Chapter 7. FINANCING A HOME

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Chapter 7. FINANCING A HOME
Evaluating different plans Negotiating for the
One that Best Suits Your Budget
A. How Home Financing Works 1. Getting a New
Home Loan 2. Assuming an Existing Home Loan 3.
How Interest is Figured - Fixed and Adjustable
(See Personal Action Worksheet, Text page
205) B. Choosing Between a Fixed Rate Loan and
an Adjustable Rate Loan, and Loan Costs 1.
Acquisition Costs 2. Insurance Costs 3.
Escrow (Reserve) Accounts C. Other Important
Loan Clauses
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D. Shopping For Home Financing
Where to Shop 1. FHA and VA Loans 2.
Conventional vs. Jumbo Loans 3. Ginnie Mae,
Fannie Mae and Freddie Mac 4. RESPA -
Settlement Costs
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6. Interest Rates 7. How Much Down
Payment? 8. How Long Should the Loan Run? 15
years? 30 years? 9. What Other Services Can
the Lender Offer You?
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E. Making the Application F. Creative
Financing - When All Else Fails G. Tax
Complications H. Timing, Timing, Timing
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TALKING POINTSChapter Seven, Number One

• You are shopping for a home loan. The home will
  cost 150,000, and you have 15,000 available for
  a down payment. You are made the following
  offers. How would you evaluate them?

• 1. A 30 year loan at 8 interest, fixed for the
  full term. No points.
• 2. A 30 year loan with a fixed rate of 7.5,
  fixed for five years and then becomes adjustable
  at the going rates at that time. One point.
• 3. A 30 year adjustable rate loan starting at
  7, and adjusting every six months at the going
  rates at that time. Two points.
• 4. An interest-only loan at 6 from your family,
  to run for three years, after which you must
  refinance at the going rates and pay them off.

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TALKING POINTSChapter Seven, Number Two

• You have made application for a 135,000 home
  loan at the lender of your choice. How would you
  react, in word and deed, to the following?

• 1. The lender tells you that they can extend a
  loan to you of only 120,000 at the quoted rate.
  If you want the full 135,000 youll have to come
  up with a co-signer.
• 2. The lender tells you that there is a bad
  report on your credit history. You were unaware
  of such a thing. As things stand, they cant
  approve the application.
• 3. Your application is approved at an 8 rate,
  with a rate lock for 30 days. Rates have gone
  higher. With three days to go before the
  scheduled closing (and on which day the rate lock
  expires) the sellers agent tells you that there
  have been some glitches, and the closing may have
  to be delayed for a week or two.