Math 1050 Project

PART #3

Insight's

Home Purchasing Basics

• Determine that you really want a home. • Figure out how much you can afford for a

home loan. • Apply for the home loan. • Preview homes that fit your criteria (location,

price, suitability, and availability). • Negotiate the best deal for you.

Types of Loans

• Conventional loans (Fannie Mae, Freddie Mac)• FHA loans• VA loans• USDA Rural Housing loans• First time Homebuyers loan• There are others. These are the main ones

VA Loans

How to get a Home Loan

•APPLY!!!!!!!

Mortgage Checklist

1. Proof of residence for the past two years.2. Copy of paystub covering the most recent 30 day pay period. 3. Copy of previous 2 years w-2 and 1045 tax return

statements.4. Employer’s name, address, and phone number for the past 2

years.5. Copy of past 2 months bank statements for all asset

accounts. 6. Copy of the most recent quarterly statements for other cash

assets. 7. Copy of transcripts/ Diploma

Summarized results

When I began this project, I had an idea as to what I thought were the pro’s and con’s of buying vs.

renting.As the project went on, my eyes were opened to

just what the differences are.My mind was changed as to the different reasons for

someone to buy or rent, but in my research the resolve to buy vs. rent was strengthened by the

information that I came across.

Buying

• These are the positive aspects of buying:• Pros:

1. It is something that you own.2. Not wasting money by throwing it away

in rent. 3. Claim on tax return.4. More room.5. Can do what you like with your own house.

Buying

• These are the negative aspects of buying:• Cons:

1. Usually a large down payment. 2. More expenses. 3. Harder to sell if wanting to move. 4. Harder up-keep. 5. More up-keep.

Renting

• These are the positive aspects of renting:• Pros:

1. Hardly any money down. 2. Small monthly payment. 3. Able to easily move. 4. Hardly any up-keep (apartment

complex is responsible for maintenance and grounds.

5. No yearly taxes.

Renting

• These are the negative aspects to renting:• Cons:

1. Wasting money. 2. Not much privacy. 3. Renter’s rules. 4. Parking space and not being covered. 5. Lack of total space(living and storage)

Things that affect the house you can afford buy:

1. How much you make 2. Debt to income ratio3. Your credit rating 4. Location5. How much you can put down 6. Interest rate7. Sweat equity8. Negotiation skills9. Market value10. Whether purchasing from a bank

or an individual

15 vs. 30 year home loan

15 year home loan• Lower interest rate• Higher monthly payment• Less paid towards interest in

the life of the loan• Pay loan off quicker• Paying more on principle

than interest with the first payment

30 year home loan• Smaller monthly payment• Easier to pay additional

payments if want too. • Higher interest rate• Pay more interest in life of

the loan• Takes until payment #159

for the amount to principle to be more than the amount to interest

Example of payments$170,000 mortgage

15 year home loan (4.24%)• Monthly payment- $1285• Total interest over 15 years -

$ 60,300

30 year home loan (4.35%)• Monthly payment - $850• Total interest over 30 years -

$ 135,450

Results of paying $100 extra each month

• Will pay off loan around 1-2 years earlier.• Will pay between $5000 - $6000 less in

interest (many variables).

CONCLUSION

30 year loan

PROS • Lower monthly payments• Easily fits most budgets

CONS

• Higher interest rates• Longer time to pay off loan• Accrues more interest• Larger bottom line cost

15 year loan

PROS

• Home paid off faster• Smaller interest rate• Lower overall cost of home• Payment towards principal with

first payment

CONS

• Higher monthly payment

• Not in everyone’s budget

RENTING vs. BUYING

RENTING PROS• No large initial down payment• Easily fit into almost everyone’s

budget• Flexibility to move easily• No HOA/Insurance fees• No Property taxes

BUYING PROS• Investment in property/equity• Finite payment structure• Establishes credit• Peace of mind of payment going towards investment

Credits• Heath Bringhurst