Transcript http://michaelbluejay.com/house/basics.html Basics of Buying a House The Steps to Buying a House.

http://michaelbluejay.com/house/basics.html
Basics of Buying a
House
The Steps to Buying a House
Terms to know:
8 Factors to determine
a home’s worth
1.
2.
3.
4.
LOCATION, LOCATION, LOCATION – how
desirable is the area
Taxes – reasonable school and town taxes
Good schools, preferably within easy walking
distance. Even if you do not have school-age
children, this will make a difference in your home's
resale value.
Convenient access to shopping and business
centers. You'll also want easy access to public
transit, a major thoroughfare, or a freeway.
However, you don't want to be so close that noise or
traffic congestion becomes a problem. Houses
directly adjacent to main roads may have a lower
value than similar houses slightly further away.
5. Houses in well-planned communities tend
to have higher values. In an unplanned area
where there is vacant land, future
development may lower property values.
6. A low crime rate. Everybody wants to feel
safe at home. The presence of a
neighborhood Block Watch program is also
beneficial.
7. Good Economic Development – high
employment opportunities
8. Houses on a cul-de-sac are especially
appealing because there is minimal traffic
and it generally comes from people who live
there.
5 Features that make a Home more
Valuable
1.
2.
3.
4.
5.
An open floor plan and lots of windows that make the house
feel bright, roomy and comfortable. For houses larger than
2,000 square feet, many buyers will prefer multi-levels.
A large kitchen that provides easy access or is open to the
family room. Buyers want plenty of counter and cabinet space
and an island can create an easily accessible work area. A
breakfast bar and up-to-date appliances are other key selling
points.
A large family room and master bedroom suite are very
popular now. Today's buyers prefer walk-in closets and plenty
of storage space.
Buyers expect at least two bathrooms, and in a two story
house, at least one downstairs bathroom is important.
Luxurious master bathrooms with dual sinks and a tub/shower
combination create even more appeal.
A porch or patio can also be an important selling feature, a
place where people can easily entertain outdoors when the
weather is nice. Covered patios are especially popular, as are
screened-in patios in areas where insects can be a problem.
Types of Homes




Rancher house – 1 floor
Colonial – 2 story, with a
basement
Split Level – multiple stories
Condo / Townhouse
(communities)


Association fees
Row / Twin (attached)
How much can you afford?

Here's the super-quick rule of
thumb:



Most people can afford a home that costs
up to three times their annual household
income, if they can make a 20% down
payment and have only a moderate amount
of other debt.
If you have little to no debt and can put
20% down you can probably buy a house
worth up to four times your annual income.
Calculator:

http://michaelbluejay.com/house/howmuc
hhome.html
The Mortgage



You don't pay cash when you buy
a home. If you had to do that then
nobody could afford to buy a house.
Instead you make a down payment
(3 to 20% of the sale price) and
qualify to receive a loan from a
bank to cover the rest.
This loan is called a mortgage. You
make payments on this loan every
month for 15 to 30 years.
Mortgages….



The bank loaning the money is the lender.
The amount you pay to the bank each
month is your mortgage payment.
The rate of interest on the loan is the
mortgage rate (or the interest rate).
 Interest rate is decided by your Credit
Score and Market Conditions


If you don't make your mortgage
payments then the bank will
repossess the house. Then they'll
sell it to make sure that they can
recoup the money they loaned to
you, and that you didn't pay back.
The number of years it takes to pay
back the loan is called the term,
which is either 15 or 30 years.
Lengths of Mortgages
15-year
mortgage
• Saves a
bundle on
interest
• Pay off the
loan in half
the time
30-year
. .
mortgage
• Easier to qualify
for
• Lower monthly
payments
• Allows you to
buy a higherpriced home
Paying the Mortgage

1.
2.
3.
4.
4 Parts:
Part of your payment goes
towards the principle (the
amount the bank loaned you)
Interest (the bank's profit from
lending you money).
Taxes – school taxes and real
estate taxes
Homeowner’s Insurance
What type of loan for you?


There are several different loan
types, each suitable for different
homebuyers.
First determine whether you
want a fixed-rate or an
adjustable rate mortgage.


With a fixed rate, you lock in a
monthly payment amount that will
remain constant throughout the life
of the loan, even if interest rates rise.
If interest rates fall, you can either
continue paying your higher preset
rate, or you could refinance your
loan, though that would mean paying
additional closing costs.
An adjustable-rate mortgage
(ARM), on the other hand, has an
interest rate that rises or falls in step
with a financial index.
Lowering the Interest Rate


You may also want to pay points to
lower the interest rate on your loan.
Basically, points -- or the "loan
discount cost," as they're more
formally known -- represent a portion
of the interest that you pay up front
in exchange for a lower rate
thereafter. One point equals 1
percent of the loan amount.
Compound Interest, NOT simple interest
We'll assume a $125,000 loan for 30 years at various interest rates.
Total Interest Paid Over the Life of the Loan
NOTE: THIS IS JUST THE AMOUNT OF INTERST YOU ARE PAYING!
Total Interest Paid Over the Life of the Loan
Financial Checklist to Qualify for a
Mortgage
1.
Pay down your debt. The bank wants your total debt
to be no more than about 38% of your income. If your
income is $3000/mo. then the bank figures your total
debt can be $1140/mo. Pay down your debt as much
as possible to increase your borrowing power. Pay
down the highest-interest debt first (credit cards)
before lower interest debt (car loans, student loans).
2.
Get the down payment together. If you don't
already have a down payment saved, start saving
now.
Clean up your credit report. Good credit not only
helps you qualify for a loan in the first place, it helps
you get a better deal when you do get a loan.
3.
Homeowner’s Insurance:
http://finance.yahoo.com/columnist/article/moneymatters/11166?p=1

Just because you have homeowners insurance doesn't mean
you're protected.

True protection is when you know for a fact that your policy will
provide you and your family coverage that allows you to repair,
rebuild, and restart after a major loss. Not assume, not guess,
but know you have the right coverage.

Yet time and again I've seen homeowners who buy a policy that
"seems OK," without really understanding the coverage they
have. Often, it's a decision simply based on which company is
offering the basic coverage demanded by a mortgage lender at
the cheapest premium. You as a buyer figure that if the mortgage
lender is fine with it, then you're amply covered.

You're not. All mortgage lenders care about is that your insurance
at least covers the value of the loan. That covers their financial
risk, but it doesn't cover everything you need to be truly secure.
Real Estate Taxes




Real Estate taxes based on the
assessed value of the property
Real estate taxes support local
services and facilities such as:
schools, roads, fire departments,
park districts, and county, city,
village and township governments.
A MAJOR FACTOR determining if
you can afford a house
Divide tax amount by 12 and then
add that to your monthly payment
Home Inspection and
Appraisal

Home Inspection: paid for by the
bidder, the buyer



Ensures the home meets all your
expectations, codes, safety (checks
roof, heater, A/C, plumbing, overall
condition of home)
Allows the buyers to back out of bid if
there is something they do not like
Appraisal: the value of your home as
calculated by the local government
Making the Bid
Try to line up data on at least three houses that have
sold recently in the neighborhood. Calculate the
difference between the original list price and the final
price of the homes sold.
Usually you will bid 5 – 15 % below asking price,
leaving yourself a little room to negotiate after the
HOME INSPECTION.
1.
2.
1.
3.
However, if it is a fair asking price and you are competing
with other bids, you may want to give the sellers what they are
asking
Be creative about finding ways to satisfy the seller's
needs. For instance, ask if the seller would throw in
kitchen and laundry appliances if you meet his price -or take them away in exchange for a lower price.
How a news story can
DECREASE property value




Residents Ask State to Investigate "Diseased" Street
Last Edited: Monday, 09 Oct 2006, 10:46 PM EDTCreated: Monday, 09
Oct 2006, 10:46 PM EDT
State health experts want to know why at least one resident in twelve
homes on the same side of Schoolhouse Lane in Mt. Laurel, New Jersey
have all fallen ill with cancer or a chronic disease.
In one instance, three separate owners of one house developed cancer,
according to one area resident.
Each of the homes backs up to the Pennsauken Creek, which
occasionally floods the properties.
The land used to be a farm and an industrial park sits on the other side of
the creek.
So residents wonder whether the soil or water could be contaminated.
An informal survey revealed 29 cases of cancer as well as eleven
gastrointestinal illnesses, seven neurological diseases and six pets with
cancer.
“I don’t think it’s a coincidence,” said another resident. “If it is, we're just
asking the township or the state to prove us wrong."
Hear what’s next for the residents in this report from FOX-29’s Claudia
Gomez.
http://www.myfoxphilly.com/myfox/pages/News/Detail?contentId=1132726
&version=1&locale=EN-US&layoutCode=TSTY&pageId=3.2.1
Home Equity Loan

A special kind of loan which is
secured against a property and
allows the owner to borrow and
repay money to make
improvements to the home.
10 priciest cities for renters*
Annual rent
New York**$2,469
San Francisco$1,9478
Los Angeles$1,5866
San Jose,Calif.$1,487
Orange County, Calif.$1,3876
Boston$1,3322
Oakland$1,2485
San Diego$1,2133
Washington, DC$1,2054
Fort Lauderdale, Fla.$1,1349











What is your home Worth?

www.zillow.com
Value of land

http://video.msn.com/v/us/msnb
c.htm?g=fc562861-0a3c-4b25be7f2a7ffc709a93&f=00&fg=copy
Top 10 cities: Where to buy now
The real estate slump could get
worse before it gets better. But
these 10 markets offer great
opportunities for those who
have the patience to buy and
hold.
 http://money.cnn.com/popups/20
06/biz2/newrules_bestinvest/ind
ex.html