Chapter 28 Buying a Home

I. Deciding to Buy a Home

  1. Is it better to buy or rent?
    • Advantages of buying vs renting: Rent- chepaer, no maintainance, no taxes, no closing costs
      • Equity– the difference between mortgage balance and value= Profit
      • Mortgage– written contract between lender(bank) and lendee(home owner)- loan for the real property
  2. What do banks require in order to be approved for a mortgage?
    1. Credit Score (good= 700-750)
    2. Gross Income
    3. Debt (owe)
    4. Work History
    5. Source of Down Payment
    6. Value of Property
      • Appraisal
  3. Finding the Right House
  4. Purchase and Sale Agreement
    1. Real Estate Agent
    2. Bid- Purchase and Sale Agreement
    3. Binder Agreement
    4. Mortgage Approval

II. Applying for the Mortgage

  • Where do you go to apply for a mortgage?
  1. Mortgage Costs
    • Mortgage Application Fee (origination fee)- 1%
    • Appraisal Fee- $500
    • Credit Report Fee- $250
    • Inspection Fee (engineers report)- $1500
    • Attorney’s Fee- $4000
    • Title Search Insurance- $3000
    • Surveyer’s Fee- $1000
    • Termite Inspection- $250
    • Mortgage Insurance- 6 months- $1000
    • 6 Months of Property taxes held in Escrow- $5000
  2. Types of Mortgages
  • Fixed Rate Mortgage- 3.5% interest
  • Variable Rate Mortgage (ARM)- 3/1, 5/1, 10/1- Risky
  1. Taking Title (Ownership)
    • Tenancy in Common- 2 people who share in the ownership of the home- co-own
    • Joint Tenancy- business partner
    • Tenancy by Entirety- married couple- right of the spouse
  2. Deeds
    • What is the importance of a Deed?
    • General Warranty Deed
    • Special Warranty Deed
    • Bargain and Sale Deed
    • Quitclaim Deed
  3. Passing of Title

III. Limitations on Property Use

  1. Limitations Imposed by Law
    • Nuisance and Zoning Laws
    • Health and Public Safety Regulations
    • Eminent Domain
    • Air Rights
    • Subterranean and Riparian Rights
    • Adverse Possession
  2. Limitations Arising Out of Contract
    • Deed Restrictions
    • Easements and Licenses
  3. Special Types of Home Ownership

IV. Qualifying for a Mortgage

  • 28%/36% Rule
    • Mortgage Payment can not be more than 28% of your gross income (monthly)
  • Debt to Income- 36%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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