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This chapter of The Homebuyer's Guide provides answers to important questions about owning a home, such as what kind of home your family needs and wants, whether to rent or buy, and how much money is available for housing. It also discusses the advantages and disadvantages of homeownership and the steps involved in the homebuying process. Additionally, it explains the costs associated with homeownership and provides a readiness quiz to help determine if owning a home is the right choice for you.
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The Homebuyer’s Guide Chapter 1 Owning a Home
Just a few questions…. • What kind of a home does my family need? • What kind of a home does my family want? • Should I rent or would I be better off buying? • What kinds of space do I need for family activities? • How much money is available for me to pay for housing? • Is this the best time for me to buy? p.3 The Homebuyer’s Guide
Advantages of Homeownership • Your Home as an Investment • Tax Advantages • Equity • Control over your environment • Stability • Locking in Housing Costs Equity = What You OWN
Disadvantages of Homeownership • Homeowners need to understand terms of their ‘deal’ to determine if changes need to be made across the life of the loan. • No guarantees of increased net worth • Maintenance and repairs • Decreased mobility • Risk of Foreclosure
Steps in the Homebuying Process • Prepare for home ownership • Determine how much you can afford to spend • Get your loan preapproved • Decide what kind of home you want and need • Shop for a home
Steps in the Home-buying Process • Make an offer • Get a professional home inspection • Apply for a mortgage loan • Get insurance and have additional inspections • Close the loan
Your Home-buying Team • Real Estate Agent • Lender • Attorney • Escrow Officer • Title Insurance Officer • Housing Inspector • Appraiser • Surveyor • Insurance Agent • Housing Counselor
What Does a House Payment Include? • Principal • Interest • Taxes • Insurance • And, possibly, Private Mortage Insurance, or “PMI”
Prequalification • Calculations using housing affordability ratios: • How much money the lender will loan you • What price home you can afford • How much down payment you need • How much your monthly payments will be A confirmed prequalification is not A guarantee that you will obtain a loan.
What Other Costs Should You Expect? • Upfront Costs • Down payment • Closing costs • Escrows • Reserves • Moving costs • Ongoing Costs • Mortgage payment • Utilities • Maintenance and repairs
Readiness Quiz • I would enjoy working around a house and yard OR • I would rather not spend my spare time tending to a house and yard. • Going into debt to buy a home is something I can handle OR • The thought of being in long-term debt bothers me. • I want to stay in one place and be a part of a community OR • I can’t be limited to one location for a long time. • p. 7
Summary • Consider of the pros and cons of ownership to determine if now is the right time for you to purchase a home. • Begin listing the key steps and professionals involved in the homebuying process • Estimate your mortgage payment and all other costs to determine the real monthly cost of homeownership to your family. • Ask questions to understand how lenders determine creditworthiness and affordability.
Where to from here? • Order copies of your credit report • Chart income and expenses for your household for three to six months to begin building a budget with new housing expenses…..mortgage, insurance, taxes.
