HOUSING AND REAL ESTATE 101

1. HOUSING AND REAL ESTATE 101 TERMS, CONCEPTS AND PROCESS

2. Renting a home • Deposit on Rental house • Usually 1-2 months rent • Utility Deposit- paid to Utility Company/provider • Such as Electricity, water, gas

3. Renting a house/apartment • Rent • Pay utilities • Pay Electricity, Gas, Water, Sewer, Trash • Might have to take care of yard, driveway • How you take care of the dwelling will determine if you get your deposit back! • Several programs that offer rental assistance • USDA, HUD, MHDC – some are tenant based, some apartment based. BEING A GOOD TENANT IS THE FIRST STEP IN BEING A GOOD HOMEOWNER!

4. Purchasing a home! • Homeownership • You own it • Responsible for it • Value goes up or down • Condition goes up or down IT IS IN YOUR HANDS!!!!!

5. Purchasing a home! • Guardianship • If a guardian is involved the guardianship must specifically state that it covers purchase of Real Estate.

6. Purchasing a home! • Starting the process • FIND OUT WHAT YOU CAN AFFORD • Work with lender or mortgage agent • Your income and other debts/obligations will determine what you can afford • You can shop for interest rates and terms. ASK!

7. Purchasing a home! • Loan application • Income verification- How much do you make? • Debt Verification – How much do you owe? • Credit Report – The lender will charge a fee typically. Credit report will reflect your payment history for a least the last seven years. • GOOD – BAD – UGLY!!!!!! It will show them all!

8. Purchasing a home! • When you meet with a lender: • Bring Bank Statements (3 months) • Pay stubs ( last 2-3) • Name and address of Landlord • Copies of debt monthly statements. • Debts are a bill that you owe a balance for over 3 months. Credit card, medical bills, car payments, • Does not include phone, electricity, cable TV

9. Purchasing a home! • ASK ABOUT FEES YOU HAVE TO PAY UP FRONT! • Credit Report Fee – Typically $25-50. • Application Fee – Typically $25-100 You will receive a “TRUTH IN LENDING STATEMENT” or a “Good Faith Estimate” It will outline what fees you will have to pay.

10. Purchasing a home! • What the lender will use to determine if you can purchase a home • PITI – Principal, Interest, Taxes and Insurance • MOTI- Monthly Obligations To Income

11. Purchasing a home! • PITI – Principal and Interest • The amount of your monthly payment • Taxes and Insurance • The project monthly amount to pay Real Estate Taxes and Home owners Insurance It is compared to gross income $700/mth PITI /$2500/mth income is a 28 PITI ratio

12. Purchasing a home! • MOTI – Monthly Obligations to Income • Monthly debt payments – Credit card, long term medical debt, and new house payment taxes and insurance (PITI) It is compared to gross income $100 to VISA, $50 to Hospital plus $700 PITI / $2500 monthly income is a 34 MOTI ratio

13. Purchasing a home! • Selecting a Real Estate Agent • Buyers Agent – Someone who will work with you, THE BUYER • Sellers Agent – The agent who is working specifically for the seller. • BOTH Buyers and Sellers agents only get paid if the sale closes

14. Purchasing a home! • Your Real Estate Agent should work to help you to find the house YOU want. • Location – what town, area, school, available transportation, shopping. • Style – Ranch, 2 story, basement, garage • QUALITY – New, remodeled, fixer upper • Make sure it is something you can afford to maintain, heat, cool and enjoy.

15. Purchasing a home! • Contract – a legal binding document • Offer – If you offer less than the asking price • Counter Offer – a second price offer Earnest Money – Money that you put down to show you are serious about purchasing the home. It often goes to pay closing costs if offer is accepted. It is returned if offer refused. It may be forfeited if you do not follow through with the deal. MAKE SURE YOUR OFFER IS CONTIGENT UPON YOUR NEEDED FINANCING!!!!!!

16. Purchasing a home! • Home Inspection – Completed by an inspector that you hire to look at the property to determine if the property is in good condition, all heating, cooling, appliances and electrical components are in working order. May be required by the lender.

17. Purchasing a home! • Closing The Transaction – Often referred to as “Closing” • Will be coordinated with your Real Estate Agent, Lender and Selling Real Estate Agent • The BUYER will need to be prepared to pay some costs at closing. Work this out with Lender before closing.

18. Purchasing a home! • Title Insurance – Required – An insurance policy that you own the property with good title • Property Insurance – Required - You will need to provide a Property Insurance policy at or before closing on the property you are purchasing. Typically must be paid for 1 year. • Mortgage Insurance – You may be required by your lender to pay for this insurance. Covers the lender if you fail to pay your loan timely. Covers the lender not YOU! Is not required for all loans or loan programs.

19. Purchasing a home! • Promissory Note – Legal document that states you will make payments for a specific length of time at a certain percent of interest until debt is paid in full. • Deed of Trust – Legal document that allows the lender to sell your property if you do not pay the debt in full. Also allows the lender to recover all costs associated with the sale and to charge you for any shortage the sale does not bring.

20. Purchasing a home! • Recording Fees – Paid to the County Recorder of Deeds. Pays to have the Deed of the Property recorded as well as the Lender’s Deed of Trust • Escrow Account – A separate account held by the lender used to pay the Real Estate taxes and the Property Insurance. You will pay an additional amount above your loan payment to cover this amount. May be revised each year to correct any shortages due to rising Real Estate taxes or Property Insurance.

21. Purchasing a home! • CONGRATULATIONS • YOU ARE A HOME OWNER

22. Purchasing a home! • Homeownership • You own it • Responsible for it • Value goes up or down • Condition goes up or down IT IS IN YOUR HANDS!!!!!