1. Buying A Home
Objective: SWBAT evaluate the different types of housing and the advantages and disadvantages of purchasing a home
Do Now: What are some of the benefits and drawbacks of owning a home?

2. The Home Buying Process
Buying a home is a huge financial commitment. It will probably be the most costly purchase you will ever make.
By understanding the home buying process, you’ll be better able to decide whether to purchase a home.

3. Advantages of Home Ownership
Enjoy a sense of stability and permanence
Allows for individual expression
Financial benefits
Interest charged on loan payment and property taxes are deductible
Values of many homes rises steadily, so that owners can usually sell their homes for a profit
Profits earned from selling depends on their equity: the value of the home less the amount still owed on the money borrowed to purchase it

4. Disadvantages of Home Ownership
Financial risk
Property values do not always go up
Saving money for down payment to buy a home is very difficult for many people
Tax deduction may not make up for high loan payments
Limited mobility
The slow process in selling or arranging for rent may result in financial loss
High expenses and maintenance costs

5. Types of Housing 1. Single-Family Dwellings
The most popular type of housing in U.S. which usually stands on a separate lot with a lawn and some outdoor living space
Provide the most privacy, hence the most expensive

6. Types of Housing (cont.)
2. Multiunit Dwellings
Duplex/Triplex – single building divided into living spaces for two/three units
Townhouse – many single-family units attached to other units. Each unit has its own outside entrance

7. Types of Housing (cont.)
3. Condominiums
A group of apartments or townhouses that people own instead of rent
Owners pay a monthly fee to cover the cost of maintenance, repairs, improvements, and insurance for the building and its common spaces

8. Types of Housing (cont.)
4. Cooperative Housing
Building that contains a number of units owned by a nonprofit organization
Owners do not actually own the property; instead they own shares of the property
Members pay a relatively high maintenance fee

9. Types of Housing (cont.)
5. Fabricated Homes/Mobile Homes
Manufactured and assembled either partially or fully at a factory
They are cheaper than single-family houses because of mass production, but they might not be as well constructed or as safe
They usually do not increase in value at the same rate as single-family houses

10. Steps to Purchase a Home
1. Determine Your Home Ownership Needs
2. Find and Evaluate a Property to Purchase
3. Price the Property
4. Obtain Financing
5. Close the Transaction

11. Step 1: Determine Your Home Ownership Needs
In this step, you need to consider:
Benefits and drawbacks of owning a home
The types of housing that can be purchased
What you can afford
Savings, Income, Living expenses
Down Payment: portion of the total cost of an item that is required at the time of purchase
Monthly mortgage payment, property taxes, homeowners insurance
Size and quality

12. Step 2: Find and Evaluate a Property to Purchase
Selecting a location
Hiring a real estate agent, who arrange the sale and purchase of homes as well as other buildings and lands
Conducting a home inspection
Before making the decision to buy, evaluation of the house and land can save you from problems and unplanned expenses in the future

13. Step 3: Price the Property
Determining the price of the home
Listing Price: the price that the owner is asking for
Appraisal: an estimation of the value of the property in comparison with other similar properties that have been recently sold in the area to determine the fair market value of the property
Negotiating the purchase price
When both parties agree on a price, they must sign a purchase agreement/contract, a conditional contract stating their intention to complete the sale

14. Step 3: Price the Property (cont.)
After signing the purchase agreement, buyer pay the seller the earnest money: a portion of the purchase price showing that the offer is serious
The earnest money is held in an escrow account: an account where money is held in trust until it can be delivered to a designated party and will be applied toward the down payment

15. Step 4: Obtaining Financing
Determining amount of down payment
Lenders suggest that you put 20% or more
If lower than 20%, some lenders will require you to obtain private mortgage insurance (PMI): a special policy that protects the lender in case the buyer cannot make payments or pay on-time
Mortgage: a long-term loan extended to someone who buys property
The size of the mortgage depends on your financial qualification and the current interest rate

16. Step 4: Obtaining Financing (cont.)
Compare interest rates from different lenders
Evaluating Points
extra charges that must be paid by the buyer to the lender in order to get a lower interest rate
each point equals one percent of your loan
Other fees and expenses related to the settlement of the real estate transaction
loan application fee, appraisal fee, etc.
the purchase agreement becomes legally binding once the application is approved

17. Step 5: Close the Transaction
Closing: a meeting of the seller, the buyer, and the lender of funds, or representatives of each party, to complete the transaction
Closing costs paid by buyer and seller:
Title search fee
Title insurance: a type of insurance that protects the buyer if problems with the title are found later
Attorney’s fee
Real estate agent’s commission
Fee for recording the deed: official document transferring ownership from seller to buyer
Credit report, appraisal fee, etc.