Chapter 6: Sections 1- 2
Own a home or car
Section 1: Borrowing to Buy a Home
Down payment - the percentage of the total cost of the house paid at the time of purchase, to the lender.
Mortgage Loan - a loan taken from with a bank or another lender that the balance of the purchase price (after the down payment) is usually borrowed through.
Principal - money that is borrow
Closing costs - are fees and expenses paid to complete the transfer of ownership of a home.
What to do:
To calculate the amount of the loan you need, subtract the down payment from the purchase price
Mortgage loan = purchase price - down payment
To calculate the amount of money you need to buy a home, add the down payment and closing costs.
Cash Needed to Buy a Home = Down Payment + Closing Costs
Jake Mcklane is buying a home for $74,000. She will make a 20% down payment and estimates closing costs as:
Legal Fees = $950
Title Insurance = $140
Property Insurance = $250
Inspection = $175
Loan Processing Fee = $84
Recording Fee = $740
What amount of money will she need to borrow for her mortgage?
What amount of cash will she need when she buys the house?
Multiply the purchase price by the down payment percent.
0.2 x $74,000 = $14,800