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Understanding Home Ownership- The Beginning

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  1. Module 1: Understanding Mindset
    9 Lessons
    |
    1 Quiz
  2. Module 2: Understanding What you want your money to do for you?
    6 Lessons
    |
    1 Quiz
  3. Module 3: Understanding The Types of Real Estate Investments
    7 Lessons
    |
    1 Quiz
  4. Module 4: Understanding The Resources
    11 Lessons
    |
    1 Quiz
  5. Module 5: Understanding The Finance
    15 Lessons
    |
    1 Quiz
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Why You Need to Understand Real Estate Financing

The Federal Housing Administration (FHA) is a United States  government program that insures mortgages for banks. If you have  health insurance or car insurance, you already understand the  concept: pooling money to spread the risk for everyone. FHA  loans are designed only for homeowners who are going to live in the  property, so you cannot use an FHA-backed loan to buy a pure  investment property. However, you can take advantage of the  exception to the rule that allows the FHA-financed home to have   up to four separate units. In other words, if you plan to live in one of the units, you could buy a duplex, triplex,  or four-plex.

A sub-set of the FHA loan, the 203K loan is a loan that allows a  homeowner to purchase a house that is in need of some rehab work  and gives them the ability to finance those repairs or improvements  into the loan itself. Like the normal FHA loan, the 203K loan still allows  for the low down payment requirement allowed by the FHA (currently  just 3.5%). This loan type is also applicable for duplexes, triplexes, and  fourplexes, but maintains the same requirement for only being for  “owner occupants” and comes with Private Mortgage Insurance  demands for loans under 20%.

Real World Example:

John found a small duplex for $100,000 that he wants to move into, with plans to live in one half and rent the  other half out. The property is in needofabout$12,000 for new paint and carpet. John is able to include that

$12,000 into the cost of the loan and pay just a 3.5% down payment on the total amount fora total of $3,920  down. John can now get the new paint and carpet (paid for by the loan), move into his renovated home, rent  out the other half, and begin making cash flow and building wealth. John is a happy camper.