Financially Speaking.. A Student’s Guide to Understanding what Financial Institutions are Talking About

Renting VS Buying a Home What’s the difference?

Renting VS Buying a Home Renting Advantages – Low move-in costs – Fixed monthly expenses – Less maintenance work – Fewer responsibilities – Utilities usually included in rent payment Disadvantages – No equity – Subject to terms of lease – Less privacy and closer neighbors – Fewer opportunities to upgrade (paint, new carpet, etc.) – No tax deduction Buying Advantages – Build equity – Pride of ownership – Stable mortgage payments – More room (potentially) and storage) – “Good” credit potential Disadvantages – Down payment, move-in costs and insurance costs – Time, money and energy commitment – Repair and maintenance costs – Utilities not included in mortgage payment

What does a lender look for? Ability to repay Credit Down payment Job Stability

Can you Repay the Loan? Lenders and landlords want you to be able to afford a payment. In order to allot for a large payment such as housing, you have to know how to budget.

Example budget Net Income Paycheck/Allowance$ Total Income$ Fixed Expenses Savings Account$ Auto Loan$ School Expenses$50.00 Variable Expenses Cell Phone$60.00 Miscellaneous (gas, food, movies, activities, other expenses) $ Periodic Expenses Car Insurance75.00 Total Expenses$600.00

What makes up a credit score?

Be your own credit manager A consumer can get a free credit report from each of the 3 credit bureaus (Equifax, Experian, and Transunion) once a year Allows a pro-active approach to monitoring, credit repair, and fraud prevention

Down Payment Shows lender your investment in your home Could take a while to save up for A larger down payment will help lower your rate and loan fees Builds instant equity

Will you have Job Stability? Job stability really means income stability. Longevity with your job shows a steady income that can support your living expenses.

Lending Terms Equity Closing Discount Points

Lending Terms Earnest money Interest Rate APR Escrow Loan origination fee Private mortgage insurance (PMI)

Mortgage Payments Amount Borrowed Interest Rate Term

Mortgage Payment Example Amount Borrowed $120,000 Interest Rate 5% Monthly Payment $645 Term 30 years

Financing Your Home Select your loan type, options include: – Fixed-Rate loan – Adjustable-Rate loan – The Department of Veterans Affairs loan (VA loan) – The Federal Housing Administration loan (FHA loan)

Fixed Rate Loan Interest rate remains the same for a specific term Standard 15 and 30 year terms, but different terms are available

Adjustable Rate Loan Interest rate can change at a predetermined interval Generally lower beginning rates Payments may increase or decrease during the life of the loan

The Process Pre-Qualification vs. Pre-Approval Finding a Home (Sales Contract) Mortgage Application & Disclosures Inspections Closing

Now What? Establish a savings account. Know the difference between saving and investing. Work to understand credit cards before you sign up for one.

This has been a financial institution point of view.. But don’t take our word for it! Contact your financial institution and find out for yourself!

Stay in the driver seat of your finances and don’t let anyone else take the wheel!

Questions?