Home Buyer Workshop

1. Home Buyer Workshop Jayne McBurney, M.S. Family & Consumer Sciences Agent Housing Counselor 919-989-5380 jayne_mcburney@ncsu.edu http://www.ces.ncsu.edu/johnston/ Jayne Makes Cents @JayneMakesCents

2. Rent vs. Buy Advantages to Rent • Pay less • Little financial risk • Cost of selling Disadvantages to Rent • Finding suitable rentals • No tax advantage • No freedom for individualizing space

3. Rent vs. Buy Advantages to Buy • Investment of mortgage dollars • Interest is tax deductible • Home can increase in value Disadvantage to Buy • Commitment of time, etc. • Ties up money • Maintenance

4. Can you afford a home? Consider that most lenders suggest that 25-29% of your gross income will go to housing. Lenders want to see less than 41% tied up in long term debt (car loans, alimony, child support, installment loans, credit cards)

5. What do lenders look at? • Income • Debt • Assets • Credit Score

6. Understanding Income Gross income vs Net Income Before taxes and deductions ‘bring home pay’ $40,872 (2000 Census $29,428 for Johnston County) $3406/month $2452/month $786/wk $566/wk

7. Monthly debts • Should be less than 15-20% of net income • $368-490/month

8. Housing 25% - 33% of gross pay $852-$1124/month

9. Vehicle • less than 15% of gross including insurance, gas and maintenance • $511/ month

10. The Steps to paying down debt TALK FIX FIND SMART TRACK ASSESS STOP

11. STOP new purchases • Average Credit Card Debt: • $8,000 • $19,000 (January) $15, 000 (October) 2014 $15,480

12. …in daily terms

13. Assess the problem • How did you get there? • Is it permanent or temporary? • Job loss or lay off • Health/Accident • Divorce or death • Living too big: needs vs. wants • Spending problem

14. TRACK your spending • Write down EVERYTHING you spend • Use a calendar with due dates • A wake-up call • Make a budget: ABC

15. Fixed vs Flexible • Fixed is NEEDS: Rent, car, utilities, insurance, savings • Flexible is WANTS: Food, clothing, recreation, car maintenance, phone

16. SMART Goals • Specific: I need new brakes for my car in 6 months. • Measurable: They will cost $300. • Attainable: I will save $50/month for six months • Realistic: how will I get the $, look at spending • Time Bound: I will have the $ by x date

17. Find $ • Cable….movie packages • Internet/Cell phone Nails/ Haircut…can you wait a week? • Daily lunch, at a modest $5 = $100 a month • Vending machine: 1/day @ $1.50, $45/month

18. Easy Fix: • Bring snacks from home in a cooler, save $30/mo • Pack Lunch 3 days a week, save $60/mo • If you have a smart phone, you may not need Internet at home, save $45/mo • Rent movies, save $25-$50/mo • Have hair and nails done every ten days, save $50/mo

19. Paying down Credit Card debt

20. Talk • Communicate with anyone who depends on your paycheck about spending issues and financial goals

21. Review the Steps TALK FIX FIND SMART TRACK ASSESS STOP

22. Monitor and Modify • Stuff happens….change in income, emergencies…. • Goals change • But also….new income…SAVE IT! • Is it worth it? - opportunity costs

23. BREAK • Need one?

24. Assets/Collateral Things you own that have value… • Car, vehicles • bank accounts, CDs , stocks • retirement plans, 401K, IRAs • Life Insurance cash values, Trust funds

25. What is my Credit Score?Score range: 300-850 • www.myFICO.com Use the Credit Education tab • www.annualcreditreport.com

26. Credit Score

27. How much can I buy? Ratios help lender determine this: • Front end: 29% of gross income • Back end: 41% of gross income, less monthly debt

28. Considering median income of $40,872 • Front end: $988 • Back end: $1396 -250 car payment -400 other debt $ 746

29. P+I+T+I Monthly payment = • Principal • Interest • Taxes • Insurance

30. Using the lower of the two ratios: • Total Payment $746 less • Real Estate Tax 85 • Home Owner Insurance 40 • Principal & Interest $621 use this amount to determine how much you can afford to finance

31. Amortization factors • Determine how big of a loan you can afford, depending on interest rate and monthly payment and term of loan • So…considering a 30 year loan and ability to pay principal and interest of $621

32. How much can you afford? • 6.00% $103,500 • 5.00% $115,000 • 4.5% $122,000 • 4.00% $130,000 • 3.50% $138,500 • 3.25% $142,500 • 3.00% $147,200

33. Your Needs in housing: • Space, how many rooms are needed? • Exterior space - garage, yard, entertaining • Appliances • Location

34. Location • Schools • Work • Groceries, shopping areas • Environmental

35. Financial Aspects • One - Time Costs - closing costs moving expenses, set-up fees • Regular costs - payments, insurance, utilities • Future Costs - maintenance, repairs, furnishing

36. Don’t become “House Poor” • Space out things you will need • Be smart about furnishings, repairs, upgrades

37. Your Home Buying Professionals • Real Estate Agent • Mortgage banker • Home Inspector • Appraiser • Attorney

38. What to expect from a Home Inspector • Licensed by the North Carolina Home Inspection Board. • A home inspection is a written evaluation or report of the condition of the home on the day it is inspected. • Home inspectors generally evaluate: foundation, masonry, roof, windows and doors, plumbing, electrical, heating, ventilation and air conditioning system, floor, walls, interior and exterior components

39. Closing Statement • Taxes • Stamps • Recording Fees • Commissions • Inspections

40. What Next? • Set up utilities • Clean the new place • Paint/repair • Plan Moving Day • Keep kids busy!!!!

41. Questions?????Ask the Extension Agent… • Landscape, plants • Bugs!!!! • Nutrition and Cooking questions • Youth programs • Johnston County 919-989-5380 • http://ces.ncsu.edu