,838 Sq. Ft. 315 E Walnut Ave Painesville, OH $118,900

Guess the Price, Part 2 4 Bed, 3.5 Bath 2,672 Sq. Ft. 350 W Main St. Geneva, OH $89,900

What might account for the differences in price? LOCATION Sq. Footage # of BR & BATHS Size of Property

P.M.I./M.R.I. Private Mortgage Insurance OR Mortgage Redemption Insurance. Covers the bank if you screw up on your payments Required until you have 20% equity in your property. Can be up to $120 extra per month!

LET’S TALK MORE ABOUT EQUITY EQUITY Difference between the value of the house and how much is owed. “I have a lot of equity built up in my house.” “I am thinking about taking out a home equity loan”

EQUITY $$ AMOUNT OWNED BY YOU $$$ AMOUNT OWNED BY THE BANK YOU JUST BOUGHT YOUR HOUSE LOW equity

$$ AMOUNT OWNED BY YOU $$$ AMOUNT OWNED BY THE BANK EQUITY AS TIME GOES BY, YOUR EQUITY GROWS more equity

$$ AMOUNT OWNED BY YOU $$$ AMOUNT OWNED BY THE BANK EQUITY After several years, you have most of the house paid for.. high equity

$$ AMOUNT OWNED BY YOU EQUITY Eventually, YOU HAVE YOUR HOUSE ALL PAID OFF 100% equity

EQUITY Your house is worth $150,000 You paid $30,000 down payment How much equity? Your house is worth $220,000 and you have 20,000 left to pay How much equity?

What Good is Equity? Allows to borrow money on the equity of your house Adds to the CAPITAL part of your credit rating (what you own) –As a bank, they are more likely to give you more credit if I know you have a house