1 / 30

Home Buying Guide: Affordable Financial Planning Tips

Learn how to determine what home you can afford with lending standards, factors affecting affordability, steps in the home buying process, and guidelines for renting and negotiating prices. Understand mortgage options and make informed decisions to secure the best deal.

oke
Télécharger la présentation

Home Buying Guide: Affordable Financial Planning Tips

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. Car & Home DecisionPart 2 Financial Planning - Yates

  2. Determining What’s Affordable: Lending Standards 1. Financial history: • Income stability • Credit history 2. Ability to pay: • Housing cost ratio at a maximum of 28% of gross income • Housing and other long-term debt ratio at a maximum of 36% of gross income 3. Appraised home value Yates

  3. Determining What’s Affordable: Other Factors • Calculation of your mortgage limit: • 28% rule (front-end ratio) • 36% rule (back-end ratio) • 80% rule (home-equity rule) • Prequalification, or knowing for sure what is affordable Yates

  4. Determining What’s Affordable: Other Factors (cont’d) • Accumulation of a down payment: • Down payment sources and “gift letters” • FHA, VA, and FmHA federally-backed loans require a lower down payment • Private mortgage insurance (PMI) • IRA loan of up to $10,000 for first-time homebuyer Yates

  5. Housing Step 2: Selection • The search process: • Use a traditional real estate agent • Use an independent or exclusive buyer-broker • Use the Internet to learn about buying a home • The inspection process: • Structural • Mechanical Yates

  6. Housing Step 3: Making the Purchase • Guidelines for renting • Negotiating a sales price • Signing the sales contract • Financing the purchase – the mortgage Yates

  7. Guidelines for Renting • Determine what you can afford. • Compare the location with shopping, employment, and schools. • Understand the lease. • Get every detail in writing. • Research the reliability of the landlord. • Acquire renter’s insurance. Yates

  8. Negotiating a Sales Price • Always haggle on the actual purchase price and counteroffers. • Include all contingencies. • Consider closing costs. • Offer earnest money. • Note: You may never see the seller because often the real estate agents carry the offers between parties. Yates

  9. Signing the Sales Contract • Always have a fixed price. • Do a title search. • Perform a pest or other inspection. • Make the contract contingent on receiving the proper financing. Yates

  10. Signing the Contract (cont’d) • Divide the utilities, insurance, taxes, and interest equitably with the seller. • Stipulate the condition of the dwelling upon transfer. • Include all other contingencies that may interfere with a satisfactory purchase. Yates

  11. Financing the Purchase • Shop for the lowest interest rate. • Determine where you want to finance. • Determine the length of the mortgage. • Choose the type of mortgage. • Note: Make sure you understand every aspect of the mortgage before you sign. This could be your largest purchase ever. Yates

  12. Sources of Mortgages • Mortgage bankers • Mortgage brokers Yates

  13. Conventional or Government-Backed? • Conventional • Veteran’s Administration (VA) mortgages • Federal Housing Administration (FHA) mortgages Yates

  14. Government-Backed Mortgages • Advantages: • Lower interest • Smaller down payment requirement • Less strict lending standards • Disadvantages: • More paperwork to qualify • Higher closing costs • Maximum lending limits Yates

  15. Types of Mortgages • Fixed-rate mortgage loans • Adjustable-rate mortgage (ARM) loans • Other mortgage loan options Yates

  16. Fixed-Rate Mortgage Loans • Assumable loans – allow for transfer of the mortgage with the home • Prepayment privilege – allows the payee to increase the monthly payment without a fee Yates

  17. Adjustable-Rate Mortgage (ARM) Loans • Initial rate – the first rate on the mortgage, usually short-term • Interest rate index – determines annual rate adjustment • Margin – the difference between the index rate and the quoted rate • Adjustment interval – the length of time between adjustments Yates

  18. Adjustable-Rate Mortgage (ARM) Loans (cont’d) • Rate cap – the maximum rate increase allowed either per year or over the life of the loan • Payment cap – the maximum allowable payment amount. Normally not a desired feature due to the risk of negative amortization. Yates

  19. Convertible Reduction-option Two-step Price level adjusted ARM Innovations Yates

  20. Other Mortgage Loan Options • Balloon payment mortgage • Graduated payment mortgage • Growing equity mortgage • Shared appreciation mortgage Yates

  21. Adjustable-Rate Versus Fixed-Rate Mortgages • Fixed-rate issues to consider: • Fixed payments • Lower interest rate risk • No risk of negative amortization • Adjustable-rate issues to consider: • Lower initial interest rate • May qualify for a larger loan due to lower monthly payments • With rising rates, rising payments Yates

  22. Mortgage Decisions:Term of the Loan • 15-year advantages: • Less total interest paid • Faster equity accumulation and payoff • Lower interest rate • 30-year advantages: • Lower monthly payments increase affordability and financial flexibility • Higher time value of money • Greater tax advantages due to interest payment deductions Yates

  23. Mortgage Decisions:Term of the Loan (cont’d) Two other considerations: • Time value of money • The effect of taxes Yates

  24. Housing Step 4:Post-purchase Activities • Time and money for upkeep and maintenance • Refinancing your mortgage: • 2% rule • Closing costs Yates

  25. Summary • Smart buying: Your automobile: • Step 1: Do your homework to narrow your car choice. • Step 2: Make your selection. • Step 3: Make your purchase. • Step 4: Maintain your purchase. • Step 5: Consider consumer protection and your car. Yates

  26. Summary (cont’d) • Choosing a vehicle: • Consider your needs versus your wants. • Look at the alternatives. • Fit your car into your budget. • Do your comparison shopping via the internet or publications. • Determine what is available in your price range. • Test-drive the exact vehicle you are considering. Yates

  27. Summary (cont’d) • Deal negotiation: • Take advantage of sales, but always negotiate the price. • Know the dealer’s cost of the vehicle. • Understand the various dealer markups. • Be aware of any rebate that may apply. • Evaluate financing. • Leasing alternatives: • Closed-end leases, or walk-away leases • Open-end leases • Alternatives Yates

  28. Summary (cont’d) • Smart buying: Your housing: • Step 1: Homework • Step 2: Selection • Step 3: Making the purchase • Step 4: Post-purchase Yates

  29. Summary (cont’d) • Choosing a housing type: • Decide on the fundamentals such as bathrooms, bedrooms, and closet space. • Decide on property size. • Compare other considerations like school systems, or proximity to shopping centers. • Buying versus renting: • Personal and lifestyle considerations • Financial considerations • Activities Yates

  30. Summary (cont’d) • Types of mortgages: • Fixed-rate mortgage loans • Adjustable-rate mortgage (ARM) loans • Other mortgage loan options • Sources of mortgages: • Mortgage bankers • Mortgage brokers • Conventional mortgages • Government-backed mortgages Yates

More Related