Download HBW with speaker notes - North Carolina Cooperative Extension

Home Buyer Workshop
Jayne McBurney, M.S.
Family & Consumer Sciences Agent
Housing Counselor
919-989-5380
[email protected]
http://www.ces.ncsu.edu/johnston/
Jayne Makes Cents
@JayneMakesCents
Rent vs. Buy
Advantages to Rent
• Pay less
• Little financial risk
• Cost of selling
Disadvantages to Rent
• Finding suitable rentals
• No tax advantage
• No freedom for individualizing space
Rent vs. Buy
Advantages to Buy
• Investment of mortgage dollars
• Interest is tax deductible
• Home can increase in value
Disadvantage to Buy
• Commitment of time, etc.
• Ties up money
• Maintenance
Can you afford a home?
Consider that most lenders suggest that 2529% of your gross income will go to housing.
Lenders want to see less than 41% tied up in
long term debt (car loans, alimony, child
support, installment loans, credit cards)
What do lenders look at?
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Income
Debt
Assets
Credit Score
Understanding Income
Gross income
vs
Before taxes and deductions
Net Income
‘bring home pay’
$40,872 (2000 Census
for Johnston County)
$3406/month
$29,428
$786/wk
$566/wk
$2452/month
Monthly debts
• Should be less than 15-20% of net
income
• $368-490/month
Housing
25% - 33% of gross pay
$852-$1124/month
Vehicle
• less than 15% of gross including insurance,
gas and maintenance
•
$511/ month
The Steps to paying down debt
TALK
FIX
FIND
SMART
TRACK
ASSESS
STOP
STOP new purchases
• Average Credit Card Debt:
2008
$8,000
2010
$19,000 (January)
$15, 000 (October)
2014
$15,480
…in daily terms
Assess the problem
• How did you get there?
• Is it permanent or temporary?
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Job loss or lay off
Health/Accident
Divorce or death
Living too big: needs vs. wants
Spending problem
TRACK your spending
• Write down EVERYTHING you spend
• Use a calendar with due dates
– A wake-up call
• Make a budget: ABC
Fixed vs Flexible
• Fixed is NEEDS:
Rent, car, utilities, insurance, savings
• Flexible is WANTS:
Food, clothing, recreation, car
maintenance, phone
SMART Goals
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Specific: I need new brakes for my car in 6 months.
Measurable: They will cost $300.
Attainable: I will save $50/month for six months
Realistic: how will I get the $, look at spending
Time Bound: I will have the $ by x date
Find $
• Cable….movie packages
• Internet/Cell phone
Nails/ Haircut…can you wait a week?
• Daily lunch, at a modest $5 = $100 a month
• Vending machine: 1/day @ $1.50, $45/month
Easy Fix:
• Bring snacks from home in a cooler, save $30/mo
• Pack Lunch 3 days a week, save $60/mo
• If you have a smart phone, you may not need Internet
at home, save $45/mo
• Rent movies, save $25-$50/mo
• Have hair and nails done every ten days, save
$50/mo
• Paying down Credit Card debt
Talk
• Communicate with anyone who
depends on your paycheck about
spending issues and financial goals
Review the Steps
TALK
FIX
FIND
SMART
TRACK
ASSESS
STOP
Monitor and Modify
• Stuff happens….change in income, emergencies….
• Goals change
• But also….new income…SAVE IT!
• Is it worth it? - opportunity costs
BREAK
• Need one?
Assets/Collateral
Things you own that have value…
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Car, vehicles
bank accounts, CDs , stocks
retirement plans, 401K, IRAs
Life Insurance cash values, Trust funds
What is my Credit Score?
Score range: 300-850
• www.myFICO.com
Use the Credit Education tab
• www.annualcreditreport.com
Credit Score
Am ount ow ed
Lengt h of
Cr ed i t Hi st or y
Paym ent
hi st or y
New Cr ed i t
Typ es of
Cr ed i t i n Use
How much can I buy?
Ratios help lender determine this:
• Front end:
29% of gross income
• Back end:
41% of gross income,
less monthly debt
Considering median income of
$40,872
• Front end:
$988
• Back end:
$1396
-250 car payment
-400 other debt
$ 746
P+I+T+I
Monthly payment =
• Principal
• Interest
• Taxes
• Insurance
Using the lower of the two
ratios:
• Total Payment
less
• Real Estate Tax
• Home Owner Insurance
• Principal & Interest
$746
85
40
$621
use this amount to determine how much you can afford
to finance
Amortization factors
• Determine how big of a loan you can afford,
depending on interest rate and monthly
payment and term of loan
• So…considering a 30 year loan and ability to
pay principal and interest of $621
How much can you afford?
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6.00%
5.00%
4.5%
4.00%
3.50%
3.25%
3.00%
$103,500
$115,000
$122,000
$130,000
$138,500
$142,500
$147,200
Your Needs in housing:
• Space, how many rooms are needed?
• Exterior space - garage, yard, entertaining
• Appliances
• Location
Location
• Schools
• Work
• Groceries, shopping areas
• Environmental
Financial Aspects
• One - Time Costs - closing costs
moving expenses, set-up fees
• Regular costs - payments, insurance,
utilities
• Future Costs - maintenance, repairs,
furnishing
Don’t become “House Poor”
• Space out things you will need
• Be smart about furnishings, repairs,
upgrades
Your Home Buying
Professionals
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Real Estate Agent
Mortgage banker
Home Inspector
Appraiser
Attorney
What to expect from a Home
Inspector
• Licensed by the North Carolina Home Inspection
Board.
• A home inspection is a written evaluation or report of
the condition of the home on the day it is inspected.
• Home inspectors generally evaluate: foundation,
masonry, roof, windows and doors, plumbing,
electrical, heating, ventilation and air conditioning
system, floor, walls, interior and exterior components
Closing Statement
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Taxes
Stamps
Recording Fees
Commissions
Inspections
What Next?
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Set up utilities
Clean the new place
Paint/repair
Plan Moving Day
– Keep kids busy!!!!
Questions?????
Ask the Extension Agent…
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Landscape, plants
Bugs!!!!
Nutrition and Cooking questions
Youth programs
• Johnston County 919-989-5380
• http://ces.ncsu.edu