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Companion PowerPoint Presentation for the Introduction to Housing textbook

Homeownership

Quick Facts

Homeownership has both benefits & drawbacks. It is not always the best option at a time. Buying your first house needs preparing & preserving. Prepare a guidelines to help you store for a house. Prequalify for home financing to see how much house you are able. There are several govt applications for first-time & low- to moderate-income real estate customers.

Homeownership: The American DreamPurchasing a home is one of the most

important choices children can make. It has serious economical & psychological effects and is a main issue with the United states desire.

Advantages

Pressured benefits plan because your home loan major expenses are maintained as value in the homeUsually a good long-term investment– value will most likely improve eventually Deduct residence taxation & interest rates from earnings tax Over time home become less expensive in "real" dollars

As value develops, you can step up to a bigger house or lend against your house (home value loan) to fund large purchasesHomeownership can improve a family's sense of control over their lifestyles & atmosphere, as well as improve more powerful group connections You can personalize the home to match special needs & tastes

DisadvantagesPer month installments (principal, interest, taxation & insurance) may be higher than lease paymentsYou must pay for normal servicing & frequent repairsOwning is less versatile than renting; most first-time real estate customers live in a house for 7 years Like any financial commitment, there is no assurance that value boosts

What Do We Want? (Professional Builder magazine, 2006)Boomers (age 41-60)

Per month installments (principal, interest, taxation & insurance) may be higher than lease paymentsYou must pay for normal servicing & frequent repairsOwning is less versatile than renting; most first-time real estate customers live in a house for 7 years Like any financial commitment, there is no assurance that value boosts

Gen XERS (26-40) & Echo Boomers (18-25)Smart-home technology—every room wired for mobile phones, locations & DSLHome enjoyment facilities in the family room—the middle of activityBuilt-in cabling & conduits for flat-screen TVs, with cables & cables out of siteBreakfast bar or place as additional eating spaceGreen/environmentally delicate features

Features Important to All 3 GroupsLarge, start cooking areas to make meals & amuse guests; they are the “new living room”Kitchen isles no broader than 40”Quality units High great quality, high-performance appliancesSeparate tub &

shower

Prepare for HomeownershipBuying your first house includes planning & saving—attend a real estate customer education and learning category to help you get ready for homeownership

Possible obstacles:High Cost

Discover options to the conventional single-family separated house: apartment, manufactured house, or older house (generally can afford a house 2.5 times total yearly income)

Credit Pay off your financial troubles & wait significant buys until after you buy a home Get a duplicate of your credit rating file to see if any issues exist

www.equifax.com If your credit score is not great,

check out subprime loans

Downpayment Most traditional mortgages--20% of the amount However, there are methods to lessen downpayments to the 0 to 5% range:

--government-insured loans --local real estate organizations &

creditors may have applications for first-time home buyers--curtail your investing & ask relatives

Closing Costs Right of ownership passes from seller to buyer at the closingCan reach several thousands of dollarsSome of the programs that help with downpayments can also help with closing costs

Long-term Affordability Per month major, attention, residence taxation & insurance (PITI) expenses No more than 28% of your total monthly earnings should go to PITI (front-end ratio)Monthly PITI expenses plus any other long-term debts expenses should not surpass 36% of your total monthly earnings (back-end ratio)Also need a support to protect servicing & repairs

Project

You have been provided two tasks, one in Fitzgibbons, MS, and the other in LA. Go to appropriate property Websites & select two similar houses. Explain each house such as its price & functions, and fix an image. Given that 28% of your earnings can go towards real property, how much would you have to generate to manage each home? Which would you choose?

Initial Selection of Homes Once you are economically prepared to purchase a home, identify one that fits your principles, needs, wants & price range Where to look?

--Real property part of a nearby newspaper

--Real property consumer books --Real property Web websites --Driving, bike riding & strolling through neighborhoods --Stop at model/open homes

Select a Real Estate AgentSelect a representative to help filter your choicesAgents are a valuable source of information because they are familiar with property in a specific area

Criteria for selecting an agent: --trust--rapport--track record--level of commitment to first-

time home buyers

As you consider different homes, evaluate each based on values, needs, wants & financial issues Be flexible, realistic & responsible—

Your first home will most likely not be your dream homeDevelop a checklist:

Can you & your family be happy living in this home?

House Hunting Checklist(Ideas of what to include, but your list must be personalized

based on your needs)

Is the area safe? Are the houses in the area maintained? Does the home have enough rooms & bathrooms? Is there sufficient storage area space? Are there top quality educational institutions in the area?

Is the place of the home and group convenient? Is there a property owners association? Is the area quiet? Does the floor-plan match your lifestyle? Is the home power efficient? Is the garden easy to worry for? What group solutions are available?

Are the equipment & accessories adequate? What are the common servicing expenses for the house? How great are regional residence taxes?

Obtain Financing When you store for a home, also store for home financing Get pre-qualified so you have a better idea of budget (price range of houses that you can afford) Mortgage creditors include: professional financial institutions, benefits & loan organizations, creditors & credit unions

Two possibilities for low- and moderate-income home buyers are: Fannie Mae's Community Home Buyers Program Freddie Mac's Affordable Gold Program

Government agencies—FHAVARHSState housing & finance authority

Besides downpayment, carefully compare mortgage options based on these criteria:

Annual percentage rate (APR) Total yearly cost of a mortgage as a

percentage of the loan amount

Includes the contract interest rate, mortgage insurance & points (each point equals 1% of the loan amount)

Interest rate lock-ins Lock in a low rate as soon as possible

Application & origination fees

Minimize fees to cover processing, credit check, appraisal, points & other overhead costs

TermFor most first-time home buyers a 30-year term to pay off the mortgage is appropriate

Determine if you want a fixed or adjustable rate mortgage

A fixed rate mortgage Loans are fully amortized with a fixed interest rate for the entire term -- both the principal & interest are paid off at the end of the loan

An adjustable rate mortgage (ARM)

Interest rate adjusted periodically, usually every 1, 3, or 5 years based on an index written into the loan agreement

Might initially get a lower interest rate, but future increases may mean higher monthly payments

Negotiate and Enter Into ContractBuy offerOffer is typically given to the property broker who provides it to the supplier (earnest money)Get a home examination report--a certified examiner provides an purpose viewpoint about home’s condition Purchase contract

Loan Approval

Obtain actual financing for homeLender will ask about your income, expenses, history of credit score, employment, & the terms of purchase offer You complete form & pay a software fee, pay for a credit score file & appraisal, receive an estimate of settlement costs & truth-in-lending statement Loan processing occurs

ClosingFinal step is the closing, a meeting between you, your lender, the seller &

other interested partiesReview & sign loan documentsExchange of documents between

buyer, seller & lenderDisbursement of funds

You receive the deed to the property & join the ranks of homeowners!

Potential DifficultiesDiscriminationAgainst the law—Fair Housing ActFair housing—several consumer laws or acts prohibiting discriminationSubprime & predatory lending

Credit affected debtors can benefit with a subprime mortgage Predatory lending comprises of unjust or violent loans, including a number of aggressive methods

Postpurchase ConcernsKeeping up with servicing & maintenance (avoid an costly crisis)Create a servicing fundRemodeling & improvements—make advised choices in picking the venture, specialist, or determining to do it yourselfRefinancing—may be a wise idea when interest levels go downForeclosure preventionLoss minimization resources such as a loan modification