Chapter 22: Buying a Home

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Chapter 22 Buying a Home
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Lesson 22.1 Why Buy a Home?

• I. Advantages of home ownership
• 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
• tax savings
• interest paid on the house and the property tax
  are tax deductible
• renters cannot deduct any part of their rent
  payment
• quality of life advantages
• provides feeling of security and independence
• offers privacy and personal freedom
• belonging to a community

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• II. Costs and responsibilities of home ownership
• 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
• 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

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Lesson 22.2 The Home Buying Process

• I. Finding and selecting a home
• 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
• 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

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• II. Obtaining financing
• 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
• 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
• types of mortgages
• fixed rate mortgage
• interest rate does not change during length of
  the loan
• adjustable rate mortgage
• interest rate can change based on the economy as
  a whole

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• III. Taking title to property
• 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