HOME BUYING CASE STUDY

By: Russell, Aaron, Noman

Family Profile

Bob - 31 yrs old - $3,500 Monthly SalaryPina - 28 yrs old - Recently laid off

- No children - want to have a baby in the next 10 years.- Living paycheck to paycheck for years, haven’t been tracking their spending- Are forced to move into something cheaper

Net Worth

ASSETS$1,000 Checking Account$10,000 Savings$3,000 401k$18,000 Value of two cars$8,000 Personal Property________ $40,000

NET WORTH

DEBTS

-$12,800 Credit Cards-$21,000 Student Loans-$14,000 Auto Loans_______-$47,800

Our Family Expenses

Monthly Income = $3,500

• $800-$1200 Rent (Including utilities)• $500 Food• $600 Auto Payments• $150 Auto Insurance• $100 Health Insurance• $200 Other expenses• $250 Credit Card Payments• $500 Savings= $3,500 TOTAL (If Renting for max. $1,100)

To BUY VS. To RENT

Rentals In Salt Lake City:

Rental #12 bed / 2 bath*Washer/Dryer in rental, covered parking------------------------------------$720/month or $8,640/year

Rental #21 bed / 1 bath*AC, Close to park

------------------------------------$650/month or $7,800/year

To BUY VS. To RENTBuying Example #1

Non-Traditional Home:Condo – Salt Lake City2 Bed/1 BathPurchase Price $117,000675 sq/ftFHA Loan4.5% Interest Rate3.5% down – (minimum) $4,09530 yr. Loan TermHOA Monthly - $100------------------------------Monthly Payment - $991.51 Buying Example #2

TraditionalSingle-Family Home – Salt Lake City2 bed / 1 bathPurchase Price $155,0001,204 sq/ftConventional Loan4.5% Interest Rate20% down - $31,000 (No mortgage Ins)30 yr. Loan TermNo HOA----------------------------Monthly Payment - $891.51

To BUY VS. To RENTReasons to Buy

• House offers space & privacy (Single-Family Home)• Allows you to build up equity over

time • Possibility of value appreciation

over time• Allows for more personal freedom

to remodel & landscape to suit your taste

• No chance of rent rising over time, fixed monthly payment

Reasons to Rent

• No Down payment required(Deposit Only)

• No home repair or maintenance• No Grounds keeping• No property taxes• You don’t lose anything if property

value goes down(depreciation).• Many times Amenities such as

swimming pools, tennis courts, play areas, and community gyms are included

Step by Step Home Buying

• Determine Needs vs. Wants • How long do we plan to live in area?• What is my credit score? (740+ for best rates)• What is my Debt to Income Ratio?• How much can I afford for down payment?

3.5% is minimum, 20% or more waves the mortgage insurance

Calculating Mortgage & Affordability

15 Year Loan or 30 ?

15 Year Loan• $150,000 Purchase Price• 3.5% Down • 3.5% Interest Rate• Annual Taxes($1,400)• Annual Insurance ($800)

Life of Loan Total: =$237,362.40

15 Year Loan or 30?

30 year Loan• $150,000 • 3.5% Down• 4.5% Interest Rate• Annual Taxes($1,400)• Annual Insurance ($800)

Life of Loan Total: =$392,850.00

Conclusion

Advice for our family:• Pay down debts (use some of savings)• Save $500/mo. • Keep Renting • Wife should work until baby comes• In 4-5 Years will be better time to buy

(improve credit, save more, pay off debts)