Purchasing a
Home
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Terms to Know
• Closing Costs – fees that are due at
the time the purchase is finalized.
• Down payment- required amount of
cash payment to be made at time of
purchase.
• Earnest Money –Money that the buyer
puts down to show they are
interested in the property.
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Terms to Know
• Interest – Money that the lending company
charges the buyer for the loan.
• Mortgage – a home loan
• Principal- the original amount of the loan
• Homeowner’s Insurance – insurance that
covers the structure and the contents
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Terms to Know
• Equity –the difference between the
market value and the amount of
money owed on the mortgage
• Escrow- money held by a third party
until a specified time
• Amortization- the gradual
elimination of the principal on the
loan
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Advantages of Home
Ownership
• Feeling of stability
• Independence – can change
the dwelling to meet their
needs
• Investment value – investing
money in real estate
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Advantages of Home
Ownership
• Good Credit Record –
helps one build their
credit rating
• Tax Advantages – can
deduct property
taxes and interest on
income tax
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Advantages of Home
Ownership
• Limited mobility –
should be a long
term investment –
may cost one
money if only stay
a short time.
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Disadvantages of Home
Ownership
• Unexpected Expenses –
appliances may need to
be bought or replaced
• Time spent on
maintenance responsible for all
upkeep
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Purchasing a New Home
• Development Homes – built by the
developer and have a limited
number of floor plans to choose
from.
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Purchasing a New Home
• Spec Homes – built by the builder
on speculation . The home is built
before the buyer is secured.
Buyer can not choose the outside
decor and some of the interior
items
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Purchasing a New Home
• Stock Home Plans – Purchase a
floor plan from a book and have a
builder build it for you.
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Purchasing a New Home
• Custom-built Home – Architect
draws up the plans according to
your desires. You own the plans
and no one else
can use them
without your
permission.
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Advantages of a New Home
•
•
•
•
Clean
In good condition
Modern Appliances
More than one
bathroom
• Can choose the
interior/exterior
material and designs
• Easier to finance
• Low maintenance costs
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Disadvantages of New Home
• Possible cost of landscaping –
most likely the back yard
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Advantages of Older Home
• More space for the money
• Greater individual
character
• Often located in a well
established
neighborhood
• Landscaping
is complete
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Disadvantages of Older Home
• Possible cost of repairs
– electrical wiring,
plumbing and exterior
and interior surfaces
deteriorate with age
• Possible structural
problems - cracks,
little or no insulation,
inefficient heating and
cooling
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Disadvantages of Older Home
• May need a larger
down payment
• May need to
redecorate
• May need new
landscaping as it
has no curb appeal
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Home Buying Process
1. Contact a Real Estate Agent or begin
the search by oneself by using
newspapers, internet, television or
driving through neighborhoods.
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Home Buying Process
• 2. Evaluate the
homes one sees
according to what
you are looking
for. Key rooms
buyers look at
today are the
kitchen and
master bathroom.
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Home Buying Process
3. Make an offer by
depositing earnest
money. This money is
held in trust until the
deal is finalized and then
applied toward the price.
If one decides to back
out, the earnest money
may be refunded.
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Home Buying Process
4. Obtain financing – must qualify
for a loan to cover the cost.
The monthly payments should
not be more than 28% of the
person(s) gross monthly income.
Buyers will have to pay for a
credit check to be done. Debt
payments for the buyer should
be no more than 36% of
monthly gross income.
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Types of Mortgages
• Conventional – pays a fixed interest rate
for the length of the loan (15 to 30 years)
• Adjustable Rate Mortgage – interest rate
changes depending on the current market
rate. Every time the rate changes, the
monthly payments change.
• Graduated Payment Mortgage – payments
start out low and increase in the later
years of the loan.
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Home Loans
• FHA Loan – insured by the Federal
Housing Administration. FHA guarantees
the lender that the debt will be paid.
• VA Loan – for people who have served in
the armed services. Loans are
guaranteed by the department of the
Veteran Affairs. No down payment is
required.
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Home Loans
• Rural Housing Service – helps low to
moderate income families buy homes in
smaller communities
• First Time Buyer Program – Government
program that helps people purchase
their first home. Features low down
payment and easier qualifying
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Home Buying Process
5. Have the home inspected.
– Termites
– Radon – naturally occurring gas
that causes health problems
– Asbestos inspection
– Lead testing – especially homes
constructed prior to 1970
– General structure such as roof,
foundation, plumbing, heating
and electrical systems
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Home Buying Process
6. Obtain homeowners
insurance – property
insurance that insures the
dwelling and contents
against fires, windstorms
and other hazards.
– It also includes a personal
liability coverage that protects
you in case someone injures
themselves on your property.
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Home Buying Process
7. Down payment- must
have money for a
down payment –
usually 5 to 25% of
the purchase price.
The standard amount
today is 20%.
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Home Buying Process
8. Closing the Deal
– Origination fee – fee to
the lender to process
the mortgage
– Cost of Survey – to
determine the exact
boundaries of the
property
– Cost of appraisal –
estimate the value of
the property
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Home Buying Process
– Title Search –
investigate the court
records to make sure
the seller really owns
the property
– Points – a one time fee
charged by the lending
company
– Attorney fee – to make
sure the contract is
legal and binding.
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Home Buying Process
• Other Costs to the
Buyer
– Moving costs
– Utility connections
(having them turned
on)
– Landscaping if not
included in the
contract with a new
home
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Congratulations
• When all paperwork is
signed and down payment
and closing costs made,
the buyer may take
possession of the
property.
• Your monthly payments
will include payment of
principal, interest,
property taxes and
insurance.
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