Business Management /Framework Homebuyer Course
Framework Homebuyer Course
This deck covers key concepts and questions related to home buying, including financial terms, credit management, and the roles of various professionals in the home buying process.
Can we deduct mortgage closing costs?
We can deduct mortgage closing costs and earn tax credits on upgrades such as solar panels.
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Key Terms
Term
Definition
Can we deduct mortgage closing costs?
We can deduct mortgage closing costs and earn tax credits on upgrades such as solar panels.
What is equity?
Equity is the amount of ownership a homeowner has in their home. You subtract the balance on the mortgage from the current market value.
What is defaulting?
When you fail to meet financial obligations.
What is a creditor?
It's any person or company to whom money is owed.
How do your credit card accounts help or hurt your credit?
If you have accounts that have been open a long time, that helps your credit. If you have inactive accounts, that could hurt your credit. Also, openin...
What score does FICO top out at?
850
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| Term | Definition |
|---|---|
Can we deduct mortgage closing costs? | We can deduct mortgage closing costs and earn tax credits on upgrades such as solar panels. |
What is equity? | Equity is the amount of ownership a homeowner has in their home. You subtract the balance on the mortgage from the current market value. |
What is defaulting? | When you fail to meet financial obligations. |
What is a creditor? | It's any person or company to whom money is owed. |
How do your credit card accounts help or hurt your credit? | If you have accounts that have been open a long time, that helps your credit. If you have inactive accounts, that could hurt your credit. Also, opening too many accounts in a short time can hurt your score. |
What score does FICO top out at? | 850 |
Can you get your credit score and credit report for free? | You can get your credit report for free once a year. You can get your credit score for a fee. |
What's the single best way to improve your credit? | Pay your bills on time. |
How long do late payments, judgments, and foreclosures stay on your record? How about bankruptcy? | 7 years, and bankruptcy for 7–10 years. |
Will checking your credit report hurt your score? | No, as long as you do it from www.annualcreditreport.com. |
How can you get your credit score? | You can purchase it from one of the credit reporting bureaus. |
What's the difference between fixed expenses and flexible expenses? What's a periodic expense? | Fixed expenses occur regularly without changing much (e.g. rent, utilities). Flexible expenses are discretionary, such as clothes, Starbucks, etc. A periodic expense is an expense that might be paid quarterly or annually, such as car insurance. |
How do you calculate discretionary income? | You take your monthly income minus fixed expenses. |
What is a Homeownership Advisor? | They provide guidance throughout the home buying process. |
What is a Real Estate Attorney? | They review the offer you make, and helps to resolve issues like title insurance and environmental laws. |
What's a good idea in terms of putting more money into savings from a Homeownership Advisor? | Put X dollars into savings every paycheck, put your tax refund or a raise into your savings. |
What is the underwriter? | Someone who scrutinizes and approves your loan on behalf of the lender. |
What's a mortgage broker? | Someone who helps you shop for and compare loans between different lenders. |
What is the purchase agreement? | It's a written contract signed by the buyer and seller specifying the terms and conditions of the sold property. |
What is a facilitator? | A real estate agent who just helps complete the purchase agreement and doesn't represent you directly. |
What is the principal? | The amount you borrowed from the lender. |
How was underwriting done before, and how is it done today? | It used to be by hand and could take 2 months. Now, there are automated underwriting systems that make it so they can make a decision in a few days. |
Who is the closing agent? | This is sometimes called an 'escrow officer'. They represent the title company and facilitate the final transaction. They conduct the closing (although the real estate attorney might do this). |
What is amortization? | Payments are spread out over a set period of time: the term of the loan (30 years in our case). |
What is an escrow account? | It's a special account used to collect and hold monthly payments for property taxes and insurance. These payments are folded into your monthly mortgage payment. When the expenses come due, the lender pays them for you from the escrow account. It's like having a dedicated savings account without the interest. |
What's the difference between prequalification and preapproval? | Prequalification gives you an informal estimate of how much you can borrow, based on your income and debts. Preapproval comes later when you start seriously looking at homes to show what the lender has agreed to. |
What are closing costs typically in % of the home loan? | 3% to 6% |