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Home Buying. Topics Include:. Are you ready to buy? What can you afford? Lenders and Loans Selecting a Real Estate Agent Negotiating the Deal Closing Costs and Closing Reducing Payback Time Homeowner’s Insurance. Are you ready to buy? Renting versus Buying. Rent. Buy.

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Topics include
Topics Include:

  • Are you ready to buy?

  • What can you afford?

  • Lenders and Loans

  • Selecting a Real Estate Agent

  • Negotiating the Deal

  • Closing Costs and Closing

  • Reducing Payback Time

  • Homeowner’s Insurance


Are you ready to buy renting versus buying
Are you ready to buy?Renting versus Buying

Rent

Buy

  • Ready for stability and sense of community

  • Have cash for a larger initial investment

  • Provides a tax advantage

  • Want your equity to grow

  • Don’t mind being a landlord

  • Don’t mind more variable expenses

  • Like fix your own home

  • Want to remodel and/or personalize

  • Move a lot

  • Unfamiliar with area

  • Low on cash

  • Can’t or won’t maintain

  • Prefer fixed expenses

  • Don’t want to risk losing equity

  • Okay with not personalizing

  • Don’t need tax advantage of home ownership

  • Don’t want to be a landlord


What type of house
What type of house?

  • Condo

  • Duplex

  • Single family

  • New construction

  • One story or two

  • Older home with character


Location location location
Location, location, location!

  • Distance to work

  • School system

  • Low crime area

  • City, suburb, country

  • Near mass transit

  • Near child care

  • Distance to schools, libraries, parks, shopping, highways, etc.



What can you afford
What can you afford?

  • Prepare, or update, your financial plan or budget

  • Reduce debt

first page of the

Financial planning worksheet

Calculating your Debt-to-income Handout


Credit scores
Credit Scores

  • 35% - Your Payment History

  • 30% - Amounts You Owe

  • 15% - Length of Your Credit History

  • 10% - Types of Credit Used

  • 10% - New Credit

    www.annualcreditreport.com


U s credit scores in 2006
U.S. Credit Scores in 2006

Up to 499: 1%500 - 549: 5%550 - 599: 7%600 - 649: 11%650 - 699: 16%700 - 749: 20%750 - 799: 29%Over 800: 11%


Down payments
Down Payments

  • Conventional = up to 20%

  • FHA = 3 – 5%

  • VA = 0%


Choose a lender
Choose a Lender

  • Get referrals and recommendations

  • Compare lenders:

    • APR

    • Discount points

    • Loan origination fees

    • Lock-in Options


Choose a mortgage loan
Choose a Mortgage Loan

  • Fixed-rate loans

  • Adjustable-rate loans

  • FHA Loans

  • VA Loans

  • Assumptions

  • Buy Down

  • Step Loans

  • Balloon Loans

  • Seller Financing

  • State Veteran’s Programs


Borrower beware
Borrower Beware!

  • Interest-Only Mortgages

  • 80/20 Mortgages

  • Subprime Lenders

  • Excessive Fees

  • Abusive Pre-payment Penalties

  • Kickbacks to Brokers

  • Loan Flipping

  • Unnecessary Products

  • … and more

www.responsiblelending.org/issues/mortgage/sevensigns.html


The mortgage application process
The Mortgage Application Process

  • Pre-qualification

  • Pre-approval

  • Formal application

  • Processing time

    • Conventional loans - 4 to 6 weeks

    • VA loans - 6 weeks to 2 months


Select a real estate agent
Select a Real Estate Agent

Real estate professionals help you to:

  • Target suitable neighborhoods

  • Identify available homes

  • Identify prices and features

  • Compare cost per square foot of recent sales

  • Assess your financial situation

  • Manage the details


Select a real estate agent1
Select a Real Estate Agent

  • Principal broker

  • Realtor

  • Listing agent

  • Selling agent

  • Buyer’s agent


Interview agents
Interview Agents

  • Arrange a meeting to discuss your “needs” and “wants”

  • Review positive features of previous homes

  • Discuss areas you have visited

  • Ask for other recommended neighborhoods

  • Have agent recheck your loan qualifications or approval

  • Arrange appointments for you to see homes in your price range


Do it yourself
Do it yourself?

  • FSBO: For Sale by Owner

  • Rent to Own

  • Foreclosures

  • MLS: Multiple Listing Service


Begin the search
Begin the Search

Checklist for

Your House

Hunt Handout


Negotiate the deal
Negotiate the Deal

  • Property Values (Use “Comps”)

  • Offer to purchase

    • Set the price

    • List personal property

    • List repairs to be included

    • Include contingencies – home inspection, selling your house, etc.

  • Earnest Money

  • Get a Home Inspection


Closing costs
Closing Costs

  • Between 2% and 4% of loan amount

  • Can be paid by buyer or seller

  • Negotiable


Examples of closing costs
Examples of Closing Costs

  • Appraisal ($350)

  • Attorney’s fees ($450)

  • Credit report ($60)

  • Escrow/title company costs ($300)

  • Home inspection ($100 - $300)

  • Home warranty programs (varies with realtor)

  • Loan origination fee (0-2%)

  • Pest inspection fee ($100 - $200)

  • Recording fee ($50 - $100)

  • Survey ($150 - $200)

  • Title search and insurance (based on loan amount)


Pre paid costs
Pre-Paid Costs

  • Private Mortgage Insurance (PMI)

  • Mortgage Insurance Premium (MIP)

  • VA Funding Fee

  • Homeowner’s insurance - 14 mos.

  • Property taxes - 3 mos.

  • Interest - Date of closing to end of month


Closing
Closing

  • Take possession

    • Collect all keys/change locks

    • Request seller provide:

      • Operating instructions for appliances, heating/cooling system

      • Names of contractors

      • Paint colors

      • Locations of utility turn-offs

      • Security system combinations, if applicable


Reducing payback time shorter loan term
Reducing Payback Time:Shorter Loan Term

Principal & Interest $817 $600 Payment (per mo.)

Total paid $147,075 $178,967 over term in P & I

15 Year

30 Year

Total Savings 15 year vs. 30 year = $31,892


Reducing payback time prepaying principal
Reducing Payback Time:Prepaying Principal

  • Prepay the principal - 30 to 20 yrs.

    • Extra lump sum payment per year

    • Increase monthly payment by 1/12th

    • Bi-weekly payments (pay one-half of mortgage payment every other week)

  • Prepay the principal - 30 to 15 yrs.

    • Pay the next month’s principal amount with each payment


Early mortgage payment
Early Mortgage Payment

  • Advantages

    • Emotional Security

    • Future Investing

    • Retirement Needs

    • Reduces Stress

  • Disadvantages

    • Missing other investment opportunities

    • Lost tax savings

    • Larger monthly payments

    • More frequent payments


Homeowner s insurance
Homeowner’s Insurance

Minimal Coverage:

  • Dwelling, cost to rebuild not what you paid

  • Other structures

  • Personal property

  • Living expenses

  • Personal liability, up to $100,000

  • Medical payment, set at $1,000 per person


Additional coverage
Additional Coverage

  • Replacement Cost

  • Umbrella

  • Riders

  • Flood Insurance

  • Earthquake Insurance


Reduce premium costs
Reduce Premium Costs

  • Shop around

  • Raise deductibles

  • Ask for non-smoker’s discount

  • Install fire alarm/extinguisher

  • Same company as life and auto insurance


Summary
Summary

  • Identify “wants” and “needs”

  • Know what you can afford

  • Research homes, agents, lenders and loans

  • Get a home inspection

  • Adequately insure the home

  • Enjoy your new home!


Print your certificate
Print your Certificate

Click on the following link to add your name to the certificate and print it:

Home Buying


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