House Buying Guides | Kim Solveson

1. Welcome to... Companion PowerPoint Presentation for the Introduction to Housing textbook

2. Homeownership

3. Quick Facts • Homeownership has both benefits & drawbacks. It is not always the best option at a time. • Buying your first house needs preparing & preserving. • Prepare a guidelines to help you store for a house. • Prequalify for home financing to see how much house you are able. • There are several govt applications for first-time & low- to moderate-income real estate customers.

4. Homeownership: The American Dream Purchasing a home is one of the most important choices children can make. It has serious economical & psychological effects and is a main issue with the United states desire.

5. Advantages • Pressured benefits plan because your home loan major expenses are maintained as value in the home • Usually a good long-term investment– value will most likely improve eventually • Deduct residence taxation & interest rates from earnings tax • Over time home become less expensive in "real" dollars

6. As value develops, you can step up to a bigger house or lend against your house (home value loan) to fund large purchases • Homeownership can improve a family's sense of control over their lifestyles & atmosphere, as well as improve more powerful group connections • You can personalize the home to match special needs & tastes

7. Disadvantages • Per month installments (principal, interest, taxation & insurance) may be higher than lease payments • You must pay for normal servicing & frequent repairs • Owning is less versatile than renting; most first-time real estate customers live in a house for 7 years • Like any financial commitment, there is no assurance that value boosts

8. What Do We Want? (Professional Builder magazine, 2006) Boomers (age 41-60) • Per month installments (principal, interest, taxation & insurance) may be higher than lease payments • You must pay for normal servicing & frequent repairs • Owning is less versatile than renting; most first-time real estate customers live in a house for 7 years • Like any financial commitment, there is no assurance that value boosts

9. Gen XERS (26-40) & Echo Boomers (18-25) • Smart-home technology—every room wired for mobile phones, locations & DSL • Home enjoyment facilities in the family room—the middle of activity • Built-in cabling & conduits for flat-screen TVs, with cables & cables out of site • Breakfast bar or place as additional eating space • Green/environmentally delicate features

10. Features Important to All 3 Groups • Large, start cooking areas to make meals & amuse guests; they are the “new living room” • Kitchen isles no broader than 40” • Quality units • High great quality, high-performance appliances • Separate tub & • shower

11. Prepare for Homeownership • Buying your first house includes planning & saving—attend a real estate customer education and learning category to help you get ready for homeownership Possible obstacles: High Cost • Discover options to the conventional single-family separated house: apartment, manufactured house, or older house (generally can afford a house 2.5 times total yearly income)

12. Credit • Pay off your financial troubles & wait significant buys until after you buy a home • Get a duplicate of your credit rating file to see if any issues exist www.equifax.com • If your credit score is not great, check out subprime loans

13. Downpayment • Most traditional mortgages--20% of the amount • However, there are methods to lessen downpayments to the 0 to 5% range: • --government-insured loans • --local real estate organizations & creditors may have applications for first-time home buyers --curtail your investing & ask relatives

14. Closing Costs • Right of ownership passes from seller to buyer at the closing • Can reach several thousands of dollars • Some of the programs that help with downpayments can also help with closing costs

15. Long-term Affordability • Per month major, attention, residence taxation & insurance (PITI) expenses • No more than 28% of your total monthly earnings should go to PITI (front-end ratio) • Monthly PITI expenses plus any other long-term debts expenses should not surpass 36% of your total monthly earnings (back-end ratio) • Also need a support to protect servicing & repairs

16. Project • You have been provided two tasks, one in Fitzgibbons, MS, and the other in LA. Go to appropriate property Websites & select two similar houses. Explain each house such as its price & functions, and fix an image. Given that 28% of your earnings can go towards real property, how much would you have to generate to manage each home? Which would you choose?

17. Initial Selection of Homes • Once you are economically prepared to purchase a home, identify one that fits your principles, needs, wants & price range • Where to look? • --Real property part of a nearby newspaper • --Real property consumer books • --Real property Web websites • --Driving, bike riding & strolling through neighborhoods • --Stop at model/open homes

18. Select a Real Estate Agent • Select a representative to help filter your choices • Agents are a valuable source of information because they are familiar with property in a specific area

19. Criteria for selecting an agent: --trust --rapport --track record --level of commitment to first-time home buyers

20. As you consider different homes, evaluate each based on values, needs, wants & financial issues • Be flexible, realistic & responsible— Your first home will most likely not be your dream home • Develop a checklist: Can you & your family be happy living in this home?

21. House Hunting Checklist (Ideas of what to include, but your list must be personalized based on your needs) • Is the area safe? • Are the houses in the area maintained? • Does the home have enough rooms & bathrooms? • Is there sufficient storage area space? • Are there top quality educational institutions in the area?

22. Is the place of the home and group convenient? • Is there a property owners association? • Is the area quiet? • Does the floor-plan match your lifestyle? • Is the home power efficient? • Is the garden easy to worry for? • What group solutions are available?

23. Are the equipment & accessories adequate? • What are the common servicing expenses for the house? • How great are regional residence taxes?

24. Obtain Financing • When you store for a home, also store for home financing • Get pre-qualified so you have a better idea of budget (price range of houses that you can afford) • Mortgage creditors include: professional financial institutions, benefits & loan organizations, creditors & credit unions

25. Two possibilities for low- and moderate-income home buyers are: Fannie Mae's Community Home Buyers Program Freddie Mac's Affordable Gold Program • Government agencies— FHA VA RHS State housing & finance authority

26. Besides downpayment, carefully compare mortgage options based on these criteria: • Annual percentage rate (APR) Total yearly cost of a mortgage as a percentage of the loan amount Includes the contract interest rate, mortgage insurance & points (each point equals 1% of the loan amount)

27. Interest rate lock-ins Lock in a low rate as soon as possible

28. Application & origination fees Minimize fees to cover processing, credit check, appraisal, points & other overhead costs

29. Term For most first-time home buyers a 30-year term to pay off the mortgage is appropriate Determine if you want a fixed or adjustable rate mortgage • A fixed rate mortgage Loans are fully amortized with a fixed interest rate for the entire term -- both the principal & interest are paid off at the end of the loan

30. An adjustable rate mortgage (ARM) Interest rate adjusted periodically, usually every 1, 3, or 5 years based on an index written into the loan agreement Might initially get a lower interest rate, but future increases may mean higher monthly payments

31. Negotiate and Enter Into Contract • Buy offer • Offer is typically given to the property broker who provides it to the supplier (earnest money) • Get a home examination report--a certified examiner provides an purpose viewpoint about home’s condition • Purchase contract

32. Loan Approval • Obtain actual financing for home • Lender will ask about your income, expenses, history of credit score, employment, & the terms of purchase offer • You complete form & pay a software fee, pay for a credit score file & appraisal, receive an estimate of settlement costs & truth-in-lending statement Loan processing occurs

33. Closing • Final step is the closing, a meeting between you, your lender, the seller & other interested parties Review & sign loan documents Exchange of documents between buyer, seller & lender Disbursement of funds • You receive the deed to the property & join the ranks of homeowners!

34. Potential Difficulties • Discrimination Against the law—Fair Housing Act Fair housing—several consumer laws or acts prohibiting discrimination • Subprime & predatory lending Credit affected debtors can benefit with a subprime mortgage Predatory lending comprises of unjust or violent loans, including a number of aggressive methods

35. Postpurchase Concerns • Keeping up with servicing & maintenance (avoid an costly crisis) • Create a servicing fund • Remodeling & improvements—make advised choices in picking the venture, specialist, or determining to do it yourself • Refinancing—may be a wise idea when interest levels go down • Foreclosure prevention • Loss minimization resources such as a loan modification