Home Buying

Matt Wilson

3 Types of Homes

Condominium: 1 housing unit in a complex of multiple housing units
  • Inexpensive & convenient, but limited & small, carrying no land

Townhomes: terraced housing that is usually skinny & multi-story; commonly urban

  • Very convenient & can be inexpensive, but is close-quartered, possibly expensive, and usually has no other land

Single-family Homes: free-standing residential buildings, oftentimes with surrounding property

  • Larger, purchased with land, & has more independence, but is more expensive & requires upkeep

Components of a Mortgage Payment

Includes: Principal, Interest, Taxes, & Insurance

  • Principal: amount that pays down the outstanding loan amount

  • Interest: the cost for borrowing money, paid proportionately

  • Taxes: money paid to the government, in this case property tax

  • Insurance: financial protection from risk

2 Types of Mortgages

Fixed Rate: interest you're charged stays the same for a number of years
  • Consistent & easy to budget, but typically higher than variable & no benefit from falling interest rates

Variable Rate: interest you pay is subject to change
  • There is freedom; you can overpay or leave at any time. However, rates can be changed at any time

3 Common Mortgage Mistakes

Failing to Check Your Credit
  • Being able to take out a mortgage loan begins with credit
  • Check your credit score
  • Stay on top of payments

Overspending on a Bigger Home
  • Tempting to stretch money for larger house
  • Can end up having little money for other necessities
  • Carefully evaluate your family's needs

Choosing the Wrong Loan
  • Evaluate costs and benefits of all options
  • Read fine print
  • Plan accordingly to needs and budget

More Qualifying and Lending

Mortgage Qualifying Ratios

  1. Housing Ratio: monthly expenses divided by monthly income
  2. Debt Ratio: total monthly debt divided by monthly income

Both ratios are equally important in qualifying for a mortgage

Private Mortgage Insurance

  • Protects the lender from losing money if the borrower ends up in foreclosure
  • Taken when down payment is less than 20%

Title Insurance

What is it?
  • Paid for by the buyer, protects lender and buyer
  • Needed when there is a loss of ownership interest while property is under mortgage
  • Prevents any unknown claims made to the ownership of your home
Why is it important?
  • Protects you from consequences of actions taken by previous owners
  • Compensation for consequential damage