Realizing the American Dream

1
Realizing the American Dream

• Are You Ready
• to Buy a Home?

2
Agenda

• Is owning a home right for you
• How you buy a home
• Your homeownership team
• Mortgage payment and other costs
• How much you can afford
• Qualifying ratios

3
Advantages of Homeownership

• Stable housing costs
• Tax benefits
• Equity
• Control over your environment
• Stability

4
Disadvantages of Homeownership

• Monthly costs
• No guarantees
• Maintenance and repairs
• Decreased mobility
• Fewer features included

5
Steps in the Homebuying Process

• Attend homeownership education class
• Determine how much you can afford
• Meet with lender for pre-approval
• Determine wants and needs in a home
• Shop for a home

6
Steps (Contd)

• Make an offer
• Have professional home inspection
• Apply for mortgage loan
• Obtain homeowners insurance
• Close the loan

7
Your Homebuying Team

• Homeownership Counselor
• Real Estate Agent
• Lender
• Attorney or Escrow Agent

• Title Insurance Agent
• Home Inspector
• Appraiser
• Surveyor
• Homeowners Insurance Agent

8
The Mortgage Payment

• Principal
• Interest
• Taxes
• Insurance

9
Costs of Buying a Home

• Upfront Costs
• Down payment
• Closing costs
• Escrows
• Reserves
• Moving costs

• Ongoing Costs
• Mortgage payment
• Utilities
• Maintenance and repairs

10
The 4 Cs of Credit

• Capital
• Capacity
• Credit History
• Collateral

11
Ordering a Credit Report

• Experian www.experian.com
• [phone]
• TransUnion www.transunion.com
• [phone]
• Equifax www.equifax.com
• [phone]

12
How Much Can You Afford?
510 of monthly income
36,000 (3,000/mo.)
90,000 108,000
Income
Debts
2.5 3 times
Home Price
13
Qualifying Ratios
Housing 33
Debts 5
Other Expenses 62 Expenses 62
38 for housing plus all other long-term debt
62
33
5
14
Prequalification

• Financial Calculations
• How much money the lender will lend you
• What price home you can afford
• How much down payment you need
• How much your monthly payments will be

This is not a guarantee
15
Summary

• Pros and cons of ownership
• Key steps and professionals involved in the
  homebuying process
• Mortgage payment and other costs
• How lenders determine creditworthiness and
  affordability

16
Next Steps

• Sign up for education or counseling
• Order copies of your credit report