Bell Ringer In a full sentence explain what role subprime mortgage had in the housing market’s...
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Transcript of Bell Ringer In a full sentence explain what role subprime mortgage had in the housing market’s...
Bell Ringer
In a full sentence explain what role subprime mortgage had in the housing market’s collapse in 2008.
Objectives
• Explain the Federal Housing Authority’s role in giving mortgages
• Articulate the 4 possible payment components of a mortgage
• Learn how to search for a home and create a list of possible homes to be bought
Credit Crisis
1. Which groups of people did the Credit Crisis bring together
2. Explain how leverage works in your own words
3. What did the brokers, lenders, and other parties do when everyone already owned a mortgage?
Federal Housing Authority – Assist in Providing Housing for Low Income Individuals
• Who uses it? • Needs a low down payment – 3.5%
• Low credit requirement – 500
• Flexible income requirements
• Only two previous years of steady employment required
• Mortgage insurance required (PMI – private mortgage insurance)
• 1.35% of total loan amount paid each month until 20% of the home is paid for
Discussion: 1.Do you think
these people should take out
a mortgage?2.At the end of
the mortgage would this be a
cheap or expensive
mortgage?
PITI Mortgage Components
• Principal – a portion of the total home value, optimally 20%
• Interest – interest payment, adds to home value to be repaid 4.75%
• Taxes – property tax • Nashville – mails tax during 1st week of October, due last day of February
• If not paid, penalty fees plus interest
• (Appraised Value / 100) x 4.516
• Example: ($25,000 / 100) x 4.516 = $1,129.00
• Insurance – • Property insurance (fire, theft, and other disasters)
• PMI
Looking for Homes: Realtor
• Most people use a realtor • Realtor – an agent who assists in the sale and purchase of
buildings and land
• Why use a realtor? • Sort through a complex process and paperwork
• Keeps you in control of the search and in dealing with seller’s agent
• Beware: Paid a commission (5%) on the final price of the home
• How can you find homes? • Online listings
• www.realtor.com
• www.homes.com
• www.google.com
• Local newspaper classifieds
• Driving through neighborhoods
Looking for Homes: Finding Homes
Looking for Homes: Variables
• What variables are important to you in selecting a home?
• Possibilities • School district
• Lawn
• Proximity to certain locations: favorite coffee story, movies, etc.
• Crime
• Noise
• Number of baths, bedrooms, square feet, etc.
Looking for Homes: Mortgage Cost
• http://www.mortgagecalculator.org/
Looking for Homes: Mortgage Cost
• http://www.mortgagecalculator.org/
Looking for Homes: Mortgage Cost
• http://www.mortgagecalculator.org/
Submit a rough draft to [email protected] by the end of class
• Find 3 homes for sale in Nashville that fit the following criteria:1. A home under $100,000
2. A home between $100,000 and $300,000
3. A home over $300,000
• In a PowerPoint or Poster for each home cover:• Address, number of bedrooms, baths, and square feet, and any other relevant details
• Qualitatively state the income you believe you would need to pay for a home that would cost this much? Also state what job would give you that much annual income.
• How much would you pay for the house if you had an interest rate of 3% for 15 years for each mortgage or a 4% interest rate for 30 years. Keep property tax at 1.25% Use the mortgage calculator at: www.mortgagecalculator.org. Display principal, interest, tax, and PMI if any
• Any other information you find to be relevant
Exit Ticket
• Do you think you will need to pay PMI for your mortgage? Explain why or why not in full sentences.