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Chapter 7. FINANCING A HOME

Evaluating different plans… Negotiating for the One that Best Suits Your Budget

A. How Home Financing Works1. Getting a New Home Loan2. Assuming an Existing Home Loan3. How Interest is Figured - Fixed and Adjustable (See Personal Action Worksheet, Text page 205)

B. Choosing Between a Fixed Rate Loan and an Adjustable Rate Loan, and Loan Costs

1. Acquisition Costs2. Insurance Costs3. Escrow (Reserve) Accounts

C. Other Important Loan Clauses

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D. Shopping For Home Financing

Where to Shop:

1. FHA and VA Loans

2. Conventional vs. Jumbo Loans

3. Ginnie Mae, Fannie Mae and Freddie Mac

4. RESPA - Settlement Costs

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6. Interest Rates

7. How Much Down Payment?

8. How Long Should the Loan Run? 15 years? 30 years?

9. What Other Services Can the Lender Offer You?

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E. Making the Application

F. Creative Financing - When All Else Fails

G. Tax Complications

H. Timing, Timing, Timing

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TALKING POINTS…Chapter Seven, Number One

You are shopping for a home loan. The home will cost $150,000, and you have $15,000 available for a down payment. You are made the following offers. How would you evaluate them?

1. A 30 year loan at 8% interest, fixed for the full term. No points.

2. A 30 year loan with a fixed rate of 7.5%, fixed for five years and then becomes adjustable at the going rates at that time. One point.

3. A 30 year adjustable rate loan starting at 7%, and adjusting every six months at the going rates at that time. Two points.

4. An interest-only loan at 6% from your family, to run for three years, after which you must refinance at the going rates and pay them off.

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TALKING POINTS…Chapter Seven, Number Two

You have made application for a $135,000 home loan at the lender of your choice. How would you react, in word and deed, to the following?

1. The lender tells you that they can extend a loan to you of only $120,000 at the quoted rate. If you want the full $135,000 you’ll have to come up with a co-signer.

2. The lender tells you that there is a bad report on your credit history. You were unaware of such a thing. As things stand, they can’t approve the application.

3. Your application is approved at an 8% rate, with a rate lock for 30 days. Rates have gone higher. With three days to go before the scheduled closing (and on which day the rate lock expires) the seller’s agent tells you that there have been some glitches, and the closing may have to be delayed for a week or two.