Part 1 of The 3 part Midterm

The topic my group researched was mortgages. How they work and what a mortgage is and what would your mortgage be for a $400,000 house? My group members were Kaylen Carter, Leo Evans, and Valerie Mozee. The process that I went through was that me and my group members we did our research first. I asked my mother some questions on how mortgages worked and what they were. she gave me some information which helped a lot since she used to be in real estate and had her own company for a couple of years. After asking my mother the expert I also searched online for some useful websites. Some websites I went to would answer only a little bit of what I wanted to know  and some gave me too much information on things that I did not want to know or that were only a little bit useful or relevant.  Then I would find a website that would be great to use but it was in the language that real estate agents or brokers use. The content in the website was really hard for me to understand. So I searched for the same information but for the website to put it in layman's terms for me. So once I gathered up my information I  just printed it out then I also copied and pasted it on to Google docs to save my info I gathered. Them later on I met up with my group in class and we shared what information we had found and how we could answer the question and how to split up our work. We decided to split the work up in five in a group of four, someone would have to do twice the work. We each did a section of mortgages, what it was, the down payments, the different types of mortgages, the loans and analysis, the closing cost, and of course the answer to our question. I did what a mortgage was also how it worked, and I also answered the question and gave an example. Kaylen did what a down payment was and how it worked, Leo did the loans, analysis and closing cost, and Valerie did the different types of mortgages. We also made a outline format after we split the work up so we knew how to say it and when. Everyone typed up their parts to the project and I typed the outline and just copied and pasted my groups work that they emailed me to the outline. Then I printed it out and emailed copies to my group members. By us splitting up the work it was easier for us to get it done and understand what we were going to talk about to the class.  I feel good about what my group learned and did while doing this little project it will all help us out in our daily lives.

Here is the handout we emailed and shared with our fellow classmates:

Intro

Introduce ourselves: Analicia, Kaylen, Leo, Valerie

Analicia

Explain what a Mortgage is:

A mortgage is a loan procured by a buyer to pay off the seller of a piece of property in full. The buyer then owes the lender the total amount borrowed, plus interest and fees. As collateral or guarantee of payment, the lender holds the deed or ownership of said property, until the buyer pays the mortgage off. However, the buyer occupies the property as if it were already their own

Kaylen

Explain a down payment:

 The down payment on a mortgageis the lump sum you pay upfront that lessens the amount of money you have to burrow. You can put as much down as you want but the normal amount is 20% of  the house cost .

Example: If you  and your spouse together make 60,000 a year (which was the case for  first -time homebuyers in 2009), you can probably buy a 180,000 home if you have moderate debt (debt payments of 12% of your income ), and a 240,000 home if you have little or no debt and can make 20% down payment  

Valerie

Different types of mortgages:

What is the difference between fixed- and adjustable-rate mortgages?

1. Fixed rate mortgages offers an interest rate that will never change over the entire life of the

  loan. Monthly mortgage payments remains the same for 15, 20, or 30 years, depending on

  the length of your mortgage. The only numbers that might change are property taxes and

  any insurance payments included in your monthly bill. 30 year fixed rate is the longest loan,

  a person will pay the most in interest. That might not seem like a good thing, it also allows

  you to deduct the most in interest payments from taxes. This long-term loan locks in the

  lowest monthly payments. 20 year fixed rate are harder to find, but the shorter term will

  allow a homebuyer to build up more equity in their home sooner. Since they’ll be making

  larger monthly payments, the interest rate is generally lower than a 30-year fixed mortgage.

  15 year fixed rate has the same benefits as the 20-year term (quicker payoff, higher equity

  and lower interest rate), but the homeowner will have an even higher monthly payment.

2. Adjustable-rate mortgages has an interest rate that changes usually once a year according

  to changing market conditions. A changing interest rate affects the size of the monthly

  mortgage payment. ARMs are attractive to borrowers because the initial rate for most is

  significantly lower than a conventional 30-year fixed-rate mortgage. Even in 2010, with

  interest rates on the 30- year fixed mortgage at historic lows, the ARM rate is almost a full

  percentage point lower. ARMs also make sense to borrowers who believe they’ll be selling

  their home within a few years.

Leo

Loans: 30 year loan vs. a 15 –year analysis

The advantages of a 30 year loan are that the monthly payments are low and with the 30 year mortgage you can qualify for a much larger loan and by much larger or nicer house. The downside is that you have to make payments for extra 15 years versus a 15 year loan you would pay a lot more total interest over the life of the loan. Yet, in most cases you will go with a 30 year loan.

We can’t get forget about closing costs

You will need to pay a closing costs from your savings (lowering the amount available for a down payment), or qualify for a long that’s a little larger than the house you want to buy, and have the closing costs added to the loan (which is called “rolling the closing costs” into the mortgage).

Question: what would your monthly mortgage be for a $400,000 house?

Answer: your mortgage would be $2,3000 per month not including property taxes.

Example: Lets say you found a house that you love and you need to borrow 400,000 to finance the home purchase. We will assume that you have some money to put down as a down payment, since very few lenders will approve  a 400,000 home loan without some upfront cash. That said, if the terms of your mortgage are 5% fixed interest rate over 25 year term, your monthly mortgage will be around 2,3000 per month not including property taxes.