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Your Own Home

Your Own Home. Your Own Home: Gives you information on the home buying process. Describes several mortgage options that you can use to buy a home. . Purpose. By the end of this course, you will be able to: Describe the benefits and pitfalls of renting versus owning a home.

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Your Own Home

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  1. Your Own Home Your Own Home

  2. Your Own Home: • Gives you information on the home buying process. • Describes several mortgage options that you can use to buy a home. Purpose Your Own Home

  3. By the end of this course, you will be able to: • Describe the benefits and pitfalls of renting versus owning a home. • Identify the steps required to buy a home. • Identify questions to ask to determine your readiness to buy a home. Objectives Your Own Home

  4. Identify basic terms used in a mortgage transaction. • Describe the advantages and disadvantages of different mortgage options. Objectives (Continued) Your Own Home

  5. No property maintenance • One year (or less) rental contract • No property taxes or homeowner’s insurance Benefits of Renting Your Own Home

  6. You can build equity in your home and borrow against it. • A home generally increases in value. • The home is yours. • Your mortgage interest is tax deductible. • You can pass your home on to family members. Benefits of Owning a Home Your Own Home

  7. Steps Involved in Buying a Home Your Own Home

  8. Steps Involved in Buying a Home (Cont’d) Your Own Home

  9. Individual Development Account (IDA) • Programs offered by cities or local government offices. • Financial institutions Homebuyer Assistance Programs Your Own Home

  10. Zero or low down payments • Flexible underwriting standards • Longer payment terms • Requirement for homeowner education • Some restrictions Characteristics of Government Programs Your Own Home

  11. P = Principal • I = Interest • T = Taxes • I = Insurance Components of a Mortgage Payment Your Own Home

  12. In an escrow account, along with the mortgage principal and interest. • Separately - • Quarterly or semi-annual property tax • Annual insurance premium How Taxes and Insurance are Paid Your Own Home

  13. Four Cs of Loan Decision-Making • Capacity • Capital • Character • Collateral Your Own Home

  14. The pre-qualification process: • Lets you know how much mortgage you can afford. • Is informal, involving no paperwork. • Gives you a “ballpark” estimate. Pre-qualification Your Own Home

  15. The pre-approval process: • Is a commitment from the lender to lend you money. • Lets you know how much money you can obtain. • Tells sellers you are prepared to buy a house. Pre-approval Your Own Home

  16. Traditional mortgage • Interest-only mortgage • Biweekly payment mortgage Mortgage Options Your Own Home

  17. Check newspapers and the Internet for terms and rates. • Negotiate the best price you can get. • Let lenders compete for your business. • Get costs in writing. Shop, Compare, Negotiate! Your Own Home

  18. An estimate of the cost of settlement services that the lender should give you when you apply for the loan. Good Faith Estimate Your Own Home

  19. You must: • Have a demonstrated ability to pay more toward housing expenses. • Show evidence of acceptable credit history or limited credit use. • Make a larger down payment. • Have cash reserves. When Debt-to-Income Exceeds Recommended Ratios Your Own Home

  20. Settlement occurs when the borrower meets with the seller and other representatives to sign the documents that will finalize the sale of the house and any mortgage financing. • Also called “closing.” • HUD-1 or HUD-1a Settlement Statement. Settlement Your Own Home

  21. Home equity loans • Home equity lines of credit • Cash-out refinancing • Reverse mortgage Tapping Into Your Home’s Equity Your Own Home

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