HDF 322 Lecture 7 Outline of Last Lecture I Housing Alternatives Outline of Current Lecture II Loan Qualification III The Mortgage Debt Service Ratio and The Debt Service Ratio IV Factors to Consider The House Hunt V The Purchase Agreement VI Applying for Mortgage Loan VII Closing Ritual Closing Ceremony VIII Closing Costs IX Down Payments Current Lecture I II Loan Qualifications a once you decide to get a new home you need to understand you need to QUALIFY for the loan its easy to get caught up in getting a new different home in furnishing it already new car new furniture THAT IS THE WORST THING YOU CAN DO FOR QUALIFICATION bc increasing debt loan b After closing you can think about car and furnishing itThe Mortgage Debt Service Ratio and The Debt Service Ratio a basically Mortgage Debt says you have P I T I can I afford those monthly payments depending on monthly ratio and current percentage used current percent can be in mid 20s to late 20s sometimes 30 or 31 but generally in mid to late 20 percents of gross income monthly income and that is what they use b for all debt car computer education you would expect percent to be greater its usually in mid 30s to 40s Dodd law is no more than 43 of income can be on total debt payments c 2 ratios MUST be met or you are NOT qualified for the mortgage These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute III IV Factors to Consider The House Hunt a b Things that are important when buying first home c LOCATION you cannot overstress how important location is school district when you want to resell how close is it to work location is VERY important you can benefit from good location d ZONING if you are in a city they will check zoning homeowners association and rules very important to know zoning is single families only or single multiple family and or commercial residential grocery store next door is good but maybe not adult film store when outside city limits no zoning so you could have trailer and then huge mansion so no control over who builds or what is built on nextdoor property e VALUE OF SURROUNDING PROP you may not want to be the best bc if you are the best then everyone else around you is trash surrounding properties can lift you up or pull you down moving into a place where there are a few more nicer homes that will help when you sell bc those nicer valued props will make you look good whereas if you are the top the not as nice ones will make yours look a little less beautiful value of surrounding prop can influence price of homes f CONVENIENCE how convenient is it to shopping the shuttle to schools the bus how far do you have to drive to shopping centers etc g NEW VS OLD want more older established neighborhood or more new neighborhoodnew no scratches new appliances plugged grass small trees older have big trees for shade landscaping can be established and more beautiful old appliances But cielings may be 10 12 foots theres not one preference just understand trade offs as textbook says look for what you are finding h Write down everything you want first then go back to whats essential when you start the hunt i Whats desirable then wish list what you dream j Need to use this list to narrow down what you choose to look at k whats essential how many bedrooms garage baths windows good backyard what do you want how close do you want it to swimming pool The Purchase Agreement a STANDARD agreement that has numerous things so you and seller come to agreement b 1 You will give a check for 1 2 thousand dollars when you find a house you want c 2 Be held in escrow you are very earnest in asking the seller to take the house off the market hold it for ME that s what earnest money does it asks seller to hold the house for you earnest money is used to buy the house if you buy the house but if you don t buy it earnest money stays with seller bc they took house off market for a few days d 3 Purchase price is given in the purchase agreement maybe they are asking 206 000 but you come in for 190 000 you will pay 20 down payment and you want the seller to pay 1 discount point and you will pay 1 discount point who is going to pay points and who isn t agent takes to seller and they see your 190 000 and if they don t want it they will cross it and put 204 000 and send it back to buyer but buyer wants to keep negotiating goes back and forth until there is price with 4 initials and discount points V VI VII initialed they are all agreed upon then THAT is the purchase agreement never get a new one things are all marked up e 4 MUTUAL ESCAPE CLAUSES get you out of buying a house what the seller AND the buyer to have these the one for SELLER they are required to move by their company they qualify for mortgage for new house buying or building and for buyer one to be that you qualify for mortgage if you don t qualify for loan you don t want that house anything that could get wrong where you don t cant buy house you want to put in escape clause anything you can put in that would allow you to get out of the loanf 5 who is paying what for closing costs generally buyer pays the majority 5 6 7 thousand the owner seller will pay a couple g 6 In the purchase agreement you need what CONVEYS what STAYS in the house what appliances what you are getting generally you leave appliances except refrigerators you leave washer and dryer dish washer etc what CONVEYS is very important to know h purchase agreement is important to know Applying for Mortgage Loan a Applying for mortgage you may be approved you have to have a loan b there is application for you to apply in calculating this once having this they give you a GOOD FAITH ESTIMATE that says buying a house using lender that the lender you go to which you can choose normally when you apply they give you lender this is outline of all closing costs you will have to pay downpayment taxes etc this is only estimate so gives you rough idea of closing costs this is good piece of info understand it could be more or les Closing Ritual Closing Ceremony a CLOSING RITUAL you are around a table 6 8 people buyer you real estate agents company could be lessb what you do is pass the various papers around title person is explaining to you sign your name buyers …