Introduction. Instructor and student introductions. Module overview. Your Own Home

Transcription

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2 Introduction Instructor and student introductions. Module overview. 2

3 Student Introductions Your name. Your expectations, questions, and concerns about buying a home. 3

4 Purpose : Gives you information on the home buying process. Describes several mortgage options that you can use to buy a home. 4

5 Objectives By the end of this course, you will be able to: Describe the benefits and pitfalls of renting versus owning a home. Identify the steps required to buy a home. Identify questions to ask to determine your readiness to buy a home. 5

6 Objectives (Continued) Identify basic terms used in a mortgage transaction. Describe the advantages and disadvantages of different mortgage options. 6

7 Agenda and Ground Rules 90 minutes long One 10-minute break Training methods Classroom participation 7

8 Benefits of Renting No property maintenance One year (or less) rental contract No property taxes or homeowner s insurance 8

9 Benefits of Owning a Home You can build equity in your home and borrow against it. A home generally increases in value. The home is yours. Your mortgage interest is tax deductible. You can pass your home on to family members. 9

10 Steps Involved in Buying a Home Step 1 Step 2: Step 3: Determine if you are ready to buy a house. Determine how much mortgage you can afford. Determine which mortgage option is best for you. 10

11 Steps Involved in Buying a Home (Continued) Step 4: Qualify for a loan. Step 5: Go through settlement. 11

12 Homebuyer Assistance Programs Individual Development Account (IDA) Programs offered by cities or local government offices. Financial institutions 12

13 Characteristics of Government Programs Zero or low down payments Flexible underwriting standards Longer payment terms Requirement for homeowner education Some restrictions 13

14 Components of a Mortgage Payment P = Principal I = Interest T = Taxes I = Insurance 14

15 How Taxes and Insurance are Paid In an escrow account, along with the mortgage principal and interest. Separately - Quarterly or semi-annual property tax Annual insurance premium 15

16 Four Cs of Loan Decision-Making Capacity Capital Character Collateral 16

17 Pre-qualification The pre-qualification process: Lets you know how much mortgage you can afford. Is informal, involving no paperwork. Gives you a ballpark estimate. 17

18 Pre-approval The pre-approval process: Is a commitment from the lender to lend you money. Lets you know how much money you can obtain. Tells sellers you are prepared to buy a house. 18

19 Mortgage Options Traditional mortgage Interest-only mortgage Biweekly payment mortgage 19

20 Shop, Compare, Negotiate! Check newspapers and the Internet for terms and rates. Negotiate the best price you can get. Let lenders compete for your business. Get costs in writing. 20

21 Good Faith Estimate An estimate of the cost of settlement services that the lender should give you when you apply for the loan. 21

22 When Debt-to-Income Exceeds Recommended Ratios You must: Have a demonstrated ability to pay more toward housing expenses. Show evidence of acceptable credit history or limited credit use. Make a larger down payment. Have cash reserves. 22

23 Settlement Settlement occurs when the borrower meets with the seller and other representatives to sign the documents that will finalize the sale of the house and any mortgage financing. Also called closing. HUD-1 or HUD-1a Settlement Statement. 23

24 Tapping Into Your Home s Equity Home equity loans Home equity lines of credit Cash-out refinancing Reverse mortgage 24