1. Housing Alternatives

2. Types of Housing Single Family Home – most popular in the U.S.
Own the lot
Lawn – outdoor living space
More privacy
Can rent it out
Multifamily Home –2+ dwellings in one building
Apartments, townhomes, duplexes
Saves on land and construction
More efficient
Provides for more people on less land

5. Types of Housing Multifamily Housing
Condominium (condo) – each unit in building is individually owned (or rented)
Common grounds are owned jointly by owners
HOA fees and set rules
Some can be rented out, some cannot
Apartment Buildings – specifically for rentals
Available in all sizes and costs
Most in apartment complexes
Desirable characteristics – space, location, parking, amenities

8. Types of Housing
Townhouses: individual units with 1-2 floors, often sharing a wall(s) with other units
Limited outdoor space
Some are available for rent or rented out by owner
Duplexes: a building with two living units, usually joined together one on top of the other
Share outdoor living space, parking
Landlord may live in other side if rented
Good for larger families
Some buildings have 3 units – called triplexes

10. Types of Housing Manufactured Homes: modular and mobile homes
Homes are built in factories and towed to land in multiple pieces, then utilities are connected
Come with furniture and appliances
Usually the land it sits on is rented through a manufactured home community – if not, find land to buy, then buy the home
Much more affordable
Most come with a warranty
Some homes can be rented out

12. Renting a Home More than 1/3 of all Americans now rent
Easier to create a budget because you don’t need an emergency fund for repairs
Easier to move if jobs change
No responsibilities of home ownership
Can invest money in other ways
Living on your own without having to buy a house
“Throwing your money away”
Cannot customize your home

13. Renting a Home Finding a roommate Finding an apartment
How will expenses be split
How will responsibilities be divided
How will problems be solved
How will you share the space
Finding an apartment
Newspapers
Online
Real estate agents
Postings
Application process for approval
Criminal history, credit check, references, paystub

14. Renting a Home Cost of renting Legal issues for renters
Security deposit
Monthly pay
Utilities may or may not be included
Renters insurance
Legal issues for renters
Rental agreement – month to month
Lease
Landlord
Tenant

15. The Fair Housing Act Discrimination in housing is against the law
No one can discriminate in the following ways:
Refuse to negotiate
Make housing unavailable to rent or sell
Set different terms
Provide different services
Falsely deny housing is available for inspections
Intimidate to sell or rent
Deny access to amenities
Provides similar protection for mortgage applications

16. Help for Those in Need
Housing subsidiaries: grants of money to low income households
Government pays part of the family’s rent
Must be approved based on income and family needs
Government programs available to the elderly too

18. BUYING A HOME - ADVANTAGES
Privacy, freedom
Building equity – the value of the home minus what you still owe on it
Single family homes appreciate the fastest
Homes should appreciate about 5% per year
Location, upgrades, renters in the area, space, condition
Economic status must be strong for optimal value

19. Buying a Home - ADVANTAGES
Tax advantage
Interest you pay on your loan is deductible
Property taxes are also deductible
Most profit made on selling your home is tax free
Achieving the “American Dream”

20. BUYING A HOME - DISADVANTAGES
Costs and responsibilities – upkeep, repairs, upgrades, taxes
The down payment
Most lenders require at least 10-20%
FHA Approved loans
Must pay PMI until 20% of home is paid off

21. Obtaining Financing Pay in cash Mortgage: a long-term home loan
Collateral: the home you buy is the asset served as a security deposit on your secured loan
How many people are on the mortgage?
Short sale: the value of the home is less than what you still owe the bank
Foreclosure: legal process the lender can use to take possession of the house to resell it if you do not pay your mortgage

22. Obtaining Financing
Contact a few lenders – banks, credit unions, mortgage companies
Preapproval – lender completes paperwork to commit in writing to lending you money
Indicates how much you are approved for
Indicates your interest rate (estimated)
Based on down payment, savings, income and credit score
Many real estate companies only show houses with preapproval paperwork

23. Obtaining Financing Mortgage rates
Compare rates of different lenders
Fractions of a % can make a huge difference
Factors to influence your monthly payments
Price of the home
Down payment
Interest rate
Length of loan
Most loans are amortized – most of the monthly pay goes towards principal, rest interest
10-30 years amortization period

24. Obtaining Financing Paying points Government financing
Some lenders will negotiate a lower interest in exchange of paying points (extra fee)
1 point = 1 percent of loan amount
EX. $200,000 loan at 7.5% with no points or 7% with 1 point ($2,000 fee)
Does the fee save you money over time given the lower interest?
Government financing
FHA financing VA

25. Types of Mortgages Fixed rate mortgage – interest rate does not change
Rate will change if you refinance or sell home
Least risk, best choice
Adjustable rate mortgage (ARM) – interest may increase and/or decrease during the life of loan
Lender can change rate based on economic conditions
Get in writing how often and how much the rates and payments are allowed to change
Beginning is the lowest rate
Most have a rate cap
Some lenders offer convertible ARMs
Better if you know you will be moving within 5-7 years

26. Types of Mortgages Balloon mortgages – medium term loans
Low payments
Not fully amortized (no set payment schedule)
At end of term (5-10 years) you pay the rest in full
If you do not have cash, you refinance the end balance
Subprime loans – high-interest loan made to high risk buyers
Subprime qualifiers – less than 600 credit score
In 2006, 20% of mortgages were subprime – in 2007 many found they could not afford their mortgages and could not sell their home

27. Working with an Agent
Commission – 6% of selling price; 3% to listing agent, 3% to your agent
Agents are certified and trained
Try to get referrals; if not, research a few before choosing one
Choose someone who is expert in the location you wish to buy in

28. Working with an Agent Communicate all of your wants and needs
Make an offer
Your agent presents your offer to seller
Seller will accept, deny or counter offer
You accept, deny or counter offer
Sometimes no agreement is made and you walk away
You many find yourself in a bidding war with other buyers
Should only provide you with facts/options – no advice!!

29. Working with an Agent The purchase agreement The escrow account
Outlines conditions met to close the deal
Such as: buyer’s ability to get the loan, inspection, repairs that must be done, closing date
The escrow account
Money and legal documents collected by real estate agent and held by a third party for safekeeping until deal is closed
Usually 1-2% of purchase price
Used to pay taxes, HOI
Good faith deposit $1000, second deposit $10,000 – applied to closing

30. Working with an Agent The walk through inspection
Inspect the repairs in the purchase agreement have been completed
Inspect any contingencies have been fulfilled
Closing the Transaction
Finalizing the sale of property by transferring the title
Deposit, purchase agreement must all be in escrow
Title search to ensure there are no financial claims against the property
Title/deed is formed – the document that transfers ownership
Pay lawyer fees for all the above
You have “closed” when all conditions have been met, down payment is given and papers are signed