Section 7.3. The Home . Buying Process. Buying a home will probably be the most expensive purchase you ever make. . You will need to determine your home ownership needs, find and evaluate a property to purchase, price the property, obtain financing, and close the transaction.. ID: 735330
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Buying and Selling a Home
Buying a home will probably be the most expensive purchase you ever make.
You will need to determine your home ownership needs, find and evaluate a property to purchase, price the property, obtain financing, and close the transaction.Slide3
Step 1: Determine Your Home Ownership Needs
Consider the benefits and drawbacks of buying a home.
Consider the types of homes that are available.
Consider how much you are able to spend.Slide4
Owning a residence
Stability and permanence
Decorating freedomFinancial benefits$ Value of home usually risesOnce paid off, you don’t have to make any more payments.
Saving $ for down payment is hard
Property value may decline
Home maintenance can be expensiveSlide5
What are two benefits and two disadvantages of owning a residence?Slide6
Types of HousingSlide7
What are 6 types of housing you may own?Slide8
Affordability and Your Needs
Price and Down Payment
How much can you spend?
Look at your income
Look at your expenses
Do you have anything saved for a down payment?
Talk to a loan officer at a bank to get approved for a loan.
Size and Quality
How big do you need your home?
What quality are you willing to settle for?
Be willing to buy small and “trade
up” as you make more money and become more financially stable.Slide9
Step 2: Find and Evaluate a Property to Purchase
Select a location
Hire a real estate agent
Conduct a home inspection: you may be able to get the house cheaperSlide10
Step 3: Price the Property
Earnest money shows the offer is serious. Money sits in an
where the $ is held and then applied to the down payment.Slide11
What questions should you ask yourself when determining how much to offer for a house?
What is an escrow account?
What is a counteroffer?Slide12
Step 4: Obtain Financing
Determine the amount of down payment. Usually 20% of the purchase price.
If you do not have the 20% you will have to obtain
private mortgage insurance (PMI).
hen the buyer has paid between 20-25% of the purchase price, the PMI insurance can be dropped.
PMI is a policy that protects the lender in case the buyer cannot make payments or cannot make them on time. You can usually elect to pay the cost of the insurance up front or spread it over payments.Slide13
What are two benefits and two disadvantages of owning a residence?Slide14
Step 4: Obtain Financing
is a long-term loan extended to someone who buys property. The buyer will borrow money and will need to pay the lender payments (including interest).Mortgages are usually 15, 20, or 30 years.
If you fail to make the payments the lender can foreclose or take possession of your home.Slide15
What is a mortgage?Slide16
Step 4: Obtain Financing
To take out a mortgage, you need to meet certain criteria.
Most lenders charge between $100 and $300 to apply for a mortgage.
The monthly payments on a mortgage are set at a level that allows
of the loan. Amortization is the reduction of a loan balance through payments made over time.Slide17
Obtaining a new mortgage to replace the existing one. If interest rates fall (from 8 to 4%) you may be eligible to refinance to get lower mortgage payments.
A loan based on the difference between the value of the home and the amount the borrower owes on the mortgage. (a 2
Interest rate changes throughout the life of the loan according to economic factors. Your payment may go up or down.
Mortgage with a fixed interest rate and a fixed schedule of payments. Payments are always the same throughout the life of the loan.
Types of Mortgages
Home Equity Loans
What are 4 types of mortgages?Slide19
Step 5: Close the Transaction
The final step is
, which is a meeting of the buyer, seller, and the lender of the funds (or a representative such as a lawyer).At closing, documents are signed, last minute details are settled, and money is paid.
The buyer and seller must also pay closing costs.Slide20
Closing Costs for Buyer and Seller
Title search fee
Lender’s origination fee
of the loan
Real estate agent’s commission
5-7% of purchase price
Insurance, taxes, and interest
What are closing costs?Slide22
Selling a Home
Prepare your home for selling: The better it looks, the faster it will sell.
Determine your selling price. An
appraisal (an estimate done by a professional) will tell you what the house is worth.
Choose a real estate agent. They will attract buyers and show your home but are paid commission on your sale.
Sell it yourself.Slide23
Activity: Find a home
On your index card is the future occupation that you want to have.
I have given you the average starting salary for that occupation.
GENERALLY, you can afford a house 2 ½ times your average salary.Search the internet for a house within your price range in the area you want to live.Print out your house and calculate how much your down payment would need to be (20%).Slide24
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