Greg & Cindy Hana

Homebuying Case
Lisa Winnett, Riley Morris, & Taylor Gallagher

Clients Greg & Cindy Hana

Client: Greg and Cindy Hana Ages: 35 & 37 2 small children - Lana (5), Clark (3) and another Child due in the early summer

Greg has a dangerous occupation as a Newark, NJ city cop. They would like to live in the Newark area since he is often on call and working late nights. Cindy currently stays home but is interested in going back to school in the next few years to obtain her nursing degree. They have no money to put as a down payment for a new home, therefore they are considering an FHA loan or renting while they save up a down payment. They want a home that is move in ready and not needing much work. Their short term goals are to replace their vehicles, pay for Cindys schooling, and set up their will. Long term goals are to fund their childrens college funds and Invest in IRAs and retirement funds.

Income & Assets

Income $66,000 (Greg) - Eligible for a pension at age 48 Estimated Monthly Expenses $2,800 Credit Score 688 Assets Total= $13,500 $3,000 - CD $2,000 - Checking $6,500 - Life Insurance Value $2,000 - Cars Debts $1,000 - Visa Life insurance $400,000 (Greg) $77,500 (Cindy) Home and Auto Ins. Liability $300,000 Health insurance - through Gregs employer

Estimated monthly housing payments: $1,340 Estimated Home purchase price: $182,000

Home Options
Option #1

West Side Village Apartments

113 North 13th Street, Newark, NJ 07107 302-9043 Pros 1. No long-term commitment. 2. Allows for saving due to lower monthly cost. 3. Minimal time required for maintenance. 4. Minimal surprise expenses.

$895-$977 per month

950 sq. ft 3 Bedroom 1 &1/2 Bath

Cons 1. No equity gained. 2. Less private space. 3. Rates rise over years. 4. Lack of decorum freedom.

Home Options
Option #2

Single Family Residence

25-27 Clinton Pl, Newark NJ, 07108

$169,900 Lot size: 0.11 sq.ft. 4 Bedrooms 2 Baths

Pros 1. Privacy. 2. Gaining equity. 3. Mortgage payment within plans and means. 4. Plenty of room for family growth

Cons 1. Appears as a rougher locale. 2. Bars on windows. 3. Been on market for a while. 4. May not be best schools for children.

Home Options
Option #3 $184,900

2 Family Unit
(rental investment)

101-103 Hanford St, Newark NJ, 07114

Lot Size: 0.09 sq.ft. 5 Bedrooms 2 baths

Pros 1. Gaining equity. 2. Income opportunity. 3. Maximum opportunity for saving on other goals. 4. Learning opportunity . 5. Opportunity to turn into completely rental property.

Cons 1. More time consumed managing tenant. 2. Less privacy or sound barrier. 3. Potential for large expenses for tenant maintenance and turnover. 4. Less opportunity to save. 5. Higher initial investment.

Home Options
Option #4 $189,000

Single Family Residence

116-118 Pine Grove Ter, Newark NJ, 07106

Lot size: 0.06 sq.ft. 4 Bedrooms 2 Bath

Pros 1. Privacy 2. Gaining Equity 3. Nicer neighborhood 4. Better schools for kids 5. Updated dcor and home amenities.

Cons 1. Less opportunity for saving. 2. Higher upfront costs. 3. Smaller lot. 4. Less parking for guests. 5. One-way street.

Smart Buying Process

#1 Differentiating Need from Want
For the Hana family money is tight and they have many financial goals they would like to accomplish. They will need to compromise on a few things right now in order to win financially in the long run. Their top priorities are cost & location.
Initial Estimated Cost Down Payment (20%) $33980 Points

3.5% down payment and 5% interest rate

2400 Loan OF 1200 Appraisal 300 Title search fee 200

#2 Do your Homework
With the Hanas we will need to look at every detail about each of the home options and do a cost analysis. We will also look at neighborhood safety, closeness to Gregs employer, local school systems, & parks.

Title insurance 500 Attorneys fee 400 Recording Fee

20
Credit Report 50 Termite & rodan inspection 150 Notary fee 50

Smart Buying Process

#3 Make your Purchase
The Hanas really are interested in Option #2 the lower priced single family home. The second option is to purchase a single family home for about $170,000. They would need about $5,947 for a 3.5% down payment. Their monthly payment would then be about $988 if they put down a 3.5% down payment and also were approved for a 5% interest rate. The same interest rate and down payment percentage is also used on the next two options.

#4 Maintaining Our Purchase

How long will it take them to pay the home off? 26 years at payments of $878 Total interest will be $103,361 at a 4% interest They make $5500 a month roughly and $878 will be going to the house payment monthly which is a grand total of $273936 will come out of their income $1716000 for 26 years

Best Home Choice

What is the best immediate housing choice for this family? Option #2 Single Family Residence 25-27 Clinton Pl, Newark NJ, 07108 $169,900

How long are they likely to live at that location?

This home has 4 bedrooms, it could be possible for them to live in this house for the rest of their lives with their 3 kids. If not it would most likely be in the house until their kids graduate high school and go off to college. What should their next move be? They should start making plans to put away money for their childrens college along with paying off their debts.