Housing
what factors make up the purchase agreement?
-earnest money -purchase points -amount of down payment -mutual escape clauses -agreements on who pays what closing costs -list of appliances
What are the advantages of renting?
-easier to move -fewer maintenance and repair responsibilities -lower initial cost
What are the first step of home buying?
-get your finances in order
What are the benefits of home-ownership?
-pride of ownership -financial benefits -lifestyle flexibility
What is the good faith estimate?
-received from the lender after formally apply for a mortgage -outlines all of the costs of purchasing the home
What is the debt service ratio?
-the total of all monthly debt payments with gross monthly income
what are the types of Mortgages?
1. conventional fixed rate mortgage 2. adjustable rate mortgage 3. 2 step mortgage
What is the maximum percentage of the mortgage debt service ratio?
25% to 29%
What is the maximum percentage of the debt service ratio?
33% to 41%
What credit score do you need to have to be considered for a home loan?
700
What is the mortgage debt service ratio?
aka front-end ratio; the total annual expenditures for housing with the loan applicants gross annual income
Where does the down payment appear on you financial planning process?
balance sheet
where do pints and closing cost appear on your financial planning process?
balance sheet
What do discount points do?
buys down the interest rate on mortgage
Based on cash flow who pays more renter renters or owners?
owners
What is the second home ownership cost someone should consider?
points and closing costs
What does PITI stand for?
principal interest, taxes, insurance
How do you calculate break even ?
$$ difference in points/$$ difference in Mo. Payments
What are some pre-paid items?
-1 year homeowners insurance + 2 months -1 year real estate taxes+ 2 months -1 year private mortgage insurance+ 2 months -prepay interest if purchase is in the last half of month -escrow account
What are discount points?
-1% of the amount borrowed on loan
According to traditional guidelines suggest what amount of your income should you spend on housing?
-25%-33% of take-home pay -2.5 time you annual income
What is the fourth step of home buying?
-apply for a mortgage loan
What is includes in the closing ceremony?
-closing costs - down payment -discount points -prepaid items -includes costs to hire your own building inspector
What are the financial benefits of home ownership?
-deduct property taxes and mortgage interest -potential increase in value of your home -building equity
What are the advantages to a higher down payment?
-easier to obtain mortgage -greater equity -smaller monthly payment -pay less in total interest -homestead law protection
What are the advantages to a low down payment?
-easier to sell a house -more money available for other pur/invest -larger mortgage during inflationary periods -more interest paid ---tax advantage -greater leverage
What are the drawback of home ownership?
-financial uncertainty -limited mobility -higher living cost
What is meant financial uncertainty in home ownership?
-getting money for down payment -mortgage financing -home values could drop
What is meant by higher living cost of home owner ship?
-home improvements -rising real estate taxes
What is the uniform settlement statement?
-lists all of the fees to be paid at the closing -must be available 24 hours prior to closing
What are some closing costs?
-loan origination fee -owner title insurance -mortgages title insurance -credit report -private mortgage insurance(PMI) -appraisal fee -survey fee -recording fee -escrow fee -termite inspection
What is the third step of home buying?
-negotiate a purchase
What are the disadvantages of renting?
-no tax benefits -limitations regarding remodeling -restrictions regarding pets and other activities -legal concerns of a lease -cost including sec. deposit, utilities, and renters insurance
What is the second step of home buying?
-pre-qualify for a mortgage
Where do taxes, insurance, and mortgage payments, maintance op appear on your financial planning process?
cash flow sheet
What is the break even concept?
compares 2 mortgage costs; used to determine the numba of months to arrive at the break even point when extra up front cost equal the savings from lower monthly payments
Who are discount points paid to?
the lender
If refinance or take out a second mortgage what happens to yo discount points ?
the loan origination fee and discount points must be amortized over the life span of mortgage for tax purposes
what is the second important thing in regard to the length of maturity?
the longer the maturity on a mortgage the higher the the total amount of interest that will be paid
What is the first important thing in regards to length of maturity?
the longer the mortgage the lower the monthly payments
When are discount points and loan origination fee deductible?
in the year that the home was purchased
What is the fourth home ownership cost someone should consider?
insurance and taxes
What are discount points considered?
up-front money and interest
what is mean by lifestyle flexibility in home ownership?
you can express yourself
What are front-end costs of buying a home?
the down payment, closing costs, discount points
What is the the third important thing in regards to the length of maturity on a loan?
it is easier to take a longer maturity and make additional payments as desired to pay off sooner
what is the third home ownership cost someone should consider?
mortgage payment
Base on taxes and appreciation who pays more?
renters
What is the fifth step of home buying/
sign your name on the closing side
what is closing?
the buyer and seller and their representatives gather in the lenders office to complete the sale
what is the first home ownership cost someone should considered?
the down payment