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Your Own Home. Your Own Home: Gives you information on the home buying process. Describes several mortgage options that you can use to buy a home. . Purpose. By the end of this course, you will be able to: Describe the benefits and pitfalls of renting versus owning a home. - PowerPoint PPT Presentation
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Your Own Home 1
Your Own Home
Your Own Home 2
Purpose
Your Own Home:Gives you information on the home buying
process. Describes several mortgage options that
you can use to buy a home.
Your Own Home 3
Objectives
By the end of this course, you will be able to:
Describe the benefits and pitfalls of renting versus owning a home.
Identify the steps required to buy a home.Identify questions to ask to determine
your readiness to buy a home.
Your Own Home 4
Objectives (Continued)
Identify basic terms used in a mortgage transaction.
Describe the advantages and disadvantages of different mortgage options.
Your Own Home 5
Benefits of Renting
No property maintenanceOne year (or less) rental contractNo property taxes or homeowner’s
insurance
Your Own Home 6
Benefits of Owning a Home
You can build equity in your home and borrow against it.
A home generally increases in value.The home is yours.Your mortgage interest is tax deductible.You can pass your home on to family
members.
Your Own Home 7
Steps Involved in Buying a Home
Step 1 Determine if you are ready to buy a house.
Step 2: Determine how much mortgage you can afford.
Step 3: Determine which mortgage option is best for you.
Your Own Home 8
Steps Involved in Buying a Home (Cont’d)
Step 4: Qualify for a loan.
Step 5: Go through settlement.
Your Own Home 9
Homebuyer Assistance Programs
Individual Development Account (IDA)
Programs offered by cities or local government offices.
Financial institutions
Your Own Home 10
Characteristics of Government Programs
Zero or low down paymentsFlexible underwriting standardsLonger payment termsRequirement for homeowner educationSome restrictions
Your Own Home 11
Components of a Mortgage Payment
P = PrincipalI = InterestT = TaxesI = Insurance
Your Own Home 12
How Taxes and Insurance are Paid
In an escrow account, along with the mortgage principal and interest.
Separately -◦Quarterly or semi-annual property tax◦Annual insurance premium
Your Own Home 13
Four Cs of Loan Decision-Making
CapacityCapitalCharacterCollateral
Your Own Home 14
Pre-qualification
The pre-qualification process:Lets you know how much mortgage you
can afford. Is informal, involving no paperwork.Gives you a “ballpark” estimate.
Your Own Home 15
Pre-approval
The pre-approval process: Is a commitment from the lender to lend
you money. Lets you know how much money you
can obtain. Tells sellers you are prepared to buy a
house.
Your Own Home 16
Mortgage Options
Traditional mortgageInterest-only mortgageBiweekly payment mortgage
Your Own Home 17
Shop, Compare, Negotiate!
Check newspapers and the Internet for terms and rates.
Negotiate the best price you can get.Let lenders compete for your business.Get costs in writing.
Your Own Home 18
Good Faith Estimate
An estimate of the cost of settlement services that the lender should give you when you apply for the loan.
Your Own Home 19
When Debt-to-Income Exceeds Recommended Ratios
You must:Have a demonstrated ability to pay more
toward housing expenses.Show evidence of acceptable credit
history or limited credit use. Make a larger down payment.Have cash reserves.
Your Own Home 20
Settlement
Settlement occurs when the borrower meets with the seller and other representatives to sign the documents that will finalize the sale of the house and any mortgage financing. Also called “closing.” HUD-1 or HUD-1a Settlement Statement.
Your Own Home 21
Tapping Into Your Home’s Equity
Home equity loansHome equity lines of creditCash-out refinancingReverse mortgage