Your First Home By the Book

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Your First Home: Home Buying by the Book

Introduction

After Hurricane Katrina destroyed theirbeloved New Orleans, many formerresidents were asked the followingquestion:

Besides L-O-V-E what do you identifyas the most important four-letter word?

The unanimous answer was simplyH-O-M-E


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Introduction

Think of a few words to describewhat having a home of your ownmeans to you.Lets take a few moments to shareour thoughts aloud.


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Overview

Today well talk about some commonfears and helpful facts about buying ahome.Well also discuss eight simple steps tosuccessful home ownership.


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Fears and Facts About Buyinga Home

Fear: I cant afford to buy a home rightnow.Fact: Actually, you cant afford not tobuy a home right now.

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Fear: I should wait until the real estatemarket gets better .Fact: There is never a wrong time tobuy the right home.

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Your First Home : Home Buying by the Book


Fear: I dont have the money for thedown payment.Fact: There are a variety of downpayment options available to you.

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Fear: I cant afford to buy my dreamhome.Fact: The best way to get closer tobuying your dream home is to buy yourfirst home.

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Eight Steps to HomeOwnership

1. Decide to buy.2. Hire your agent.3. Secure financing.4. Find your home.5. Make an offer.6. Perform due diligence.7. Close.

8. Protect your investment.Appears on Page19


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Decide to BuyFinancial net worth comparison,according to the U.S. FederalReserve Board of Consumer Finance:

Average net worth of renters = $4,000Average net worth of home owners =$184,400

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A home is the largest financial assetmost people have due to equity andappreciation over time.

Historical appreciation rate is 5 to 6percent .

This means that a home purchased for$150,000 would grow to a potential value

of $861,000 in 30 years!Even at 3% annual appreciation, a homepurchased for $150,000 would grow to$364,000 in 30 years.

Decide to Buy


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Decide to Buy

Buying your first home is an emotionaldecisionHome is where the heart is.

A home represents your personal tastesand provides a haven of stability andsecurity for both you andyour loved ones.Provides a pride of home ownership,because its yours.


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Decide to Buy

Its also a rational decisionHome iswhere your wealth is.

Grow wealth via equity buildup, debt paydown, and value appreciation.In the United States, you can takeadvantage of tax-deductible benefits suchas property and mortgage interest write-offs.


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Decide to BuyHome is where your wealth is.(continued)

A home is an accidental investment thatcreates leverage opportunities.Examples:

In a few years, you can use your equity totrade up to a better home.

Or, you might consider using some of yourhome equity to invest in a rental property ora second home.


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Decide to BuyWhy pay rent when you can own?

If you took out a 30-year fixed-ratemortgage for $150,000 and made monthlymortgage payments of $900

Youd pay $324,000 in mortgage andinterest payments over the life of the loan.And after 30 years youd own a home withan appreciated value potential of $364,000 (on the low end at 3% annual appreciation)or $861,000 (on the historical norm of 6%annual appreciation).

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Decide to Buy

Compare that to paying $800 permonth in rent over 30 years

Even if your landlord improbably never raised rent,you would still spend $288,000 andown nothing!

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Hire Your Agent

Real estate agents perform 7 mainroles:

1. Educate you about the market2. Analyze your wants and needs3. Steer you to homes that fit your criteria4. Coordinate the work of other needed

professionals5. Negotiate on your behalf 6. Review paperwork and deadlines7. Solve any problems that may arise

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Secure Financing

Six steps to financing a home :1. Choose a loan officer (or mortgage

specialist).2. Make a loan application and get

preapproved.3. Determine what you want to pay and

select a loan option.

4. Submit to the lender an acceptedpurchase offer contract.5. Get an appraisal and title commitment.6. Obtain funding at closing.

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Secure Financing

Know your mortgage options. Three basic factors:

1. Down payment2. Interest rate3. Term

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Secure Financing

Understanding your monthlypayment:

Principal

Interest TaxesInsurance

Together, these four elements are commonlyreferred to as PITI .

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Secure Financing

Prequalification vs. preapprovalPrequalification is simply a roughestimate of how much you can borrow.Preapproval involves a formalapplication process and provides youwith a formal commitment from a lender

stating how much you can borrow andat what rate.Appears on Page60


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Secure Financing

Deciding among your mortgage options:If you wantA low monthly payment put more moneydown or purchase a more affordable home.

A low down payment secure a secondmortgage or an 80-15-5 piggyback.

To build equity quickly make voluntaryprepayments.

To minimize risk take a 30-year fixed-rateprogram with 20 percent down.

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Secure Financing The suitcase principle

Your lender decides what you can borrow, butyou decide what you can afford.In your preapproval letter, make sure themonthly payment is an amount yourecomfortable paying each month.Its best to spend no more than a third of yourgross monthly income on your home payment.

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Find Your HomeDefine your home criteriaanalyze yourvalues, needs, and wants.Consult with your agent to understand therules of your market.

Appears in Chapter 4


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Find Your HomeWhen viewing a home, what you considerand what your agent considers aredifferent.

Youll want to look forLayout, space, a sense of value, convenienceof location to work and schools, and featuresand amenities.

Your agent will look forHow the home compares in terms of size,layout, and value to other homes in the area,as well as maintenanceand structural concerns.

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Make an Offer

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Whats a fair price?Lets take a look at a pricing scenarioon the next slide.


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Perform Due Diligence

Property inspectionexposes anystructural or hidden issues.Home owners insurance policyprotects against loss or damage.


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Perform Due Diligence

In your inspection, its the big stuff thatreally matters.

Cracks or crumbling in the foundationCracks inside the house over windowsWater stains in ceilings, floors, or wallsFaded or worn shingles

Mold issuesAppears on Page 111


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ClosePreclosing responsibilities include:

Appraisal, survey, title search, and titleinsurance.Keeping yourself mortgage worthy!Doing a final walk-through of home.

Countdown to closing includes:Getting your settlement statement,certified funds, evidence of insurance,and transferof clear title.

Appears in Chapter 7


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Protect Your Investment Two keys to good home habits:

1. Keep it clean.Perform routine maintenance on yourhomes systems, depending on their ageand style.

2. Keep an eye on it.Watch for signs of leaks, damage, and

wear. Fixing small problems early cansave you big money later.Tip : Keep a file of receipts for your repairs.Appears on Page 133


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Free Copy of Your First Home

If you would like a free copy of the bookYour First Home , come and introduceyourself.

Thank you for your time and good luckwith your home search.Keller Williams associate contact info

Name: Kirk M RauPhone number: 253.376.5475

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Your First Home By the Book

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