Buying a home

1. Buying a home December 8, 2011

2. 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

3. Rent Versus Buy?

4. 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”

5. 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

6. 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

7. 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

8. 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?

9. 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.

10. 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

11. 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

12. 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)

13. Buying a House Activity Finding a home www.homeseller.com Calculating a mortgage http://mortgage-x.com/calculators/amortization.htm