Financing a house

Financing a House

Agenda  Renting vs. Buy House  Renting house

 Lease, Security Deposit, Renter’s Insurance

 Buying house

 Guidelines (Inspection, Location, Down Payment, )  Financing Options (Mortgage, Home Equity Loan, Buy-down, Refinancing, Renting part of the house)  Property tax, Homeowner’s insurance  Selling house (owner, real estate agent)

 Tax Credits

 First time home buyer tax credit  Energy efficient (wind, solar panel, insulation)

Renting vs. Buying House Renting  Advantages  Easy to move  Fewer maintenance responsibilities  Minimal financial commitment

 Disadvantages  No tax benefits  Remodeling limitations  Restrictions regarding pets and other activities

Buying  Advantages  Ownership asset  Financial benefits  Lifestyle flexibility

 Disadvantages  Financial commitment  Higher living expense  Limited mobility

 Lease

Renting a House

 defines the conditions of a rental agreement in a legal document

 Security Deposit  typically one month’s rent, this payment is required when the lease is signed and is held by the landlord to cover the cost of any damages

 Renters Insurance  insurance for all of your possessions inside your unit, even if the building itself is insured

 Utilities  costs that may include electric, heat, water, garbage service, television, telephone, and internet 4

Buying a House  Five steps to buying a house  Determining Home Ownership needs  Choosing a house and location that comes closest to meeting your needs at your given price range.

 Find and Evaluate a Property to Purchase  Consider a real estate agent and visit multiple properties for sale.

 Price the Property  Determine market pricing, inspect the house, and make an offer.

 Obtain Financing  Down payments, mortgage research

 Close the Purchase Transaction  Obtain funds, sort out remaining questions, and arrange a closing date.

Determining Initial Payments  Down Payment  Establishing a fair down payment

 Taxes  Closing Costs  Determining who will pay to get the house up to code

Mortgages And Other Financing Options

Types of Mortgages  Mortgage – a long term loan on a specific piece of property such as a home or other real estate.  Fixed-rate mortgage  Adjustable-rate mortgage  Convertible ARMs – change adjustable-rate mortgage to fixed-rate mortgage

Buy-Down  Reduced mortgage payments during the first few years of the loan.  After the buy-down period, the mortgage payments increase to the level that would have existed without the financial assistance

Shared Appreciation Mortgage  Mortgage where the lender is entitled to some of the future increase in value of the house, resulting in lower interest rates and payments.

Home Equity Loan  Second mortgage  Way for homeowners to get a loan using the value of their home as collateral.  Loan is determined by the paid value  Risk losing house if required payments are not made on both mortgages.

Mortgage Refinancing  Obtaining a new mortgage with a lower interest rate

Tax Credits  Home Energy Efficiency Improvement Tax credits  Residential Renewable Energy Tax Credits

Home Energy Efficiency Improvement Tax credits  30% of cost, up to $1,500  Biomass Stoves  Heating Ventilating, Air Conditioning (HVAC)  Insulation  Roofs (Metal and Asphalt)  Water Heaters (non-solar) Central AC  Windows and Doors

 December 31, 2010 Natural gas furnace

Electric water heater

Residential Renewable Energy Tax Credits  30% back with no upper limit  Geothermal Heat Pumps  Residential Wind Turbines  Solar Water Heater –Fchart

 December 31, 2016

Wind energy for electricity

Ground heat for HVAC

Solar Panel for electricity

Selling a House  Preparing to sell  make any repairs needed and keep the house in optimum condition by cleaning and removing excess items

 Appraisal  an estimate of the current value of a property

 Sale by owner  in order to forgo paying a real estate agent approximately ten percent of the profits, you can advertise your own home by posting information in public places and newspapers

 Sale by agent  find an agent that provides the best services for the lowest interest rates, and pay special attention to their knowledge of the area and 16 16 their enthusiasm

Citations      

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Amadeo, Kimberly. "Fixed Rate Mortgage." About.com. N.p., n.d. Web. 7 Oct. 2010. <http://useconomy.about.com/od/glossary/g/fixed_rate.htm>.

"The Basics of Renters Insurance." Insure.com. N.p., 23 May 2010. Web. 6 Oct. 2010. <http://www.insure.com/articles/homeinsurance/renters.html>.

"Buying versus Renting." Ginnie Mae. N.p., n.d. Web. 6 Oct. 2010. <http://www.ginniemae.gov/rent_vs_buy/rent_vs_buy.asp?subtitle=ypth>.

"Federal Tax Credits for Consumer Energy Efficiency." Energy Star. N.p., 15 Feb. 2010. Web. 7 Oct. 2010. <http://www.energystar.gov/ index.cfm?c=tax_credits.tx_index#chart> "Money101 Lesson 8: Buying a Home." CNNMoney: n. pag. Web. 6 Oct. 2010. <http://money.cnn.com/magazines/moneymag/money101/lesson8/index.htm>.

Quealy, Kevin, and Archie Tse. "Is It Better to Buy or Rent?" The New York Times 21 Apr. 2010: n. pag. Web. 6 Oct. 2010. <http://www.nytimes.com/ interactive/business/buy-rent-calculator.html>.

"Risks of Home Equity Loans." Mortgageloan.com. N.p., n.d. Web. 7 Oct. 2010. <http://www.mortgageloan.com/risks-of-home-equity-loans>.

"Tax Breaks." US Department of Energy. N.p., n.d. Web. 7 Oct. 2010. <http://www.energy.gov/taxbreaks.htm>.

Weston, Liz Pulliam. "10 Ways to Sell Your Home Faster." MSN Money 27 Apr. 2009: n. pag. Web. 6 Oct. 2010. <http://articles.moneycentral.msn.com/Banking/ HomebuyingGuide/10WaysToSellYourHomeFaster.aspx?page=1>.

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