Chapter 22 Buying a Home
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