2. Your Own Home 2 Purpose Your Own Home: Gives you information on the home buying process. Describes several mortgage options that you can use to buy a home.

3. Your Own Home 3 Objectives By the end of this course, you will be able to: Describe the benefits and pitfalls of renting versus owning a home. Identify the steps required to buy a home. Identify questions to ask to determine your readiness to buy a home.

4. Your Own Home 4 Objectives (Continued) Identify basic terms used in a mortgage transaction. Describe the advantages and disadvantages of different mortgage options.

5. Your Own Home 5 Benefits of Renting No property maintenance One year (or less) rental contract No property taxes or homeowner’s insurance

6. Your Own Home 6 Benefits of Owning a Home You can build equity in your home and borrow against it. A home generally increases in value. The home is yours. Your mortgage interest is tax deductible. You can pass your home on to family members.

7. Your Own Home 7 Steps Involved in Buying a Home Step 1Determine if you are ready to buy a house. Step 2:Determine how much mortgage you can afford. Step 3:Determine which mortgage option is best for you.

8. Your Own Home 8 Steps Involved in Buying a Home (Continued) Step 4:Qualify for a loan. Step 5:Go through settlement.

9. Your Own Home 9 Homebuyer Assistance Programs Individual Development Account (IDA) Programs offered by cities or local government offices. Financial institutions

10. Your Own Home 10 Characteristics of Government Programs Zero or low down payments Flexible underwriting standards Longer payment terms Requirement for homeowner education Some restrictions

11. Your Own Home 11 Components of a Mortgage Payment P = Principal I = Interest T = Taxes I = Insurance

12. Your Own Home 12 How Taxes and Insurance are Paid In an escrow account, along with the mortgage principal and interest. Separately - –Quarterly or semi-annual property tax –Annual insurance premium

13. Your Own Home 13 Four Cs of Loan Decision-Making Capacity Capital Character Collateral

14. Your Own Home 14 Pre-qualification The pre-qualification process: Lets you know how much mortgage you can afford. Is informal, involving no paperwork. Gives you a “ballpark” estimate.

15. Your Own Home 15 Pre-approval The pre-approval process: Is a commitment from the lender to lend you money. Lets you know how much money you can obtain. Tells sellers you are prepared to buy a house.

16. Your Own Home 16 Mortgage Options Traditional mortgage Interest-only mortgage Biweekly payment mortgage

17. Your Own Home 17 Shop, Compare, Negotiate! Check newspapers and the Internet for terms and rates. Negotiate the best price you can get. Let lenders compete for your business. Get costs in writing.

18. Your Own Home 18 Good Faith Estimate An estimate of the cost of settlement services that the lender should give you when you apply for the loan.

19. Your Own Home 19 When Debt-to-Income Exceeds Recommended Ratios You must: Have a demonstrated ability to pay more toward housing expenses. Show evidence of acceptable credit history or limited credit use. Make a larger down payment. Have cash reserves.

20. Your Own Home 20 Settlement Settlement occurs when the borrower meets with the seller and other representatives to sign the documents that will finalize the sale of the house and any mortgage financing. Also called “closing.” HUD-1 or HUD-1a Settlement Statement.

21. Your Own Home 21 Tapping Into Your Home’s Equity Home equity loans Home equity lines of credit Cash-out refinancing Reverse mortgage