M12: Purchasing and Leasing a Home

• Obtaining a mortgage is a crucial step in purchasing your first home, and there are several factors for choosing the most appropriate one. While the financing options available for first-time homebuyers can seem overwhelming, taking the time to research the basics of property financing can save you a significant amount of time and money.
• For many, buying a home is the single most important financial decision they will make in their lifetime. However, the process of becoming a first-time homebuyer can be overwhelming, and requires a foundation for basic home-buying knowledge. This lesson will provide students with information on buying a home and where and how to begin the process.
• Understanding the market where the property is located, and whether it offers incentives to lenders, may mean added financial perks for you. And by taking a close look at your finances, you can ensure you are getting the mortgage that best suits your needs.
• The short term arrangement of one party living in or using a piece of property owned by another party.

  Renting
• A regular payment made to a landlord by a tenant leasing property like a house or apartment

  Rent
• The person who owns the rental property.

  Landlord
• The person who is renting the place ( the renter).

  Tenant
• is a legal contract between the tenant and the landlord,

  specifying the responsibilities and rights of both parties.

  Lease
• One of the most basic considerations about housing is whether to rent or buy. Your decision will depend on your lifestyle and on financial factors.
• Renting is a good choice for your adults who are beginning their careers. It also appeals to people who want or need mobility ( the ability to move).

  Renting is also a good choice for people who do not want to devote time or money to maintenance. Because renting is often though not always cheaper than owning a home, it appeals to people whose funds are limited.
• In contrast, owning property also has advantages. It is a wise choice for people who want a certain amount of stability in their lives. Buying a home also gives the owner privacy and some freedom that may not be available to a renter.
• For example:

  You may not be allowed to have pets or large parties in an apartment, but you can do so in a house that you own. While ownership can be costly-at least in the short-run, it offers financial benefits, such as tax advantages.
• Housing Information Sources


  Libraries

  Newspapers

  Internet

  Friends and Families

  Real Estate Agents
• Housing Information Source that will probably have books and other basic resources on the subject.

  Libraries
• Housing Information Source where you can find articles on renting, buying and other housing topics in the reals estate section of a newspaper.

  Newspapers
• Housing Information Source that can provide home buying tips, the latest mortgage rates and information on available housing in your area.

  Internet
• Housing Information Source that can share some of their own housing choices

  Friends and Families
• Housing Information Source where you might seek the services of an experienced who is familiar with the local housing market.

  Real Estate Agents
• 10 Steps of Buying a Home

  1.Start your research early

  2. Determine How Much House You Can Afford

  3. Find and Evaluate a Property to Purchase

  4. Find and Evaluate a Property to Purchase

  5. Shop for Your Home and Make an Offer

  6. Get a Home Inspection

  7. Work with a Mortgage Banker to Select Your Loan

  8. Have the Home Appraised

  9. Coordinate the Paperwork

  10. Close the Sale
• As soon as you can, start reading Web sites, newspapers, and magazines that have real estate listings. Make a note of particular homes you are interested in and see how long they stay on the market. Also, note any changes in asking prices. This will give you a sense of the housing trends in specific areas.

  Start your research early
• After you have checked out the property as thoroughly as possible, it is time to consider making an offer to the current owner. This is usually done through a real estate agent unless the owner is acting as his or his own agent.

  Determine How Much House You Can Afford
• When you know what type of residence you would prefer and what you can afford, you will be able to start searching for a property to purchase.

  Find and Evaluate a Property to Purchase
• Real estate agents are important partners when you’re buying or selling a home. Real estate agents can provide you with helpful information on homes and neighborhoods that isn’t easily accessible to the public. Their knowledge of the home buying process, negotiating skills, and familiarity with the area you want to live in can be extremely valuable. And best of all, it doesn’t cost you anything to use an agent –they’re compensated from the commission paid by the seller of the house.


  Find the Right Real Estate Agent
• Start touring homes in your price range. It might be helpful to take notes on all the homes you visit. You will see a lot of houses! It can be hard to remember everything about them, so you might want to take pictures or video to help you remember each home.

  Shop for Your Home and Make an Offer
• Typically, purchase offers are contingent on a home inspection of the property to check for signs of structural damage or things that may need fixing. Your real estate agent usually will help you arrange to have this inspection conducted within a few days of your offer being accepted by the seller. This contingency protects you by giving you a chance to renegotiate your offer or withdraw it without penalty if the inspection reveals significant material damage.

  Get a Home Inspection
• Every home buyer has their own priorities when choosing a mortgage. Some are interested in keeping their monthly payments as low as possible. Others are interested in making sure that their monthly payments never increase. And still others pick a loan based on the knowledge they will be moving again in just a few years.

  Work with a Mortgage Banker to Select Your Loan
• Lenders will arrange for an appraiser to provide an independent estimate of the value of the house you are buying. The appraiser is a member of a third party company and is not directly associated with the lender. The appraisal will let all the parties involved know that you are paying a fair price for the home.

  Have the Home Appraised
• As you can imagine, there is a lot of paperwork involved in buying a house. Your lender will arrange for a title company to handle all of the paperwork and make sure that the seller is the rightful owner of the house you are buying.

  Coordinate the Paperwork
• At closing, you will sign all of the paperwork required to complete the purchase, including your loan documents. It typically takes a couple of days for your loan to be funded after the paperwork is returned to the lender. Once the check is delivered to the seller, you are ready to move into your new home!

  Close the Sale
• If you're looking for a home mortgage for the first time, you may find it difficult to sort through all the financing options. Take time to decide how much home you can actually afford and then finance accordingly. If you can afford to

  put a substantial amount down or have enough income to create a low LTV, you will have more negotiating power with lenders and the most financing options. If you push for the largest loan, you may be offered a higher risk-adjusted rate and private mortgage insurance.
• Weigh the benefit of obtaining a larger loan with the risk. Interest rates typically float during the interest-only period and will often adjust in reaction to changes in market interest rates. Also, consider the risk that your disposable income won't rise along with the possible increase in borrowing costs.
• A good mortgage broker or mortgage banker should be able to help steer you through all the different programs and options, but nothing will serve you better than knowing your priorities for a mortgage loan.