DECEMBER 8, 2011 BUYING A HOME

AGENDA Rent or buy a home? Advantages and disadvantages of owning a home Determining home ownership wants and needs Qualifying for a mortgage Types of Mortgages Closing Costs Buying a Home activity

RENT VERSUS BUY?

ADVANTAGES OF OWNING A HOME Equity Increases Equity = Market Value of the home minus what you owe on the property Potential economic gain Tax Savings The interest that you pay on your home loan along with the property taxes are tax deductible Quality of Life Advantages Ownership offers privacy, freedom and a feeling of security (most of the time) “the American Dream”

DISADVANTAGES OF OWNING A HOME Upkeep and routine maintenance that needs to be done to the house Extra expenses that may not be foreseen Not Mobile Financial Investment – Long term Down Payment Mortgage payments monthly Closing costs Property taxes Insurance Utilities

SHOULD THEY BUY OR RENT? 1. Marla, age 22, plans to work full time while completing her college degree in a nearby city. RENT BUY DEPENDS 2. Bill, age 44, travels out of town frequently for his sales job. His company may transfer him to another sales territory within a year or two. RENT BUY DEPENDS 3. Craig, age 32, recently completed his master’s degree in business while working at the same company for the past six years. He has also been able to save nearly $8,000 over this time period. RENT BUY DEPENDS

SHOULD THEY BUY OR RENT? 4. Jess, age 19, has just taken her first job as a sales representative trainee for a computer software company. RENT BUY DEPENDS 5. Barb and Frank, ages 54 and 57, are planning to retire within the next few years. RENT BUY DEPENDS

DETERMINE HOME-OWNERSHIP WANTS AND NEEDS What type of house should I buy? Small or large, 3 bedrooms, 2 baths, 2 car garage etc. How much can I afford to spend? Where do I want to live? What is the appropriate market price?

QUALIFYING FOR A MORTGAGE Determine the estimated value of the home you would like to purchase. Obtain funds for a down payment from savings or through gifts or loans from family members. Reduce other debts or improve your credit record, if necessary. Compare fees, services, and mortgage rates for different lenders. Prepare the mortgage application.

QUALIFYING FOR A MORTGAGE **** your mortgage acceptance will be based on your credit record. The amount of the mortgage for which you qualify will be influenced by: Your income The amount available for a down payment Current mortgage rates

TYPES OF MORTGAGES fixed-rate, fixed-payment mortgages: Conventional 30-year mortgage Conventional 15- or 20-year mortgage FHA/VA fixed-rate mortgage “Balloon” loan (3-10 year terms) adjustable-rate, variable payments: Adjustable-rate mortgage (ARM) Graduated-payment mortgage Growing-equity mortgage other financing methods: Buy-downs Shared-appreciation mortgage (SAM) Second-mortgage (home equity loan) Reverse mortgage Refinancing

CLOSING COSTS At the real estate “closing” the following are some costs that are typically incurred by a person buying a home: Title search fee ($50-$150) Title insurance ($100-$600) – sometimes paid by the seller Attorney fees ($50-$100) Appraisal fee ($250-$300) Recording fees($15-$30) Credit report ($25-$75) Termite inspection ($50-$150) Home Inspection ($300-$400) Lender’s origination fee (1-3% of loan amount) Reserves for home insurance and property taxes (amount varies) Interest paid in advance (if applicable)

BUYING A HOUSE ACTIVITY Finding a home Calculating a mortgage x.com/calculators/amortization.h tm