Renting vs. Buying Housing

Rental Terminology

Landlord Owner of property Expects rent to be paid on time and for tenant to keep the property in reasonable condition Usually makes repairs to property Can charge the tenant if tenant at fault for damages

Tenant Person who rents a property from the owner of that property

Application Fee Fee when filling out application to rent Helps insure that the renter is serious about renting the unit Usually $25.00 - $100.00 depending upon the city

Credit Check Fee Renter pays a fee to have their credit checked prior to the landlord accepting them as a tenant The credit check tells the landlord if the renter pays their other bills on time

Security Deposit Fee that renter pays to cover any future damage that the renter might cause to the property May be equal to one month’s rent Returned at the end of the lease if the property is not damaged

Pet deposit Fee that renter pays to cover any damage that may occur by a pet Many landlords allow only certain types or weights of pets Some landlords charge pet deposit PLUS a fee per month for the pet

Advance on Rent Landlord requires one or month’s rent in addition to the security deposit

Renter’s Insurance Insurance to cover the renter’s belongings in the event of flood, fire, theft, or any other hazard Very inexpensive

Utilities Depending on the unit, sometimes the landlord pays for water, sewer, gas, electricity, and trash collection Other landlords may require the tenant to pay for some or all of the utilities as well as telephone and cable This should be a consideration for the tenant when choosing a rental unit as it can be a major monthly expense

Lease Legal document signed by landlord and tenant agreeing to rent housing for specific period of time Should list items such as amount of rent, late fees, address of unit, when amount of rent can be changed, who pays utilities, pets, etc. Typical lease is one year

Assign To transfer the remainder of a lease to another person The original tenant is No Longer responsible for rent or damages

Sublet Renter leases the property to someone else The original renter is still legally responsible for all rent and damages to the property along with the person who is subletting the property i.e. college student leaving for the summer and subletting apartment

Eviction Legally removing a person from leased property The landlord may only start legal proceeding after the tenant has failed to meet the terms of the lease The renter must receive a Written legal notice of eviction

Breach of Contract Legal phrase for failure to meet the terms of contract/lease Non-payment of rent is the most common type of breach of contract

Buying Terminology

Mortgage A conditional pledge of property to a creditor/bank/financial institution as security for repayment of a debt specifying the terms in reference to length of time to repay the loan, the total amount to be paid, the amount of interest to be paid, and the amount of monthly payment to be paid

Conventional Mortgage The most common type of mortgage, usually 15 – 30 year term, usually a fixed interest rate

FHA Loans A loan that is insured by the federal government against the borrower defaulting on the loan Usually has a lower down payment Can be fixed or adjustable interest rate Any person can apply for this type of a loan

VA Loans MUST currently be a member of armed forces or a veteran Does not require a down payment and Congress sets eligibility requirements

Terms of Loans Loans may repaid in 15 – 30 years Loans are paid in equal monthly payments

Earnest Money Money that is given as a deposit by the potential buyer to the seller as a good faith gesture to show that the buyer is serious about buying the property Can range form hundreds to thousands of dollars The $ is held in trust until the closing and applied toward the final price of the home

Agreement of Sale A legally binding contract that the buyer and seller sign that states all of the conditions and specific terms of the sale Includes detailed description of the property, purchase price, amount of down payment, and any items to be included in the sale

Survey Must be completed before the sale in order to establish that the building on the land is actually the same as in legal description and what the correct boundary lines are

Inspections Part of the home buying process Several may be required by the lender or the state, others are optional General home – certified home inspector checks for structural soundness and ensures plumbing, electrical, and heating systems are in proper working order Termite – the most common require inspection Most contracts require the seller to pay fees for inspections

Closing Costs Costs associated with closing of the loan and transferring the property into the name of the buyer Most are paid by the buyer, but there are fees that the seller is required to pay

Title Search Search to make sure that the seller actually holds the title to the property and no one else has any claims to the property

Appraisal Valuation of the property This can determine how much the lender will loan for a mortgage

Origination Fee Fee paid to the lender for processing the loan Usually 1 % of the loan amount

Attorney Fee Money paid to the attorney to represent the buyer at the time of closing