Transcript Chapter 22: Buying a Home - Geometry and Personal Finance

Chapter 22:
Buying a Home
Lesson 22.1 Why Buy a Home?
I. Advantages of home ownership
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equity increases
market value is the highest price of the house
real estate agents and appraisers can estimate the market
value by comparing it to recent homes sold that are similar
appreciation is one way to earn equity in your home
equity can increase also each time you make a payment on
your loan it decreases the debt
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tax savings
interest paid on the house and the property tax are tax
deductible
renters cannot deduct any part of their rent payment
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quality of life advantages
provides feeling of security and independence
offers privacy and personal freedom
belonging to a community
II. Costs and responsibilities of home ownership
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down payment
10-30% down payment
i.e. house that cost $150,000, you will need $15,000 (10%)
to $45,000 (30%) for a down payment
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mortgage
payments on a mortgage range from 15-30 years
property taxes and insurance are often included in your
mortgage payments, these are called escrow accounts
closing
these costs may add another $3,000 to $5,000 to the
purchase of the home
these fees are paid to the title company for a background
check that the seller is the legal owner of the home and no
one else claims the rights to the property
property tax
funding for local government
taxes are based on the assessed value of your home
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insurance
MUST have insurance covering at least the structure
of your home
Utilities
maintenance and repairs
you are responsible for them
before buying the home, make sure you have the time
and money to keep your home in good condition
ongoing maintenance: painting, mowing, landscaping,
weeding, fixing things that break or wear out
example a roof, furnace or water heater may last 15
years
Lesson 22.2 The Home Buying
Process
I. Finding and selecting a home
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working with a real estate agent
look at many homes before buying one
can look on your own (online or in the newspaper) or with a
real estate agent
agents can help find the right home, assist with the
purchase, financing, and closing
real estate agents make a commission for their work, usually
around 5-7% of the sale price
advantage of going with an agent is the MLS listings
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making an offer
when making an offer: price offering, down payment,
mortgage amount, dates of closure
when making an offer with earnest money the house cannot
be sold to anyone else
the seller may or may not accept the offer, they may
counteroffer
this process will continue until both are under a mutual
agreement
II. Obtaining financing
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down payment sources
most people save for the down payment
others may borrow from a friend or relative
banks will not allow you to borrow a down payment
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qualifying for a mortgage
complete an extensive loan application
check your credit history, employment, and references
evidence you can meet the bills
are able to manage monthly mortgage fees of 30-40%
of your take home pay
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types of mortgages
fixed rate mortgage
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interest rate does not change during length of the loan
adjustable rate mortgage
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interest rate can change based on the economy as a
whole
III. Taking title to property
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After all agreements have been reached
on the selling of the home closing is the
last step
At closing the title of the property will
be transferred to you
Before closing the lending institution
prepares the loan papers
Any repairs on the house must be
completed before the closing
At this meeting there are a lot of papers
to sign and any costs are to be paid
At the closing the home becomes yours