Have
you ever thought of having a
house? Maybe
a house with a family room where
the kids can play and you can
read quietly in your own bedroom?
Sounds
nice - right? This is only one
of the reasons why people buy
homes.
Click
on the faces below to see their answers.
Now
is your turn:
Why
would you want to buy a house?
Write
your answers in your
Home Buying Checklist
Great!
Now that you have
this list, let's find out what
you need to buy a home.
UP
TO LIST OF BIG IDEAS
II.
How Much Money Will You Need?
I
bet you're now wondering:
How much money will I need
to buy a house? Let's see...
Click
on the faces below to see their answers.
Now
is your turn:
How
much money do you think
you need to buy a house?
Write
your answers in your
Home Buying Checklist
Good job. Now, let's look
at some of the costs
of buying a home
The
Costs of Buying a Home
Type
of Cost
(Estimated Amount)
What
This Means
What
Esmeralda & Quentin Paid
Initial
Deposit
The
amount of your initial deposit varies.
If you buy a HUD home,
for example, your deposit generally will
range from $500 - $2,000.
Once
you find the house of your dreams and make
an offer, you will need to give the real
estate agent or the seller's lawyer a certain
amount of money to let them know you are
serious about buying the house.This money
will go into an escrow account; should your
offer be accepted, the money is applied
to the down payment or closing costs. If
your offer is not accepted, the money will
be returned to you.
Their
initial deposit was $500.00
Down
Payment
An
ideal down payment is 20% of the property
value.Nowadays, there are many programs
that allow you to put down as little as
3% or in some cases, 0%--if you qualify.
Special
Programs to Help Lower Your Down Payment
How
Much Can You Afford
A
percentage of the value of the home. The
percentage will depend on the type of mortgage
you qualify for and how low you want your
monthly mortgage payments to be.
Calculating
your down payment
Quentin
& Esmeralda qualified for a special
mortgage program and they only had to put
down 3% of the property value.
The
total amount was $3000.00
Closing
Costs
Generally
these costs range between 3-6% of the property
value. You will receive an estimate of these
costs from your lender after you apply for
a mortgage.
Additional
fees that you pay when you are finalizing
your purchase. Includes items like lawyer's
fees, taxes and insurance.
See
a sample BREAK DOWN of closing costs
Their
closing costs were 5,487.00
Other
Costs
Other
costs can be divided into discretionary and
mandatory costs or fixed expenses.
See
examples of other costs
Property
Tax is: 5,000
Home
Insurance: 500/yr
PMI:
$2425/yr
Let's
take quick minute to recap.
Let's
say you are buying a house that
is worth $100,000.
You give an initial deposit
of $500, and you put down a
5% down payment.
What
are your up-front costs? What
Do You Think?
$5,000
$4,487
$9,987
$10,000
How
we solved this problem:
To
calculate the Down Payment
To
calculate Costing Costs
Purchase
Price $100,000
Purchase
Price $100,000
Percentage
Down 5%
Approximate
Fees of .5487
$
100,000 * 5% = $5,000
$
100,000 *. 5487% = $5,487
Grand
Total
= $5,000 - 500 (initial
deposit) + $5487 = 9,987
Note:
This number does NOT include Other Costs.
UP
TO LIST OF BIG IDEAS
III.
Are You Ready to Buy a Home?
Becoming
a homeowner takes time,
money,
and lots
of research, but it is
all worth it.
Let's find out if you are you
ready to buy a house…
Take
this Quiz and don't forget to write your
answers on your Home Buying Checklist.
Now,
let's take a look
at your answers:
* If
you answered yes to most of
the questions,
you are ready - YEAH!!
*
If you had a couple of
Nos - RELAX! Go back to those
questions and review our advice
too see what you can do to
buy a house in the future.
UP
TO LIST OF BIG IDEAS
IV.
Understanding Mortgages
A
mortgage is simply a loan from
a bank to you. With this money,
you can buy your home.
In return,
you promise to repay that loan
with interest over a period
of time.There are two basic
types of mortgages: Fixed
Rate
and Adjustable
Rate
If
you break your promise to pay
back your mortgage, you could
lose your home. The bank may
take away your house and you'll
need to move out!
So,
let's take a look at what makes
up your mortgage… The shorthand
word for what goes into your
mortgage is PITI. Try to figure
out what each letter stands
for in this shorthand word…
What
do you think?
P
Principal
Property
Personal
Prime rate
I
Index
Interest
Income
Independent
T
Total
Tickets
Taxes
Terms
I
Idea
Internet
Investing
Insurance
Now,
find each of the words in the word puzzle.
When you find them, you will see
their definition.
If you need help finding the words, just select
the word on the right side of the puzzle and hit
the button "find word"!. You will see
its definition at the top.
Now
that you understand what makes
up a mortgage,
let's
take a look at the types of
mortgage programs that are
available to you.
Our
friends Pedro and Mary need
our help to figure out what
mortgage program
is best for them
Read
Mary's and Pedro's situations and decide
what might be their best option for a mortgage.
Pedro
has been working for 5 years at the same
place. He has excellent credit and $10,000
saved in a CD
account. He has very little debt.
Conventional Fixed Rate
No Down Payment
Less Than Perfect Credit
FHA
Mary
is a single mom working at a toy store for
the past two years. She also has a business
on the side and a small savings of $2,000.
Mary's monthly income is $1,200 a month. Unfortunately,
she has a debt of $724.63, but she does have
good credit.
Money
Center 
Buying
a Home
