How to Buy a Home

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How to Buy a Home
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• Average cost of a home is 150,000 and higher.
• Mortgage
• loan to buy real estate (house or land)
• The property serves as collateral for the land,
  if you do not repay the loan it becomes the
  property of the lender (bank)

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Mortgage Payment

• Two parts PRINCIPAL and INTEREST
• Principal is the amount you borrow.
• Down payment is a price you pay upfront usually
  20 of the loan.

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Example

• If the cost of the house is 100,000 and you need
  a 20 down payment
• How much is your down payment?
• 20,000!
• So your principal is.
• (the amount left after the down payment)
• 80,000

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Costs to Consider

• Interest
• when you borrow money from a lender you will pay
  interest on the principal balance.
• Points
• Lenders charge a fee on getting a loan from them.
• Property Taxes
• Local government charges property taxes on the
  value of your property.

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Costs to Consider contd

• Closing Cost
• At the closing you will need to pay for
  additional services the lender had to do to get
  you the loan
• Example
• An inspector goes to the house to verify
  everything is up to code. THAT COST MONEY!
• Homeowners Insurance
• You must purchase a homeowners insurance policy
  to protect your house against fire, theft and
  other hazards.

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Types of Mortgages

• Two Types
• Fixed-Rate Mortgage and Adjustable-Rate Mortgage.
• Fixed-Rate
• Charges the same amount of interest for the
  entire term of the loan.
• Adjustable-Rate Mortgage
• also known as ARM.
• Interest rates go up and down as the economy
  rises and falls.

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• A home loan can be anywhere from 30-40 years.

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Home buying process

• Know what you can afford.
• Tip You can afford a home that costs up to 2.5
  times your annual gross income.
• Example
• If you earn 50,000 and you have NO debt. How
  much can you afford?
• 125,000 (50,000 x 2.5 125,000)
• Make a list of things that you want in a house
  number of bedrooms, bathrooms, basement, yard.

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Home buying process contd.

• Find a real estate agent to help you find a home.
• Find a house and go through walkthroughs
• Look at walls, carpeting, if there is an odor.
• Look for watermarks on the ceiling or musty
  odors.
• You dont want water damage.
• Hire a professional inspector

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• Both parties will sign paperwork.
• Make you need to provide an offer, negotiate.

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Information to provide

• Personal information
• SSN (credit check)
• Proof of employment with pay stubs
• Taxes
• 3 months of bank statements
• Amount of debt
• Verification of down payment

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Is your head spinning? Too much information?

• All in All
• Make sure to save 20 for a down payment
• Establish a good credit history
• Maintain a steady job
• Houses appreciate (they go up in value)!

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Terms to Know

• Appreciate To increase in value.
• Earnest Money A payment made to the seller to
  show you are serious about wanting to buy their
  house
• Appraisal Opinion as to the fair market value of
  property
• Mortgage A loan enabling a person to buy
  property or a home
• Settlement/Closing Costs Charges involved in
  finalizing a home purchase