1. Home Buying the Best Investment BALANCING LIFE’S ISSUES, INC.

2. Objectives Why a home is a good investment What to consider before buying How much house can you afford? Your Credit Score What type of mortgage is best for you? Closing Costs Points and APR Tax advantages

3. Why a Good Investment? Building “Equity” By taking out a “Mortgage” Historically home values have increased steadily over the long term. The only investment you can also live in.

4. What to Consider Before Buying Down payment (5-10%) Debt Stable Income Housemates Home Maintenance Are you committed to living in the area long term.

5. How Much House Can You Afford? Initial costs to be considered:  Down payment  Closing costs  Interest Rates Ongoing expenses:  Monthly mortgage payment (with escrows?)  Homeowners Insurance  Property Taxes  Maintenance Expenses (or fees if condo)  Unanticipated Expenses

6. Your Credit Score Your credit score will effect your interest rate. Know your credit history before applying for a mortgage. You are entitled to 3 free credit reports annually. Be wary of for fee “Credit Monitoring Services.” If you are applying for a joint mortgage – the lower credit score will be the one considered for the loan.

7. Types of Mortgages Fixed Rate  Term = 15,20,30 year  Equal installments Pros  Payments stay level overtime  If interest rates go up your rate stays the same Cons  If interest rates go down, you would need to refinance to get a lower rate

8. Types of Mortgages Adjustable Rate  Starts with a lower fixed rate for 1,3,5 or 7 years  As interest rates go down your payments are reduced Pros  Good option for short-term ownership  Benefits when rates go down Cons  Payment could increase after fixed term expires

9. Types of Mortgages Balloon Mortgage  Low monthly payments for 5-10 years  One lump sum or “Balloon” payment pays off all of the principal Pros  Some allow you to convert to extend the loan Cons  If you find yourself short when balloon is due you could lose your house Interest- Only  Low interest only payments are made for 5-7 years  Principal is paid in a lump sum Pros  May be able to refinance Cons  If you can’t make final principal payment you can lose home  You are not building equity What are the advantages of “Pre-Approval”?

10. Paperwork Borrower  Employment verification  W-2 Statements  Income tax returns for at least 2 years  Bank account information  Current debts and credit card balances House or Property  Signed Sales Contract  Survey  Architects plans if new construction  Co-op and condos require additional documentation Do your homeworkBe prepared

11. Closing Costs Appraisal Attorney’s Fees Inspections (termites, radon, oil tank, asbestos) Filing fee Mortgage Tax Points Real Estate Taxes Title Insurance Title Search

12. Points and APR Points  Up-front interest charges paid to the lender Discount points  Pre-paid interest Origination points  Like a commission APR  Annual Percentage Rate When does it make sense to take points?

13. Tax Advantages Mortgage Interest is Deductible Discount Points are tax deductible (as long as not used for closing costs) Depreciation of home

14. Home Buying the Best Investment BALANCING LIFE’S ISSUES, INC