Buying Your First Home

1. Buying Your First Home

2. Is Housing a Good Investment? Home Price Risks Home Values Will Go Up Home Values Will Go Down Home Values Will Stay the Same

3. Median Housing Prices

4. Assuming It Costs The Same or Less to Rent vs. Own (after tax) • $200,000 House • 20% Down Payment = $40,000 Investment • 3% Annual Appreciation Over 20 Years: • $361,222 Home Value • $161,222 Gain • 8.41% Annual Rate of Return • 1.5% Annual Appreciation Over 20 Years: • $269,371 Home Value • $69,371 Gain • 5.16% Annual Rate of Return

5. Assuming it Costs The Same or More to Rent vs. Buy (after tax) • $200,000 House • 20% Down Payment = $40,000 Investment • 3% Annual Appreciation Over 20 Years: • $361,222 Home Value • $161,222 Gain • $76,291 Additional Equity Through Principal Reduction • 10.17% Annual Rate of Return • 1.5% Annual Appreciation Over 20 Years: • $269,371 Home Value • $69,371 Gain • $76,291 Additional Equity Through Principal Reduction • 7.98% Annual Rate of Return

6. Long Term Housing Needs Demand for Homes • 3 million more people each year • 1.27% avg. annual population growth since the year 1900 • 1.3 to 1.5 million household formation per year • 1.4 million per year was the 30-year average • Supply of Homes • 300,000 homes demolished per year • 1.6 – 1.8 million new units needed to keep up with population and replace demolished homes

7. Housing Starts Could lead to housing shortage?

8. Is this a good time to buy? • Warren Buffet: • “I buy on the assumption that they could close the market the next day and not reopen it for five years.” • “The dumbest reason in the world to buy a stock is because it’s going up.” [buy value] • Imagine going shopping a department store, and getting all emotional and buying all you can when prices are rising. Then, when prices are falling because of a blow-out sale, you stay away from the store, or worse, you go back to the store and sell everything at rummage sale prices that you bought before at a high price. That is what people do every day in the real estate market.

9. Understanding the Costs of Owning a Home • Mortgage payment (PITI) • Principal • Interest • Property Taxes • Home Insurance • Mortgage Insurance (if less than 20% down) • Condo and homeowner association dues • Repairs and Maintenance • Landscaping • Furniture / Draperies / Housing Decorations

10. Understanding the Costs of Selling a Home

11. Understanding the Costs of Buying a Home * Can be paid by seller!

12. Have the Seller Pay Points and Closing Costs on Your Behalf • In most cases lenders will allow the seller to pay 3% - 6% of the purchase price in points and closing costs on your behalf • Why would the seller do this? • Makes their home more affordable to more buyers • Sell their home quicker • Why important to you? • Reduces your cash required to close • Seller-paid points are 100% tax deductible to you! • Lowers your monthly payments and dramatically reduces the long-term costs of owning the home

13. Seller-Paid Points

14. Seller-Paid Points Save You Much More Money than a Lower Purchase Price! Plus, points are fully deductible to you even when paid by seller!!

15. Understanding the Tax Benefits of Home Ownership * Assumes 96.5% FHA Financing on $200k purchase price ** These items are generally tax deductible – see a CPA for details.

16. Understanding the First-Time Homebuyer Tax Credit • Like a gift certificate to IRS Restaurant that you can turn in and redeem for cash immediately after closing! • Not owned a home in the last three years • Single - $75k / $95k • Married - $150k / $170k • January 1, 2009 – November 30, 2009 • $8,000 • Repaid only if you sell the home within 3 years

17. First-Time Homebuyer Tax Credit: More Rules… • Married couples - both must be first-time buyers • No purchases from related parties • Spouse, Ancestors, Lineal descendants • Unmarried FTHB can split credit “in any reasonable manner” - generally based on ownership % and/or $$ contributions to the purchase price; total credit cannot exceed $8,000 • Of the buyers, only the ones who are qualified FTHB can claim the credit (income, whether owned a home, etc.) • Co-purchasers and Co-signors OK!

18. Higher loan and value limits - $625,500 Expires at the end of 2009 $417,000 in 2010 Can Be Used to Purchase 1-4 Unit Properties How does It Work? Buyers Age 62 and Older 30% - 35% Down Payment No Income or Credit Qualification NO MORTGAGE PAYMENTS for the rest of your lives! Are You 62 or Older? You May Want to Consider a Reverse Mortgages for Your Home Purchase

19. Can’t Qualify Now? Participate in Our “Tenant-to-Homeowner Program” Rent-to-Own Investors Willing and able to invest $40,000 - $50,000 Timeframe is 3-4 years Qualified for NOO financing Tenant-Home Buyers Willing and able to re-establish credit within 2-3 years Likely to qualify for FHA or conventional financing in 2-3 years Willing to contribute 5% toward non-refundable deposit

20. College Funding - Four years, including room and board; PER CHILD $84k = public $148k = private $196k = Ivy League Retirement Planning Average LE = 79 Elder-Care Issues 4.9 million Americans with Alzheimer’s disease 27% of adult Americans care financially for elderly friends or relatives Bottom Line: This Decision Will Impact Your Life for Years to Come!

21. Next Steps: How Can We Help? • Schedule meeting to review your situation • Help us understand your timelines, goals and objectives • Develop a home buying budget that meets your housing and cash flow needs • Discuss and select the home buying and mortgage planning strategies that make the most sense for your situation