Buying 2 3 of people are

Buying

• 2/3 of people are homeowners • Why? – Freedom – Less likely to be evicted – No dependence on others – Financial advantages • inflation

equity • Money value of the house beyond what is owed on the house • Renters cannot build equity • Homeowners build equity when they sale or refinance • Tax advantages

• Buying a home is complex, time consuming, and costly • Cost more than rent, at least for the first few years. • Property taxes, homeowners insurance, utilities and maintenance

Foreclosure • Legal proceeding in which a lending firm takes possession of the property.

Price • Buying a house is not an easy task • Income, savings, and debts all contribute to how much you can spend on a home • Credit score

Estimating what you can afford • 2. 5 times your gross income • Gross income is what you make before taxes are taken out • Example: 40000 then you can afford a 100000 home. • Ballpark figure

Down payment • Usually at least 5 percent down

Housing to Income ration • Monthly housing cost should not exceed 28 percent of your gross income. • Mortgage, property taxes, utilities, repairs, fees

Debt to Income Ration • Monthly housing cost plus long term debt should not total more than 36 percent of your monthly gross income. • Long term debts. Take more than 10 months to pay off

To build or buy? • Building a home • If you choose to build a home you first have a lot then a home 1. ) choose a region, community, neighborhood site 2. ) find a house that fits your lifestyle 3) Select a contractor( Bid) 4. ) obtain the money ( loan, appraisal value) First loan will be for the construction second a long term long

Buying a home • • • Less time Move in or close soon Visualization Preowned- extra stuff No house is perfect, know your flaws

Things to look for • A cracked foundation • Rotten or sagging roofs, walls or support, major construction flaws • Insect damage • Less serious conditions can be repaired if you want to spend the time, money and effort ex. .

• Inspector will judge the construction • Appraiser will give you an expert estimate of the quality of the property.

Locating a home • • Real estates Internet Newspapers ride throughs

Steps in buying a home • Contract called agreement to sale • Specific terms and agreements • Should include – Real estate and its legal location, purchase price, down payment, possession dat – Specific terms must be spelled out. Example keeping the carpet

Earnest Money • Deposit the potential buyer plans to pay to show he or she is serious about buying the house. • Held until deal goes through, then put toward the house

Abstract of title • Have to make sure seller is legal. • Public records

Survey • Professional survey is often required • Assures the lender of the home that the building is actually located where it says it is

Securing the mortgage • Pledge of the property that a borrower gives to a lender as a security for the payment of a debt • Lender is usually a bank

• For years standard home morgtages where long term, fixed rate which means usually written for 20 -30 years with the interest rate and monthly payments

• Conventional Morgtages: two party contract between a borrower and a lending firm. Government does not insure this type of loan • FHA- 3 party contracts, includes borrower, lending firm and the federal housing administration. FHA is a part of HUD( housing and urban development) FHA does not make loans but insures the loan • VA: generally cost less than other common types of fixed morgtages. 3 party loans. Must be a veteran and insured by the veterans administration. • No down payment but the lender may

• Arm rate: adjustable rate mortgages. Interest rates periodically go up or down based on national interest rate index. • Monthly payments may increase or decrease. • Some have caps • Renegotiable rate mortgages: interest and monthly payment may be fixed for a certain amount of time. When time expires rates will go with current rate of interest.

Closing cost Fes and charges for settling the legal and financial matters must be paid. This is called closing cost. Closing cost include: recording fees for the deed and mortgages, attorneys fees, abstract title and title insurance, apprasial, survey charges, escrow fees, points( interest paid) orgination fee( paid to the lender for processing the loan) Miscellaneous fees, flood insurance, termite inspection, credit report, tax services, appliation fees Commission

Title and the Deed • Title document of the rights of ownerships and possession of property. • Deed describes the property being sold

Insurance • Protects • Fires and other hazards • Take a look at page 148

Refinancing • • • Lowers monthly payments Lower interest rates Home improvements College tuition Things to ask – – – Prepayment penalty Title search, appraisal, survey, how much will it cost Who pays the recording fees Monthly payments How many months