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Transcript of Mortgages
review your goals, why do you want to buy? Will you stay in one place for at least 5 years?
how much house can you afford? compare to current payment
Improve your credit rating (FICO of 740 + will get you best interest rate)
pay off debt, do NOT close accounts, you need the history of your credit
save lots - you need 20-25% down to be comfortable
decide on the type of house/mortgage, buy what you can afford and maintain
get paperwork in order - employment, taxes, etc.,
Check with your Bank first
pre-qualification and pre-approval
Fixed or Variable?
A fixed-rate mortgage is a loan that charges a set rate of interest that does not change throughout the life of the loan. It is the traditional loan used to finance the purchase of a home and is what most people have in mind when they think about a mortgage.
A variable-rate mortgage, also commonly referred to as an adjustable-rate mortgage or a floating-rate mortgage, is a loan in which the rate of interest is subject to change. When such a change occurs, the monthly payment is "adjusted" to reflect the new interest rate. Over long periods of time, interest rates generally increase. An increase in interest rates will cause the monthly payment on a variable-rate mortgage to move higher.
The Commission for Adult Learners
MoneyCounts: A Financial Literacy Series
In Collaboration with University Libraries
Dr. Daad Rizk
P = Principal
I = Interest
T = Taxes
I = Insurance
Private Mortgage Insurance (PMI if < 20% down payment)
design by Dóri Sirály for Prezi
What is a mortgage?
Ways to improve your chances of getting a mortgage - first time home buyers
Create a budget (Housing < than 28%-30% of net income)
Types of rate-mortgages /fixed/variable
Components of a mortgage (PITI) & down payment, closing cost
Amortization schedule and strategy to meet monthly payments
Diving into the process of buying a home!
The Pennsylvania State University
A debt instrument that is secured by the collateral of specified real estate property and that the borrower is obliged to pay back with a predetermined set of payments.
Mortgages are used by individuals and businesses to make large purchases of real estate without paying the entire value of the purchase up front.
Mortgages are also known as "liens against property" or "claims on property."
in the French language, mortgage means Death Pledge
The word means the deal dies when the debt is paid or the payment fails.
Ways to improve your chances of getting a mortgage
Loan amount: $165,000
Interest rate: 4.25%
Mortgage term: 30 years
Number of payments: 360
Monthly payment: $811.70
Total interest paid: $127,212.30
First-time Home Buyer - The Search Process!
Define search parameters
In person search
type of home and neighborhood
How long should it take to buy your first home?
How long do you want to spend searching?
How many homes are you willing to see?
How do you decide this is the home?
Take pictures, take notes, check the surroundings, rate each home on a scale of 1 to 10 and pick top choices
Visit top choices again to re-evaluate with open eyes and mind
Research the real estate tax and required insurance
Do not allow real estate agents to pressure you
work with a real agent you trust and comfortable with or hire your own agent
Keep searching till you are satisfied with your top choice
Resist falling in love with the house!
Making the offer, negotiating the terms, price, closing cost
Sticking to your budget/price range
First-time Home Buyer - Getting your "docs" in a row!
First-time Home Buyer -
The Art of Negotiation!
Your offer is presented to the seller who could either accept it, reject it or counter offer it....
Now it is your turn to do the same... Negotiation can be rough and time sensitive, so stay calm, remain flexible within your budget, always do the math...
Consider what you are willing to accept and what a deal breaker is to you
Make a list of terms (pros & cons)
keep your list handy and re-evaluate throughout the process
Once an offer is accepted, an agreement is reached, the contract is signed.
9 tips for first-time home buyers
Components of a mortgage
Loan amount: $165,000
Interest rate: 3.61
Mortgage term: 15 years
Number of payments: 180
Monthly payment: $1,188.49
Total interest paid: $48,928.09
Date Interest Principal Balance
Jul, 2013 $584.38 $227.33 $164,772.67
Aug, 2013 $583.57 $228.13 $164,544.54
Sep, 2013 $582.76 $228.94 $164,315.60
Oct, 2013 $581.95 $229.75 $164,085.85
Nov, 2013 $581.14 $230.56 $163,855.29
Dec, 2013 $580.32 $231.38 $163,623.91
Jan, 2014 $579.50 $232.20 $163,391.71
Feb, 2014 $578.68 $233.02 $163,158.69
Mar, 2014 $577.85 $233.85 $162,924.84
Application Fee ( cost of appraisal and credit report)
Sales contract signed by buyers and sellers
Social Security numbers of all applicants
Complete address for the past 2 years (Landlord info)
Employment information for past 2 years
W-2 for the last 2 years
Most recent year to date pay stub /current pay stub
Banking information, Saving accounts, checking accounts, for the last 3 months
Loans and LOC information
Family help and assistance (letter)
Tax information for the last 2 years
Things you must do throughout the process
Carefully review the good faith estimate
Get a house inspection
Understand any restrictive covenants or association rules
Do a final walk before you take possession to make sure no damage happened after closing date
Ask questions and do your own research for every step in the way
Tip: Shop for a loan before you shop for a property! this will guide you to make sound financial decisions.
Tip: Make a list of what you are looking for including location, type of a home, features, age, school district, neighborhood, real estate tax, insurance requirements, etc., and adjust as needed...
Tip: Some lenders allow you to pay your own property taxes and home insurance premiums, but they could also raise your interest rate to compensate! need to understand escrow arrangement!
Overview of the Cost
Down payment (20% of purchase price)
if not, expect .05% PMI
Closing cost (3%-5%)
if not, negotiate with seller
Inspection of the house (varies)
Application fee for loan
Moving expense into the new house
Increase your emergency fund saving by at least 5% to allow for unexpected house maintenance cost (15% instead of recommended 10%)
Trim your spending budget to allow for the increase
Wait at least 6 month to a year before you start making any major changes to your house
Do not acquire credit card debt to accommodate additional spending on the new house
Instead of making a monthly mortgage payment, send 1/2 of your mortgage payment every 2 weeks, you end up making 13 payments in the year instead of 12 payments. you reduce the life of your loan by 5 years
prepare different scenarios of payment to accommodate your long term goal, use online mortgage calculators to help you decide the best payment option for you and your family