Chapter 5
Owning a Home
The Right Place
The Right Price
Buying Process and Terms
Feeling at Home
Selecting A Home: Feeling Like Home
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Assess your housing
requirements
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What can I afford to
spend? Financial
experts suggest 28%
of your monthly gross
for income.
What location am I
interested in?
What type of housing
would suit me?
How much space do I
need?
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Consider the following
factors:
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Individual/Family Life
Cycle
Stage in Life
Quality of Life
requirements (checklist)
Income
Debt Ratio
What is Available-Right Place
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How do you find out what is available?
Drive or walk through areas you would
like to live.
“For Sale” signs posted.
Newspapers print advertisements for
“Homes for Sale”.
You can also check for online listings.
Real estate agencies and home finding
services often have lists of home on the
market.
The Home-Buying Process
Evaluating Homes
 Making an Offer
 Agreeing to Purchase
 Obtaining Financing
 Having the Home Inspected
 Obtaining Homeowner’s Insurance
 Closing the Deal
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The Home-Buying Process
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Buying a home is a long and complicated
process. If you know the basic steps,
however, the procedure becomes much
easier.
The Role of Real Estate Agents
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Screens prospective buyers and shows the home only
to people who are truly interested in buying a home.
When listing a house, the owner agrees to pay the
agent a fee or commission when the home is sold.
An agent can also help negotiate the price with the
seller or the seller’s agent.
Deciding What to Look for
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New Home or Old?
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What are the advantages and
disadvantages of each?
Inspect and Compare
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Living Space
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Garage, appliances,
laundry connections
Homeowners
association, pool, club
house, etc.
Individual Needs
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Consider
accessibility/universal
features
Safety and Security.
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Facilities
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Evaluate the overall
layout
Compare floor plans.
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Neighborhood?
Neighbors?
Are entrances well
lighted?
Are there covenants
and restrictions?
Maintenance
ordinances
Inspections
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Part of the home buying process
Several may be required by the lender or
the state, others are optional
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General home – certified home inspector
checks for structural soundness and ensures
plumbing, electrical, and heating systems are
in proper working order
Termite – the most common required
inspection
Most contracts require the seller to pay fees
for inspections
Right Price

A home is a large investment.
Buyers will want to choose a home that
will increase in value and be easy to
resell.
 Location
 Design
 Taxes and Assessments
 Improvements
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Financial Planning: The First
Step
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Income and
Budget
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Buyer’s income
determines loan
amount
28% Debt ratio
Savings
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Down paymentportion of the purchase
price that must be paid
in cash.
Closing costs
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Debt and Credit
History
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Current debt
Credit history: or
their record of paying
loans and bills.
Understanding Financing
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Mortgage Basics
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A mortgage contract
outlines the terms of a
loan between the
lender and the
borrower.
The borrower agrees to
repay the loan
according to the terms
of the contract.
If the borrower fails to
repay, the lender can
take possession of the
home.
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Each time a mortgage
payment is made, the
principal balance- the
amount owed to the lenderis reduced.
When the last payment has
been made the principle of
the loan has been repaid and
a balance of zero.
This gradual elimination of
principal is called
amortization.
Equity, is the difference
between the market value of
a property-the price it might
sell for- and the principle
owed on the mortgage.
Process: Offer to Buy
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It’s essential that you carefully
review all the terms and you
understand them.
Appraisal
Valuation of the property
 This can determine how much the
lender will loan for a mortgage
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Types of Mortgages
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Conventional
Mortgage
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This is the most
common type of
mortgage.
The borrower pays a
fixed interest rate for
the length of the loan.
This interest rate,
determined at the time
the loan is made,
remains the same for
the length of the loan.
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Adjustable Rate
Mortgage
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A loan in which the
interest rate
changes after a
certain length of
time, usually every
one to five years.
Types of Mortgages Cont’d
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Graduated Payment Mortgage
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An option that appeals to many first
time buyers is a graduated payment
mortgage.
Shopping for a Mortgage
Mortgage loans are available from
money sources, including banks,
savings and loans, credit unions,
finance companies, and lenders that
specialize in mortgages.
 Buyers should compare not only the
interest rate of mortgage loans but
the numbers of points.
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Prequalifying for a loan
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Many lenders are willing to
prequalify a buyer for a loan.
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This means that after obtaining
information from the buyer, the lender
provides a written estimate of how
large a mortgage is likely to be
approved.
Prequalifying can also save time in
the final loan application process.
Loans
FHA:
 A loan that is insured
by the federal
government against
the borrower
defaulting on the loan
 Usually has a lower
down payment
 Can be fixed or
adjustable interest
rate
 Any person can apply
for this type of a loan
VA
 MUST currently be a
member of armed
forces or a veteran
 Does not require a
down payment and
Congress sets
eligibility
requirements
Buy vs Rent
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Ownership
Pay utilities
Maintenance Costs
Tax deductible
interest
Investment
Privacy
High front in costs
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Temporary
Pay or not pay
utilities
Costs embedded in
rent
No tax benefits
Some multi-family
Affordable