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Unformatted text preview: Chapter 9 Buying Your Home Renting or Buying Renters Have no down payment Need mobility Do not want the responsibility of home ownership Lower cash flow Buyers Want to increase net worth through home appreciation Enjoy the positives of home ownership Accept the fact of lesser mobility Tax advantages often make buying a better financial decision Renting Appropriately Consider rent , security deposit, and related expenses Carefully read lease and restrictions Know your tenant rights Costs of Buying a Home Down payment Points Attorney fees Title search and insurance Miscellaneous Fees Costs of Buying a Home Principal and interest Taxes and insurance Mortgage insurance Home warranty insurance Prepaid taxes and insurance The Steps of Home Buying Getting your finances in order Pre-qualifying for a mortgage Search for a home Negotiating a purchase Applying for a mortgage loan Closing the sale Factors Affecting Monthly Mortgage Payments The amount borrowed The length of the maturity of the loan The interest rate Mortgage Loan
A loan to purchase property with real estate serving as collateral for the loan. The mortgagee (lender) has a lien on the property and a legal right to obtain the property if the mortgagor (borrower) defaults on the loan. LoantoValue Ratio (LTV) Maximum a lender will loan on property Conventional loans allow 80% Larger LTV's are available with Mortgage Insurance Traditional Mortgages Conventional FHA Insured VA Insured Reverse Mortgage
Pays homeowner Used by elderly Can be left with no money and no home FNMA Guidelines FNMA (Federal National Mortgage Association) includes principal, interest, taxes, and insurance (PITI) when determining house payment. FNMA allows a house payment of 25-29% of gross monthly income FNMA allows a debt ratio including house payment and all other debt payments of 33-41% of gross monthly income Equity The difference between the home value and the loan balance Increases over time Adds to net worth Selling Your Home Pros and cons of using a realtor Costs of selling Dangers of seller financing ...
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- Spring '08