COA 4131 1st Edition Lecture 10 Outline of Last Lecture I. Did You KnowII. Renting vs OwningIII. Budget ItemsIV. Median House Prices Outline of Current Lecture I. OwningII. Steps in Buying Home Current LectureA. Owninga. Appreciationi. Sense of pride b. Reasons for buyingB. Steps in Buying a Home a. Step 1i. Determining Financial Readiness1. Bank will do this for you ii. PITI1. Principle interest taxes insurance iii. Median price of a house 1. $132,000 but has gone up2. depends where you live b. Step 2i. Know your preferencesii. What are you’re non-negotionables c. Renting is fine for 2 to 5 yearsd. Securityi. Cashii. CD’siii. Savings bondsiv. Enough insurancee. Real estate involves more risk but maybe a greater return over time f. Building a down payment, normally 10% of the price of the house g. Step 3i. Making an offerii. Real estate agents1. Exclusive to them for about 3 months to 6 months, according to contract2. Pay them 6% of home pricea. This is the norm 3. Find out how many houses they’ve already sold4. Normal for people to start selling themselves and then turn to a realtor when it doesn’t sell 5. Time of year for selling involves where in the world you are selling/buyinga. Summer time is a better time for buying iii. How to set up home for potential buyers to look at1. Empty versus lived ina. Some people like to see it empty, but others like to see things like flowers or something to make it look homey b. No pictures of dog, family, or anything personal2. In new houses, they will set up the home with tinier furniturea. Master bedroom will have a queen bed instead of a king tomake it look bigger 3. Buyer’s agenta. May pay them 1 or 2 percentb. Very rareiv. Binder1. Earnest money a. Realtor will give check for seller to hold onto until they get cleared from bank to secure spot b. If it is acceptedi. Could be taken off of house priceii. Or could be given back and just rip up the check c. It is legal for the seller to keep the check if you are not cleared or something i. Don’t go around giving checks to all these different housesii. Careful when you write these checks v. Negotiating1. Bidding wars2. If you go to low, you could be out bidded or insult the people h. Step 4i. Getting financing1. Title to propertya. Legal right of ownership of propertyb. Make sure you will own it free and clearc. Title search does cost money but clearly worth it 2. Abstracta. Written history of the property so you will know previous owners3. Issues you a deeda. This deed grants you ownership b. People put it in safety deposit box, proves you are ownerii. Mortgage loan1. Can be from a whole lot of sources2. Can be transferred 3. Some people do 15 yearsa. Pay more but own it free and clear after 15 years iii. Down paymentiv. Sources of loansv. Types of loans 1. Fixed rate, conventionala. Fixed at 6% for 30 yearsb. Doesn’t mean you have to stay there for 30 years; most people do not live there for 30 years vi. Adjustable rate mortgagesa. Range from 3 to 6 percentb. Can start off low and then rise c. More risky d. Range from 3 to 6 percente. Can start off low and then rise f. More risky vii. FHA and VA1. Low income buyers 2. Will get a 3. VAa. Veteran’s administrationb. Can get a better deal on a house viii. Owner financingix. Assumable mortgages 1. Pre-owned2. Assume the previous mortgage for a better deal i. Step 5i. Closing1. When you exchange keys and everything2. Physical meeting for an hour or two at a conference room 3. Can be online now, Skype 4. Exchange from person 1 to person 25. Huge
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