Presentation on theme: "Housing Alternatives. Location, Location, Location Your housing location may be determined largely by what you are doing – Where are you working? – Are."— Presentation transcript:
Location, Location, Location Your housing location may be determined largely by what you are doing – Where are you working? – Are you attending college? – Do you want a short commute or do you mind driving a longer distance? – Want to live in the city, suburb, or the country?
Factors Affecting Location Employment Opportunities Cost of Living Climate Lifestyle Neighborhood Community Facilities and Services Schools
Types of Housing Apartments – Lease (rent) from the owner of the complex Condominiums – A form of home ownership where a person owns the unit he or she occupies – Ownership of the surrounding building and grounds is shared – You pay a monthly maintenance fee to cover the costs of upkeep on the property – You obtain a mortgage and have the same tax and equity benefits as a home owner Cooperatives – A form of home ownership in which a person buys shares in a corporation that owns the property – In return, the buyer lives in a designated unit and becomes a member of the cooperative – You pay a monthly fee that covers your share of maintenance and service costs; the fee also cover building mortgage and taxes
Types of Housing (continued) Single-Family Homes – Custom-built houses – Tract houses These are neighborhoods of new homes built by developers who build many houses at once within a given area These houses are built from similar plans in order to keep costs down – Modular and Kit Houses Partially built in factories They are moved in sections to the home site for completion – Town Homes Single-family units that share one or both sidewalls with other town houses Units are usually built at the same time from similar blueprints
Types of Housing (continued) Manufactured Homes – Single-family house built in a factory and shipped to the home site – Less expensive than other types of housing – Low maintenance costs – Can decrease in value rather than increase
Housing Costs According to financial advisors, your total MONTHLY housing costs should total no more than 1/3 of your take- home pay – Example: Your net take-home pay for the month is $2100; so your monthly housing costs should not exceed $700 (2100/3) A suggested formula for determining how much house you can afford is to multiply your ANNUAL SALARY by 2.5. – Example: You make $35,000 per year; so your max price for a house would be $87,500 (35,000 x 2.5) Housing costs include: – Rent/mortgage payment – Utilities – Maintenance of the property/home – Property taxes – Homeowners insurance
Renting Versus Buying Advantages of Renting – Fewer financial responsibilities No down payment needed Rents are generally lower than mortgage payment (but not always!) You do not pay for major repairs or for new appliances – More free time You are not responsible for lawn maintenance or home repairs – Less financial risk You do not have to worry about property values You do not have to worry about a mortgage payment – Great mobility You can move at the end of your lease/rental agreement
Renting Versus Buying (continued) Disadvantages of Renting – No buildup of equity – Little control over living space – No tax benefits
Renting Versus Buying Advantages of Buying a Home – Can increase wealth You build equity in your home Can resell at a profit – Tax benefits Mortgage interest and property taxes are deductible on your tax form – Greater control You have freedom to make decisions concerning your property Careful though; some subdivisions have rules regarding property
Renting Versus Buying Disadvantages of Buying a Home – Greater costs and financial responsibility May require a significant down payment Mortgage payment has to be paid as well as home insurance and property taxes You must maintain your property and make repairs – Less mobility If you need to move, you have to sell your house; this may take a long time depending on the market – Greater financial risk Typically, property values rise over time Homeowners can lose money if property values decrease or if they cannot make the mortgage payment
Renting Rental Application – A form you complete requesting to rent – Security deposit will be required – Pet deposit/fee may be required Rental Lease – A contract that specifies the conditions, terms, and rent for the use of an asset – You, the renter, are the lessee – The person who owns the property being leased, is the lessor – Explains the legal rights and responsibilities of both a tenant (you) and the landlord (owner)
Renting (continued) What should I know about the lease? – Rent. How much, when is it due, what is the penality for late payment? – Security deposit. Is one required, how much? Under what circumstances would you lose your deposit? – Utilities. Are any utilities included in rent? What should you expect to pay each month? – Furnishings, appliances, services. What furnishings and appliances are included? What facilities are available on the premises? – Lease period. What term or period of time does the lease cover? What are the beginning and ending dates of the lease? When do payments begin? When can you move in? When must you renew the lease or give notice that you plan not to renew? What happens if you need to move before the lease expires? Can you sublet or assign the lease to someone else? What are your responsibilities if the person taking over does not pay the rent?
Renting (continued) What should I know about the lease? – Upkeep, maintenance, repairs. Who is responsible for upkeep, maintenance, and repairs? What does the landlord maintain and what must you maintain? What happens if one or the other fails to carry out their responsibilities? Where and how do you contact the landlord or rental agent with questions, problems, or complaints? – Legal remedies. What can you do if the landlord breaks the lease in any way? What can the landlord do if you break the lease in any way? Who pays the legal costs? – Conditions of use. Can you paint, wallpaper, and decorate your living space? If you install carpet, shelving, or equipment can you get credit or take it with you? Can you have pets? Can you add a roommate later?
Renter Protection Federal, State, and Local Laws and Regulations Protect Renters – Title VIII of the Civil Rights Act of 1968 (Fair Housing Act) Prohibits discrimination against consumers who are looking to buy, rent, or get financing for a dwelling You cannot be discriminated against by race, color, national origin, religion, sex, familial status, or disability – Other laws state that landlords cannot enter your dwelling except in the case of an emergency; landlord is required to give tenant notice before entering a rental property to make repairs or perform maintenance.
Renter Protection (continued) Federal, State, and Local Laws and Regulations Protect Renters (continued) – Rent cannot be raised until the lease period is over Some cities have laws that limit how much landlords can raise the rent on tenants – Landlords are required to have fire alarms in their rental properties – Tenant rights can be found at www.hud.gov/rentingwww.hud.gov/renting Conduct an inspection at the property and make notes of problems or repairs that need to be made Get renters insurance on your personal property!
Renting as a Young Adult What should you discuss with your roommate before signing a lease? – What will be each persons share of the rent and when is it due? – Is there a security deposit? How will that be divided if there are charges for damage to the residence? – How long will each person live in the dwelling? Who will pay the rent for the rest of the lease term if someone moves out? – How will utility bills be divided? – Will furniture, TVs, computers, appliances be shared? If they are damaged, who will pay for repair or replacement? – Will guests be allowed? – How will housework be divided?
Buying a Home Make a list of features you desire in the home Which ones are most important? How many bedrooms do you want? Do you want a garage? basement? a garage apartment for parents or in-laws? Do you want yard space or a fenced in yard? Are you willing to make improvements before moving in?
Buying a Home (continued) Real estate broker – A person licensed to arrange for the purchase and sales of real estate for a fee or commission – For their services, brokers and agents receive a commission, usually between 3 and 6 percent of the homes final sale price – Seller usually pays the commission Exclusive buyer agents – A person who works for the buyer and not the seller
Buying a Home (continued) Negotiating – Home buyers do no usually pay the asking price for a home – Seller and buyer will usually go back and forth with counter offers – As a buyer, you should conduct thorough research about the home, neighborhood, comparable houses in the neighborhood before making an offer
Buying a Home (continued) Negotiating (continued) – You may decide to offer less than the asking price if the property needs repairs the home has not sold despite being on the market a long time other comparable homes nearby sold for much less the seller is desperate to sell you are flexible about the move-in date the market for selling homes is bad and there are many homes on the market
Buying a Home (continued) Purchase Agreement – When the buyer agrees to buy the house and the seller agrees to sell it, they both sign a contract called a purchase agreement – Sometimes it is called a sales agreement – The agreement should state All of the conditions and terms of the sale Amount of earnest money required – Earnest money is given to a seller to show that the buyer is serious about the purchase and prevents the seller from offering the home to someone else while you are finalizing the sale – It is applied toward the down payment – A buyer can forfeit (lose) earnest money if the buyer does not go through with the agreement
Buying a Home (continued) Home Inspection – Before finalizing the sale, the prospective home buyer will ask for a home inspection to be performed – For a fee, a home inspector will examine the home for problems that may affect the value of the home or require costly repairs – Examples to look for include Cracks in the foundation Leaky roof Plumbing problems Electrical problems Faulty appliances Termite damage
Buying a Home (continued) Home Mortgage – A mortgage is simply loan to buy a home – It is a contract between a borrower (the home buyer) and the lender (bank or mortgage company) – The home buyer promises to pay back the loan amount PLUS interest – The amount is paid in fixed monthly installments over a period of time, usually 15 to 30 years – If a borrower fails to make the mortgage payment, the lender can repossess (or foreclose on) the house
Buying a Home (continued) Home Mortgage (continued) – A mortgage is simply loan to buy a home – It is a contract between a borrower (the home buyer) and the lender (bank or mortgage company) – The home buyer promises to pay back the loan amount PLUS interest – The amount is paid in fixed monthly installments over a period of time, usually 15 to 30 years – If a borrower fails to make the mortgage payment, the lender can repossess (or foreclose on) the house
Buying a Home (continued) Types of Mortgages – Fixed Rate Guarantees a fixed or unchanging interest rate for the life of the loan – Adjustable Rate Mortgage (ARM) Allows the interest rate to be adjusted up or down periodically; adjustments are made according to a national rate index; be carefulthese loans are often offered at a lower interest rate than fixed, but borrowers take the risk that interest rates will increase when the adjustment is made
Buying a Home (continued) Financing a Home – FHA-insured loan Guaranteed by the Federal Housing Administration (FHA) and helps lower- and moderate-income people purchase homes The FHA does not make the loan; it insures lenders (bank or mortgage company) against borrowers if they default (dont pay their mortgage) Down payments can be as low as 3 percent The house must meet FHA standards – VA-guaranteed loan Insured by the Veterans Administration Only veterans of the U.S. Armed Forces are eligible The VA sets the rates NO DOWN PAYMENT REQUIRED
Buying a Home (continued) Closing Costs – Settlement charges paid before the sale of a home is final Good Faith Estimate Points Appraisal Title Abstract of title Deed Loan application Commission/fees Escrow account (property taxes, insurance) PMI (private mortgage insurance)