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Basics of Buying a House

http://michaelbluejay.com/house/basics.html. Basics of Buying a House. The Steps to Buying a House. Terms to know:. 8 Factors to determine a home’s worth . LOCATION, LOCATION, LOCATION – how desirable is the area Taxes – reasonable school and town taxes

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Basics of Buying a House

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  1. http://michaelbluejay.com/house/basics.html Basics of Buying a House

  2. The Steps to Buying a House

  3. Terms to know:

  4. 8 Factors to determine a home’s worth • LOCATION, LOCATION, LOCATION – how desirable is the area • Taxes – reasonable school and town taxes • Good schools, preferably within easy walking distance. Even if you do not have school-age children, this will make a difference in your home's resale value. • Convenient access to shopping and business centers. You'll also want easy access to public transit, a major thoroughfare, or a freeway. However, you don't want to be so close that noise or traffic congestion becomes a problem. Houses directly adjacent to main roads may have a lower value than similar houses slightly further away. http://www.realestateabc.com/homebuying/?cid=19083&ctry=&title=Buyer+Tips

  5. 5. Houses in well-planned communities tend to have higher values. In an unplanned area where there is vacant land, future development may lower property values. 6. A low crime rate. Everybody wants to feel safe at home. The presence of a neighborhood Block Watch program is also beneficial. 7. Good Economic Development – high employment opportunities 8. Houses on a cul-de-sac are especially appealing because there is minimal traffic and it generally comes from people who live there.

  6. 5 Features that make a Home more Valuable • An open floor planand lots of windows that make the house feel bright, roomy and comfortable. For houses larger than 2,000 square feet, many buyers will prefer multi-levels. • A large kitchen that provides easy access or is open to the family room. Buyers want plenty of counter and cabinet space and an island can create an easily accessible work area. A breakfast bar and up-to-date appliances are other key selling points. • A large family room and master bedroom suite are very popular now. Today's buyers prefer walk-in closets and plenty of storage space. • Buyers expect at least two bathrooms, and in a two story house, at least one downstairs bathroom is important. Luxurious master bathrooms with dual sinks and a tub/shower combination create even more appeal. • A porch or patio can also be an important selling feature, a place where people can easily entertain outdoors when the weather is nice. Covered patios are especially popular, as are screened-in patios in areas where insects can be a problem.

  7. Types of Homes • Rancher house – 1 floor • Colonial – 2 story, with a basement • Split Level – multiple stories • Condo / Townhouse (communities) • Association fees • Row / Twin (attached)

  8. How much can you afford? • Here's the super-quick rule of thumb: • Most people can afford a home that costs up to three times their annual household income, if they can make a 20% down payment and have only a moderate amount of other debt. • If you have little to no debt and can put 20% down you can probably buy a house worth up to four times your annual income. • Calculator: • http://michaelbluejay.com/house/howmuchhome.html

  9. The Mortgage • You don't pay cash when you buy a home. If you had to do that then nobody could afford to buy a house. • Instead you make a down payment (3 to 20% of the sale price) and qualify to receive a loan from a bank to cover the rest. • This loan is called a mortgage. You make payments on this loan every month for 15 to 30 years.

  10. Mortgages…. • The bank loaning the money is the lender. • The amount you pay to the bank each month is your mortgage payment. • The rate of interest on the loan is the mortgage rate (or the interest rate). • Interest rate is decided by your Credit Score and Market Conditions

  11. If you don't make your mortgage payments then the bank will repossess the house. Then they'll sell it to make sure that they can recoup the money they loaned to you, and that you didn't pay back. • The number of years it takes to pay back the loan is called the term, which is either 15 or 30 years.

  12. Lengths of Mortgages

  13. Paying the Mortgage • 4 Parts: • Part of your payment goes towards the principle (the amount the bank loaned you) • Interest (the bank's profit from lending you money). • Taxes – school taxes and real estate taxes • Homeowner’s Insurance

  14. What type of loan for you? • There are several different loan types, each suitable for different homebuyers. • First determine whether you want a fixed-rate or an adjustable rate mortgage.

  15. With a fixed rate, you lock in a monthly payment amount that will remain constant throughout the life of the loan, even if interest rates rise. If interest rates fall, you can either continue paying your higher preset rate, or you could refinance your loan, though that would mean paying additional closing costs. • An adjustable-rate mortgage (ARM), on the other hand, has an interest rate that rises or falls in step with a financial index.

  16. Lowering the Interest Rate • You may also want to pay points to lower the interest rate on your loan. • Basically, points -- or the "loan discount cost," as they're more formally known -- represent a portion of the interest that you pay up front in exchange for a lower rate thereafter. One point equals 1 percent of the loan amount.

  17. Compound Interest, NOT simple interestWe'll assume a $125,000 loan for 30 years at various interest rates.Total Interest Paid Over the Life of the LoanNOTE: THIS IS JUST THE AMOUNT OF INTERST YOU ARE PAYING! Total Interest Paid Over the Life of the Loan

  18. Financial Checklist to Qualify for a Mortgage • Pay down your debt. The bank wants your total debt to be no more than about 38% of your income. If your income is $3000/mo. then the bank figures your total debt can be $1140/mo. Pay down your debt as much as possible to increase your borrowing power. Pay down the highest-interest debt first (credit cards) before lower interest debt (car loans, student loans). • Get the down payment together. If you don't already have a down payment saved, start saving now. • Clean up your credit report. Good credit not only helps you qualify for a loan in the first place, it helps you get a better deal when you do get a loan.

  19. Homeowner’s Insurance:http://finance.yahoo.com/columnist/article/moneymatters/11166?p=1 • Just because you have homeowners insurance doesn't mean you're protected. • True protection is when you know for a fact that your policy will provide you and your family coverage that allows you to repair, rebuild, and restart after a major loss. Not assume, not guess, but know you have the right coverage. • Yet time and again I've seen homeowners who buy a policy that "seems OK," without really understanding the coverage they have. Often, it's a decision simply based on which company is offering the basic coverage demanded by a mortgage lender at the cheapest premium. You as a buyer figure that if the mortgage lender is fine with it, then you're amply covered. • You're not. All mortgage lenders care about is that your insurance at least covers the value of the loan. That covers their financial risk, but it doesn't cover everything you need to be truly secure.

  20. Real Estate Taxes • Real Estate taxes based on the assessed value of the property • Real estate taxes support local services and facilities such as: schools, roads, fire departments, park districts, and county, city, village and township governments. • A MAJOR FACTOR determining if you can afford a house • Divide tax amount by 12 and then add that to your monthly payment

  21. Home Inspection and Appraisal • Home Inspection: paid for by the bidder, the buyer • Ensures the home meets all your expectations, codes, safety (checks roof, heater, A/C, plumbing, overall condition of home) • Allows the buyers to back out of bid if there is something they do not like • Appraisal: the value of your home as calculated by the local government

  22. Making the Bid • Try to line up data on at least three houses that have sold recently in the neighborhood. Calculate the difference between the original list price and the final price of the homes sold. • Usually you will bid 5 – 15 % below asking price, leaving yourself a little room to negotiate after the HOME INSPECTION. • However, if it is a fair asking price and you are competing with other bids, you may want to give the sellers what they are asking • Be creative about finding ways to satisfy the seller's needs. For instance, ask if the seller would throw in kitchen and laundry appliances if you meet his price -- or take them away in exchange for a lower price.

  23. How a news story can DECREASE property value • Residents Ask State to Investigate "Diseased" Street • Last Edited: Monday, 09 Oct 2006, 10:46 PM EDTCreated: Monday, 09 Oct 2006, 10:46 PM EDT   • State health experts want to know why at least one resident in twelve homes on the same side of Schoolhouse Lane in Mt. Laurel, New Jersey have all fallen ill with cancer or a chronic disease.  In one instance, three separate owners of one house developed cancer, according to one area resident.   Each of the homes backs up to the Pennsauken Creek, which occasionally floods the properties.   The land used to be a farm and an industrial park sits on the other side of the creek.   So residents wonder whether the soil or water could be contaminated.   An informal survey revealed 29 cases of cancer as well as eleven gastrointestinal illnesses, seven neurological diseases and six pets with cancer.  “I don’t think it’s a coincidence,” said another resident.  “If it is, we're just asking the township or the state to prove us wrong."  Hear what’s next for the residents in this report from FOX-29’s Claudia Gomez. • http://www.myfoxphilly.com/myfox/pages/News/Detail?contentId=1132726&version=1&locale=EN-US&layoutCode=TSTY&pageId=3.2.1

  24. Home Equity Loan • A special kind of loan which is secured against a property and allows the owner to borrow and repay money to make improvements to the home.

  25. 10 priciest cities for renters* • Annual rent • New York**$2,469 • San Francisco$1,9478 • Los Angeles$1,5866 • San Jose,Calif.$1,487 • Orange County, Calif.$1,3876 • Boston$1,3322 • Oakland$1,2485 • San Diego$1,2133 • Washington, DC$1,2054 • Fort Lauderdale, Fla.$1,1349

  26. What is your home Worth? • www.zillow.com

  27. Value of land • http://video.msn.com/v/us/msnbc.htm?g=fc562861-0a3c-4b25-be7f-2a7ffc709a93&f=00&fg=copy

  28. Top 10 cities: Where to buy nowThe real estate slump could get worse before it gets better. But these 10 markets offer great opportunities for those who have the patience to buy and hold. • http://money.cnn.com/popups/2006/biz2/newrules_bestinvest/index.html

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