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Financial Smarts

Financial Smarts. For Teachers. Sponsors. Buying a House. Homeownership. Advantages Stable costs Tax benefits Investment Inflation hedge. It’s Yours!. Homeownership. Disadvantages Maintenance and repair costs Decreased mobility You are responsible Foreclosure if you don’t pay

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Financial Smarts

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  1. Financial Smarts For Teachers

  2. Sponsors

  3. Buying a House

  4. Homeownership Advantages • Stable costs • Tax benefits • Investment • Inflation hedge It’s Yours!

  5. Homeownership Disadvantages • Maintenance and repair costs • Decreased mobility • You are responsible • Foreclosure if you don’t pay • Market changes can reduce value It’s Yours!

  6. Can You Afford It? • Yearly income 2.5 x gross yearly income 2.5 x $42,000 = $105,00.00 • Monthly income 0.28 x gross monthly income 0.28 x $3,500 = $980.00 • Ask a lender to pre-qualify you

  7. Up-front Expenses • Down payment • Application fees • Closing costs • Moving expenses • Hook-up costs

  8. Purchase Considerations • Market value • Condition • What you can afford • How you will finance • Special circumstances Review Disclosure Statement

  9. Your Offer • Earnest money • Your price • What you want • Home warranty • Window coverings • Other …

  10. Contract Contingencies • Financing • Inspection • Appraisal • What you want • Disclosures

  11. Financing Fixed-Rate Mortgage Interest rate and payment stay the same throughout the life of the loan Example: 30 Year Loan @ 7.5% 70,000 Mortgage = 489.45 50,000 Mortgage = 349.60

  12. Financing Variable-Rate Loan Interest Rate Varies Throughout Life of Loan Year 1 – 6% Year 2 – 7% Year 3 – 8% Yearly Increase Varies

  13. Financing Variable-Rate Loan Payment Goes Up as Interest Goes Up 6% = $300 7% = $333 8% = $367 Yearly Increase Varies

  14. Mortgage Components P I or P I T I? • Principal • Interest • Taxes • Insurance

  15. Loan Sources Conventional Lenders • Bank • Savings and Loan • Credit Union Higher Down Payment Strict Income Requirements

  16. Loan Sources Federal Housing Administration • Pay MIP (mortgage insurance premium) • Loan amount varies by location • Requires small down payment • Insures against defaults • Loans are flexible • Property must meet minimum standards • Takes time to process

  17. Loan Sources Teacher Loan Programs • California Housing Finance Agency • California State Treasurer’s Office (Teacher Home Purchase Program) • CalSTRS Home Loan Program • Housing and Urban Development (Teacher Next Door Program) www.teachershomeloanresource.com/

  18. Teacher Loan Programs California Housing Finance Agency • Below-market interest first loan • Forgivable second loan • Up to 100% financing • For credentialed school staff

  19. Teacher Loan Programs Teacher Home Purchase Program • Tax credit or reduced loan rate • For first-time buyers (or last owned 3 years previously) • Combined income under 115% of median for family of 3+ (100% for family of 1 to 2)

  20. Teacher Loan Programs CalSTRS Home Loan Program • Refinance existing home or buy new • Various loan programs • Conventional • No points • No fees • Zero down • 80-17 Mortgage Loan Program

  21. Teacher Loan Programs HUD Teacher Next Door Program • For full-time teachers, administrators • Must purchase within school district • For low- and moderate-income areas

  22. Loan Processing Steps • Property appraisal • Credit report • Lender checks facts • Lender approval • Commitment letter

  23. Closing the Deal • Select date • Select settlement of escrow • Complete inspections • Secure homeowner’s insurance

  24. Closing the Deal • Decide type of ownership • Single man/woman • Unmarried man/woman • Community property • Married man/woman as sole owner • Joint tenancy • Tenancy in common

  25. Closing the Deal • Secure home warranty • Walk through • Closing cost estimate

  26. Closing the Deal The Final Exchanges • The documents • HUD-1 settlement statement • Truth-in-lending statement • The note • The mortgage • Affidavits • The deed

  27. Closing the Deal The Final Costs • Lender fees • Advance payments • Interest • MIP (mortgage insurance premium) • Homeowner’s insurance • Recording fees, title charges • Escrow fees

  28. Closing the Deal Last Steps • Record documents • Get keys

  29. Enjoy

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