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Day 9: Your Capital
Day 10: Popular Home Loans
Day 11: Ways to Save
Day 12: Special Housing Programs
Day 13: Review, Reflect, Relax
Day 14: Weekly Inspiration
WEEK 3: The Home Loan Process
This Week’s Goal: To learn how the homebuying process works.
Today’s Easy Financial Task: Learn what collateral is and how it impacts your home purchase.
How to rock this task:
- Watch the video
- Understand how collateral plays a role in homebuying
- Learn how lenders determine the value of a home through an appraisal
Welcome to the last week of the LRC: Homebuying Edition!
Give yourself a hand clap for making it this far in the Challenge! This week we have a new set of tasks to help you on your journey to becoming a homeowner. So far, we’ve tackled four of the five C’s of Credit including capacity, character, and capital.
Today we’re going to talk about collateral.
First... a video!
Collateral is an asset that secures a loan. When buying a home, your property is what secures the home loan. If you don’t keep up with the payments, your lender can take the home (aka the collateral) and sell it to pay off your loan.
Why Lenders Need to Determine the Value of Your Home
You’ve probably heard of the term appraisal before.
An appraisal is done by a lender to determine how much the home you’re buying is worth. Lenders do an appraisal to make sure they’re lending you an appropriate amount of money for the home you’re buying. Why? If they take the home, they want it to be worth what you borrowed.
What happens during an appraisal?
The appraiser will estimate the market value of the home. The appraisal is typically ordered by the lender and should be done by an unbiased party to ensure they give an unbiased estimate. The appraiser will look at:
- The location
- The home size
- The age of the home
- How many rooms the home has
- How much other homes in the market have sold for
The result of the appraisal is the appraisal report. It typically takes a few days for the appraisal report to come back. At that time, you (the buyer) or the seller can raise questions about the findings.
How does the appraisal impact the buyer?
The seller is on the hot seat during the appraisal. They’re hoping the home comes back at a value that’s acceptable to the lender.
However, the appraisal is an important aspect of the deal for you to pay attention to as well. Purchasing a home can be an emotional decision, but it’s also a business one. Selecting the right location and property is important for you AND the lender. You want to choose a home in an area where the value of your home can soar. This will be important when you sell the home.
That’s the end of today’s task. See you in the next one! Make sure to check in with your accountability partner(s).
You can also head into the Dream Catcher Facebook Group to communicate with other Dream Catchers working through the Challenge.
Leave a comment below or reach out to your accountability partner(s) if you have any questions. Don’t forget to check into the Dream Catchers: LIVE RICHER group as well.
Share what you’ve learned today with your tweeps:
You can reach out to me here:
Facebook: The Budgetnista
Private Forum: Dream Catchers : LIVE RICHER
Want to work through the Live Richer Challenge: Homebuying Edition in a workbook? It's part of a bestselling series!
Click the link below and get your copy.
P.S. If you haven't already... Get your Challenge Freebies from our Live Richer Challenge: Homebuying Edition coauthor, Netiva Heard. Click the pic below if you'd like to learn more about Netiva's services. You'll receive a discount! Just let her know you're a Dream Catcher
P.P.S. Here’s a copy of the Challenge Calendar. It’s a fun way to keep track of your progress.
P.P.P.S. Don’t forget to get your free Live Richer Challenge: Homebuying Edition Starter Kit. Download it HERE.