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BiG-Ticket purchase: home
Transcript of BiG-Ticket purchase: home
Go back to the beginning and basics in home purchasing
FICO score.....big factor in determining your mortgage interest rate...Do you know your FICO score yet???....HINT: free credit report.
Pay down your credit card balance. FICO increases and the more options among lenders you will have.
Assemble a team
Crucial member of the team. He/she is going to shop around at different lenders for the east deal. Ask to be pre-qualified so you know you will be able to obtain a loan for the amount you want based on your income. FICO score, etc.). You can "lock in" a rate for 60 days where you must either buy or loose the rate guarantee.
Your Mortgage Broker will be focusing on the FICO score. Best way to secure a best loan is to have a score above 760'
Set your own budget:
how much you can borrow may not be all you can afford...there are extras....
monthly property tax $156,
monthly homeowners insurance $38,
Monthly PMI $65, Home repairs: $125.
Total Monthly payments: 1,239.00
All mortgages are for a finite period of time, known as the
You are required to pay the loan at the end of the term. Options 30,20,15 years.
original loan amount
is known as the
payments are the
additional amount paid to the lender for lending you the principal amount
: the interest rate will never change, therefore, your payments for the entire period will never change.
Adjustable-rate Mortgage (ARM)
: initial rate lower that the fixed rate. Respect the word "adjustable"...the interest rate will change typically once a year (known as one year ARM) with an annual maximum change of two percentage points.
initial is fixed for a period of 3,5,7 or 10 years. After that period, the loan converts into an ARM that starts adjusting after 1 year. For example 5/1 ARM...fixed for 5 years and then adjustable-rate adjusted every year.
Mobility: moving is easier
Fewer responsibilities: regular cleaning
Lower initial costs: Security Deposits
Bringing Cash to the Table
Mortgage lenders will do
of the heavy lifting
You must come up with
10 to 20%
(magic number is 20%)
Ready? no rocket science here....
The more money you invest in the house upfront, the happier your lender will be....the likelier you are to stay in the house and the less likely you are to default on the loan.
renting or buying a home?
Selecting an Apartment:
2) Building Exterior
3) Building Interior
4) Apartment's Layout & Facilities
5) Financial Aspects
Few Financial benefits: no tax deductions (interest & prop taxes)
Restricted lifestyle: may not be able to have pets
*Lease agreement define the conditions of a rental (lease) agreement which may include conditions you may not want to accept. Negotiate.
*Most Leases are written but verbal leases are also valid
*Subletting (may or may note be allowable)
You are purchasing a $100,000 home.
You must come up with a percentage of the price in cash (down payment) and the rest can be financed with a loan (mortgage).
Down payment ranges from 3 to 20%.
Your down payment is $10,000 (10%).
If home value rises 4%, your home is now worth $104,000. Your investment was $10,000 and you just made $4,000 from that investment (40% return on your money).
Interest paid on mortgage as well as property taxes are tax-deductible.
If your down payment is less than 20%, the lender will likely require you to pay for Private Mortgage Insurance (PMI).
Closing Costs, are fees charged to get the deal done.
A few tips:
Play house before you buy: figure out the cost homes in the are you want to live. Estimate a basic mortgage cost. Add 40% to that sum. Subtract the your monthly rent payment from the sum. The difference is then deposited into a bank account, if you can make it every month for six months you are ready to buy...if not, then you are not ready yet.
Talk with your real estate agent and share your budget. You are not to be shown a house above your budget...too tempting and too frustrating
To make an informed offer, keep track of what is happening...here is what you need to track:
How many weeks are the houses on the market before they sell? On the rise = buyer's market falling = seller's market
If homes are selling above or below their asking price, then by how much above or below? If above seller's market if below, buyer's market. Best is when homes staying on the market longer before they sell and also selling below their asking price = buyer's market.
Get at least two 'comps' from your agent. Comparable sales - how much similar homes have sold for recently so you know what your bid should be.
Every bid should include a contingency clause that the home must pass a structural inspection.
Once bid is accepted and before you show up at the closing, make sure you and your agent do a final walk-through of the house to make sure everything is in good shape...for example the seller may have scraped the walls while moving out so you would need to ensure the walls are repaired before the closing date.
Best big ticket purchase you will ever make. After you have maxed out on your company's 401k and after your credit cards have been paid off...then, focus on buying a house.