ON YOUR WAY HOMEA little about buying and

owning a Home

Main advantages of renting are:

• Ease of mobility • Fewer responsibilities • Lower initial costs

Common disadvantages of renting your housing are:

• Few financial benefits in the form of tax deductions

• Restricted lifestyle, decorating, having pets, and other activities

• Legal concerns • Nothing to show at the end of the

ownership period.

Key benefits of buying your housing are:

• Tax savings • Pride of ownership • Flexibility in using the property

Disadvantages of buying your housing may include:• Financial risks • Limited mobility • Higher living costs due to repairs

and maintenance

A few important terms

• MORTGAGE A loan for a house or property• DOWN PAYMENT The amount you pay up front for a

house or other major purchase

A few important terms

• DEED / TITLEWritten proof of ownership• CLOSING COSTSCharged when you close the deal on

your house, includes insurance, taxes, etc.

REALTOR

• The person who helps you buy a house

• They work on commission• They can be very helpful, but be

careful• Don’t be rushed into anything• If you do use a realtor, USE your

realtor!

A few important terms• EQUITYDifference between the value of the house and

how much is owed.• P.M.I./M.R.I.Private Mortgage Insurance OR Mortgage

Redemption Insurance. Covers the bank if you screw up on your payments

• Earnest MoneyMoney you put up to show that you are interested in a house

A QUICK LOOK AT SOME HOUSING STYLES

CAPE COD

BUNGALO

COLONIAL

RANCH

SPLIT LEVEL

The home buying process

• PHASE ONE - DETERMINE YOUR NEEDS

• What type of home should I (we) buy?• How much can we afford?

– How much you make– Your credit rating– Current rates

The home buying process

• PHASE TWO - Find some houses you like in your price range– Make sure you

• Set your priorities– (Neighborhood, How close to work, Shopping

Convenience)

• Take your time– It’s a long process!

• Drive by, maybe some visits to open houses

The home buying process

• PHASE THREE - Decision Time– Narrow your choices– Visit lots of houses!– Use your realtor

The home buying process

• PHASE FOUR - Get Financing– How much down payment do you have?– Two months of bank statements– Two months of pay stubs

• PHASE FIVE - Closing the Deal– Offers and Counter-offers – Funds Needed– Documentation (closing = signing)

Costs of Buying a Home

• DOWN PAYMENT• Mortgage Payment• Closing Costs• P.M.I./M.R.I.• Moving Expenses• Repairs• Appliances

TYPES of MORTGAGES

• Different Types of Mortgages are Available. – LENGTH OF MORTGAGE PAYMENT

• 30 year• 15 year

– TYPE OF RATE • Fixed• ARM (Adjustable Rate Mortgage)

Mortgage Questions

• What would the difference be between a 30-yr. and 15 yr. mortgage payment?

• Why would you want a 15-yr. mortgage?

• What rate will be initially lower an ARM or a FIXED?

• What is riskier, an ARM or FIXED?

Closing Costs

• May be as much as $5,000 - $7,000

• Closing costs are fees associated with getting a mortgage.

Closing Costs May Include:

• Property Taxes• Attorney’s Fees• Loan Origination Fee• Title Search • Recording Fee• Appraisal Fee• Termite Inspection

GUESS THE PRICE!

$74,900

Estimated Monthly Payment: $467.50

GUESS THE PRICE

$334,900.00

Estimated Monthly Payment: $2,200.05

Guess the Price, Part 2Colonial

4 Bed, 2 Bath1,838 Sq. Ft.

315 E Walnut AvePainesville, OH 44077

$118,900

Guess the Price, Part 2

4 Bed, 3.5 Bath2,672 Sq. Ft.

350 W Main St.Geneva, OH 44041

$89,900

What might account for the differences in price?

• LOCATION• LOCATION• LOCATION• Sq. Footage• # of BR & BATHS• Size of Property

P.M.I./M.R.I.

• Private Mortgage Insurance OR Mortgage Redemption Insurance.

• Covers the bank if you screw up on your payments

• Required until you have 20% equity in your property.

• Can be up to $120 extra per month!

LET’S TALK MORE ABOUT EQUITY

• EQUITYDifference between the value of the

house and how much is owed.“I have a lot of equity built up in

my house.”“I am thinking about taking out

a home equity loan”

EQUITY

$$ AMOUNT OWNED BY YOU

$$$ AMOUNT OWNED BY THE BANK

YOU JUST BOUGHT

YOUR HOUSE

LOW equity

$$ AMOUNT OWNED BY YOU

$$$ AMOUNT OWNED BY THE BANK

EQUITYAS TIME

GOES BY, YOUR

EQUITY GROWSmore equity

$$ AMOUNT OWNED BY YOU

$$$ AMOUNT OWNED BY THE BANK

EQUITY

After several years, you have

most of the house paid for. .

high equity

$$ AMOUNT OWNED BY YOU

EQUITYEventually

, YOU HAVE YOUR

HOUSE ALL PAID

OFF

100% equity

EQUITY

Your house is worth $150,000You paid $30,000 down paymentHow much equity?

Your house is worth $220,000 and you have 20,000 left to pay

How much equity?

What Good is Equity?

• Allows to borrow money on the equity of your house

• Adds to the CAPITAL part of your credit rating (what you own)– As a bank, they are more likely to

give you more credit if I know you have a house