1. Chapter 7, Section 3 Home Buying Process
Personal Finance
Chapter 7, Section 3
Home Buying Process

2. Objective
Describe the home buying process

3. Equity
The value of the home less the amount still owed on the money borrowed to purchase it

4. Step 1: Determine Your Home Ownership Needs
Types of housing:
Single-Family
Multi-unit
Condos
Cooperative Housing: Non-profit holding
Manufactured Homes

5. How much can you afford?
Price and down payment
Size and Quality

6. Zoning Laws
Regulations that limit how property in a given area can be used

7. Step 2: Find and Evaluate a Property to Purchase
Selecting a location
Hiring Real estate Agent:
Help negotiate, arrange financing, recommend lawyers, insurance, inspectors, etc…
Agents are technically free for the buyer
Home Inspection Process

8. Step 3: Price The Property
How long on the market?
What similar homes sold for in the neighborhood?
Housing market?
Current owners need to sell in a hurry?
Condition of home meet your needs?
Negotiating the Price

9. Earnest Money
A portion of the purchase price of a home paid by the buyer to the seller to show that the buyer’s offer is serious

10. Step 4: Obtain Financing
Escrow Account: an account in which money is held until it is delivered to the designated party
Private Mortgage Insurance: a special policy that protects the lender in case the buyer can’t make payments, or can’t make them on time
PMI: Less than 20% down

11. Mortgages/Points
Mortgage: Long term loan extended to someone to buy property
15, 20, 30, even 60 years
Interest Rates affect how much you can afford
Points: extra charges that must be paid in order to lower your interest rate
Each point is 1% of the loan

12. Amortization
The process of reducing the balance of a loan, such as a mortgage, every time a payment is made

13. Types of Mortgages
Fixed Rate/Conventional: Fixed interest rate and fixed schedule of payments
Adjustable/Variable: Interest increases or decreases depending on the market
FHA: Federal Housing Authority Loan- For low to moderate incomes & first time homebuyers
FHA pays your loan if you default

14. Defaults
Inability to make payments on a loan

15. Home Equity Loan
A loan based on the difference between the current market value of a home & the amount still owed on the mortgage

16. Refinance
To take out a new mortgage at a lower interest rate than your previous mortgage

17. Step 5: Close The Transaction
Closing: Meeting of buyer, seller, lender, and lawyers to complete the real estate transaction
Closing Costs: Fees & charges for which a seller and buyer are responsible when a real estate transaction is completed
Title Insurance: Protects a home buyer in the event that problems with the title are found in the future
Deed: Official document transferring ownership from a seller to the buyer

18. Appraisal
An estimate of the current value of a property

19. Assessment Exercise
Individually, complete questions #1-4 on p.229