Home Buying the Best Investment

BALANCING LIFE’S ISSUES, INC.

Objectives

Why a home is a good investment

What to consider before buying

How much house can you afford? 

Your Credit Score

What type of mortgage is best for you? 

Closing Costs 

Points and APR

Tax advantages 

Why a Good Investment?

Building “Equity”

By taking out a “Mortgage”

Historically home values have increased steadily

over the long term.

The only investment you can also live in.

What to Consider Before Buying

Down payment (5-10%)DebtStable IncomeHousematesHome MaintenanceAre you committed to living in the area long

term.

How Much House Can You Afford?

Initial costs to be considered: Down payment Closing costs Interest Rates

Ongoing expenses: Monthly mortgage payment (with escrows?) Homeowners Insurance Property Taxes Maintenance Expenses (or fees if condo) Unanticipated Expenses

Your Credit Score

Your credit score will effect your interest rate.

Know your credit history before applying for a

mortgage.

You are entitled to 3 free credit reports annually.

Be wary of for fee “Credit Monitoring Services.”

If you are applying for a joint mortgage – the lower

credit score will be the one considered for the loan.

Types of Mortgages

Fixed Rate Term = 15,20,30 year Equal installments

Pros Payments stay level overtime If interest rates go up your rate stays the same

Cons If interest rates go down, you would need to refinance to

get a lower rate

Types of Mortgages

Adjustable Rate Starts with a lower fixed rate for 1,3,5 or 7 years As interest rates go down your payments are reduced

Pros Good option for short-term ownership Benefits when rates go down

Cons Payment could increase after fixed term expires

Types of Mortgages

Balloon Mortgage Low monthly payments for

5-10 years One lump sum or “Balloon”

payment pays off all of the principal

Pros Some allow you to convert

to extend the loan

Cons If you find yourself short

when balloon is due you could lose your house

Interest- Only Low interest only payments

are made for 5-7 years Principal is paid in a lump

sum

Pros May be able to refinance

Cons If you can’t make final

principal payment you can lose home

You are not building equity

What are the advantages of “Pre-Approval”?

Paperwork

Borrower Employment

verification W-2 Statements Income tax returns for

at least 2 years Bank account

information Current debts and

credit card balances

House or Property Signed Sales Contract Survey Architects plans if new

construction Co-op and condos

require additional documentation

Do your homework Be prepared

Closing Costs

Appraisal

Attorney’s Fees

Inspections (termites,

radon, oil tank,

asbestos)

Filing fee

Mortgage Tax

Points

Real Estate Taxes

Title Insurance

Title Search

Points and APR

Points Up-front interest charges paid to the lender

Discount points Pre-paid interest

Origination points Like a commission

APR Annual Percentage Rate

When does it make sense to take points?

Tax Advantages

Mortgage Interest is Deductible

Discount Points are tax deductible (as long as not used for closing costs)

Depreciation of home

Home Buying the Best Investment

BALANCING LIFE’S ISSUES, INC