Chapter 22 Buying a Home

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What are the disadvantages of Home Ownership?

1. Making a down payment 2. Long term loan of a mortgage 3. Points or extra interest to be paid at closing 4. Closing Costs / Settlement Ho

Is there a maximum rate increase for ARMs?

2-3% a year and ceilings such as a top of 12%

How much is a down payment on a house usually?

20% is the norm

How much do real estate agents make?

5-7% commission of the sales price of the property

More disadvantages of Home Ownership?

5. Paying of property Taxes yearly 6. Paying Homeowners Insurance 7. Utitlity Expenses are more for homeowners 8. Maintenance and Repair Costs

What are two sources of the down payment?

Personal Savings and borrowing from parents or relatives

What is Earnest Money?

Portion of the purchase price that the buyer deposits as evidence of Good Faith

How do you determine the market value of a property

Real estate agents and appraisers estimate the market value

What is the MLS?(Multiple Listing Service)

Real estate marketing listing service where agents pool all listings and share commissions. Can be found online in some locations

Which rate is usually lower?

The ARM

What is an Advantage of Home Ownership?

The Tax Savings interest paid by the homeowner for mortgage loan payments and property taxes are deductible

Explain the Title Search Process?

The borrower pays for this to determine if it is clear of liens - meaning no one else can claim it as theirs

Explain the Closing?

The buyer, seller and lender meet and the the title pass from the seller to the buyer. Paperwork is signed and closing costs are paid.

What is Appreciation in Real Estate?

The increase in the value of the property over time

Explain the Adjustable Rate Mortgage (ARM)?

The interest rate changes in response to interest rate movement in the economy

Explain a Fixed Rate Mortgage?

The interest rate remains the same for the entire loan term

How do they decide how much for property taxes?

The land's and house value is assesed by the local government

Why is better to buy/ sell with an agent?

They have more exposure to the entire home market

How long is a mortgage?

Ususlly 30 yrs sometimes 15yrs

What is a Lien?

A financial claim to the property

What is Acceptance of the Offer?

A formal agreement to accept your offer

What is Good Faith?

A promise to continue with the trancasction

What is a Counter-Offer?

An Offer in response to another offer. It can be accepted or rejected and terms can also be changed

How does a home buyer Qualify for a loan?

An application is filled out and a credit report ran to make sure the borrower can meet the loan payments. This is a difficult process with a lot of paperwork

How much are closing costs?

Around $3,000 - $5,000

What happens after the down payment is made?

Most home buyers borrow the rest from a financial institution

Does the Seller have to accept an Offer?

No - They can accept or reject or counter

How do you find and select a property to purchase?

Check online yourself or get a real estate agent

Who determines property taxes?

Determined by the local government- a major source of funding for them

What is equity?

Difference between the market value of property and the amount owed on it

Another advantage of Home Ownership?

Equity is gained as each monthly mortgage payment is made because the payments reduce the debt

What are points at real estate closing?

Extra interest rate charged by the mortgage company that are usually 1 -3% of the loan amount

Name the types of mortgages?

Fixed Rate and Adjustable Rate

Who is the agent really working for?

For the seller since they are the one paying the commission

What is an Offer?

Formal document that expresses interest in entering into a Contract with someone

What happens to a home's market value over time?

It can increase or decrease

What happens to Earnest Money?

It is held in a Trust Account until the real estate purchase transaction is closed

What is the Title?

Legal document that establishes ownership

What is the Deed?

Legal document that transfers the title of Real Property


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