1 / 18

Ch 8: Independent Living

Ch 8: Independent Living. 8.4 Purchase a Home. Answer the following in your groups…. What will the American dream cost you? What are some recurring and nonrecurring costs that you are responsible for now? Why is it important for a prospective buyer to have a title search?

livia
Télécharger la présentation

Ch 8: Independent Living

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Ch 8: Independent Living 8.4 Purchase a Home

  2. Answer the following in your groups… • What will the American dream cost you? • What are some recurring and nonrecurring costs that you are responsible for now? • Why is it important for a prospective buyer to have a title search? • What are some financial responsibilities that are paid in arrears?

  3. Investigative questions to think about • What would be most important to you on this list??? • In other words, what are your “must haves” • Talk with your groups

  4. Cost is most important • Two categories: recurring costs and nonrecurring costs • Recurring costs = costs that occur o a regular basis (Every month, every year etc.) • Ex: mortgage payment, insurance payments, property taxes • Nonrecurring costs = one-time only costs • Ex: closing costs, moving costs • Closing is a meeting attended by the buyer, seller , their attorneys and a representative of the lending institution • this is where the official sale takes place • Closing costs are costs that have to be paid to close the sale

  5. Closing Costs can include the following… • Earnest Money Deposit – money paid to the seller by an interested home buyer to show that they buyer is serious about buying the home • Attorney Fees – fees paid to the attorney in return for representation at the closing • Origination Fees – money paid to the lending institution for the paperwork involved in the loan application process • Title – the legal claim of property ownership • Before property changes hands, a title search is conducted to be sure that the seller actually holds the title to the property being sold

  6. More on closing costs • Points – extra fees charged by the lending institution for the use of their money. Each point is equivalent to 1% of the loan amount. There are two types of points: • Origination points are points collected from the buyer as a means of paying for the loan application process • Discount points are points that reduce the interest rate of the loan • Prepaid Interest - • Transfer Tax – fee that is charged for the transfer of the title from the buyer to the seller

  7. Example 1 • Leah and Josh are buying a $600,000 home. They have been approved for a 7.25% APR mortgage. They made a 15% down payment and will be closing on September 6th. How much should they expect to pay in prepaid interest at the closing?

  8. Check your understanding • How much will be charged in prepaid interest on a $400,000 loan with an APR of 6% that was closed on December 17?

  9. Example 2 • Leah and Josh know that they will have to bring their checkbook to the closing. What might they expect to pay in total at the closing?

  10. Check your understanding • Shannon had to make a down payment of 15% of the selling price of her house. She was approved for a $340,000 mortgage. What range of costs might she expect to pay at the closing?

  11. Example 3 • Trudy and Tom have been approved for a $300,000, 15-year mortgage with an APR of 5.75%. How much of their first monthly payment will go to interest and principal?

  12. Check your understanding • What percent of the monthly payment went to principal and what percent went to interest?

  13. Example 4 • How can Trudy and Tom get an accounting of where their monthly payments will go for the first year of their mortgage? • We will use an amortization table (a listing of the unpaid principal, monthly payment, amount allocated to paying down the pricipal and the amount allocated to interest)

  14. Example 5 • Trudy and Tom decide to make an extra payment of $100 each month to reduce their principal. They adjust their spreadsheet as shown. What formula change(s) did they make in row 6 so that the extra payment could be accounted for?

  15. Adjustable Rate Mortgages (ARMs) • Previous examples were all fixed rate mortgages • In an adjustable rate mortgage(ARM) the interest rate can change periodically which means the monthly payments will change as well • Lenders quote you an initial rate that stays in effect for a specific amount of time (can be 1 month to several yrs) • Monthly payment is based on initial rate • The period between rate changes in known as the adjustment period • Hybrid ARMS are a combination of a fixed rate period of time with an adjustable rate period of time

  16. Example 6 • Chris and Gene have a 6-month adjustable 15-year mortgage. They borrowed $300,000 and were quoted an initial rate of 5%. After 6 months, their rate increased by 1%. Examine the following spreadsheet for the first year of payments. How were the amounts for payment 7 calculated?

  17. Check your understanding • How much of a difference did the 1% adjustment in interest rate make in the monthly payment and the amounts towards interest and principal?

  18. Ch 8 Asnmt 4 • Pg 420 #2, 4-7, 9, 11, 13

More Related