1. Chapter 22: Buying a Home

2. Lesson 22.1 Why Buy a Home? I. Advantages of home ownership
equity increases
market value is the highest price of the house
real estate agents and appraisers can estimate the market value by comparing it to recent homes sold that are similar
appreciation is one way to earn equity in your home
equity can increase also each time you make a payment on your loan it decreases the debt
tax savings
interest paid on the house and the property tax are tax deductible
renters cannot deduct any part of their rent payment
quality of life advantages
provides feeling of security and independence
offers privacy and personal freedom
belonging to a community

3. II. Costs and responsibilities of home ownership
down payment
10-30% down payment
i.e. house that cost $150,000, you will need $15,000 (10%) to $45,000 (30%) for a down payment
mortgage
payments on a mortgage range from years
property taxes and insurance are often included in your mortgage payments, these are called escrow accounts
closing
these costs may add another $3,000 to $5,000 to the purchase of the home
these fees are paid to the title company for a background check that the seller is the legal owner of the home and no one else claims the rights to the property
property tax
funding for local government
taxes are based on the assessed value of your home

4. insurance
MUST have insurance covering at least the structure of your home
Utilities
maintenance and repairs
you are responsible for them
before buying the home, make sure you have the time and money to keep your home in good condition
ongoing maintenance: painting, mowing, landscaping, weeding, fixing things that break or wear out
example a roof, furnace or water heater may last 15 years

5. Lesson 22.2 The Home Buying Process
I. Finding and selecting a home
working with a real estate agent
look at many homes before buying one
can look on your own (online or in the newspaper) or with a real estate agent
agents can help find the right home, assist with the purchase, financing, and closing
real estate agents make a commission for their work, usually around 5-7% of the sale price
advantage of going with an agent is the MLS listings
making an offer
when making an offer: price offering, down payment, mortgage amount, dates of closure
when making an offer with earnest money the house cannot be sold to anyone else
the seller may or may not accept the offer, they may counteroffer
this process will continue until both are under a mutual agreement

6. II. Obtaining financing
down payment sources
most people save for the down payment
others may borrow from a friend or relative
banks will not allow you to borrow a down payment
qualifying for a mortgage
complete an extensive loan application
check your credit history, employment, and references
evidence you can meet the bills
are able to manage monthly mortgage fees of 30-40% of your take home pay
types of mortgages
fixed rate mortgage
interest rate does not change during length of the loan
adjustable rate mortgage
interest rate can change based on the economy as a whole

7. III. Taking title to property
After all agreements have been reached on the selling of the home closing is the last step
At closing the title of the property will be transferred to you
Before closing the lending institution prepares the loan papers
Any repairs on the house must be completed before the closing
At this meeting there are a lot of papers to sign and any costs are to be paid
At the closing the home becomes yours