1. How to Buy a Home

2. Average cost of a home is $150,000 and higher. Average cost of a home is $150,000 and higher. Mortgage: Mortgage: loan to buy real estate (house or land) loan to buy real estate (house or land) The property serves as collateral for the land, if you do not repay the loan it becomes the property of the lender (bank) The property serves as collateral for the land, if you do not repay the loan it becomes the property of the lender (bank)

3. Mortgage Payment Two parts PRINCIPAL and INTEREST Two parts PRINCIPAL and INTEREST Principal is the amount you borrow. Principal is the amount you borrow. Down payment is a price you pay upfront usually 20% of the loan. Down payment is a price you pay upfront usually 20% of the loan.

4. Example If the cost of the house is $100,000 and you need a 20% down payment If the cost of the house is $100,000 and you need a 20% down payment How much is your down payment? How much is your down payment? $20,000! $20,000! So your principal is………. So your principal is………. (the amount left after the down payment) (the amount left after the down payment) $80,000 $80,000

5. Costs to Consider Interest: Interest: when you borrow money from a lender you will pay interest on the principal balance. when you borrow money from a lender you will pay interest on the principal balance. Points: Points: Lenders charge a fee on getting a loan from them. Lenders charge a fee on getting a loan from them. Property Taxes: Property Taxes: Local government charges property taxes on the value of your property. Local government charges property taxes on the value of your property.

6. Costs to Consider contd’ Closing Cost: Closing Cost: At the closing you will need to pay for additional services the lender had to do to get you the loan At the closing you will need to pay for additional services the lender had to do to get you the loan Example: Example: An inspector goes to the house to verify everything is up to code. THAT COST MONEY! An inspector goes to the house to verify everything is up to code. THAT COST MONEY! Homeowner’s Insurance: Homeowner’s Insurance: You must purchase a homeowners insurance policy to protect your house against fire, theft and other hazards. You must purchase a homeowners insurance policy to protect your house against fire, theft and other hazards.

7. Types of Mortgages Two Types: Two Types: Fixed-Rate Mortgage and Adjustable-Rate Mortgage. Fixed-Rate Mortgage and Adjustable-Rate Mortgage. Fixed-Rate: Fixed-Rate: Charges the same amount of interest for the entire term of the loan. Charges the same amount of interest for the entire term of the loan. Adjustable-Rate Mortgage: Adjustable-Rate Mortgage: also known as ARM. also known as ARM. Interest rates go up and down as the economy rises and falls. Interest rates go up and down as the economy rises and falls.

8. A home loan can be anywhere from 30-40 years.

9. Home buying process Know what you can afford. Know what you can afford. Tip: You can afford a home that costs up to 2.5 times your annual gross income. Tip: You can afford a home that costs up to 2.5 times your annual gross income. Example: Example: If you earn $50,000 and you have NO debt. How much can you afford? If you earn $50,000 and you have NO debt. How much can you afford? $125,000 ($50,000 x 2.5= $125,000) $125,000 ($50,000 x 2.5= $125,000) Make a list of things that you want in a house: number of bedrooms, bathrooms, basement, yard. Make a list of things that you want in a house: number of bedrooms, bathrooms, basement, yard.

10. Home buying process contd. Find a real estate agent to help you find a home. Find a house and go through walkthroughs Look at walls, carpeting, if there is an odor. Look for watermarks on the ceiling or musty odors. You don’t want water damage. Hire a professional inspector

11. Both parties will sign paperwork. Make you need to provide an offer, negotiate.

12. Information to provide Personal information SSN (credit check) Proof of employment with pay stubs Taxes 3 months of bank statements Amount of debt Verification of down payment

13. Is your head spinning? Too much information? All in All: Make sure to save 20% for a down payment Establish a good credit history Maintain a steady job Houses appreciate (they go up in value)!

14. Terms to Know Appreciate: To increase in value. Earnest Money: A payment made to the seller to show you are serious about wanting to buy their house Appraisal: Opinion as to the fair market value of property Mortgage: A loan enabling a person to buy property or a home Settlement/Closing Costs: Charges involved in finalizing a home purchase