1. Chapter 7 Selecting and Financing Housing McGraw-Hill/Irwin
Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.

2. Selecting and Financing Housing Chapter Objectives
Assess costs and benefits of renting
Implement the home-buying process
Determine costs associated with purchasing a home
Develop a strategy for selling a home
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3. Objective1 Assess Costs and Benefits of Renting
Evaluating Renting and Buying Alternatives
Your lifestyle and your choice of housing
Personal preferences vs. financial factors
Traditional financial guidelines:
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4. Renting vs. Buying Housing
Choice should be based on:
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5. Rent vs. Buy
Or Insert Exhibit 7-1
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6. Housing Rental Activities
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7. Rental Activities Selecting a rental unit Advantages of renting
Disadvantages of renting
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8. Selecting an Apartment
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9. Legal Details of a Lease
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10. Costs of Renting Utilities not covered in rent payment
Security deposit
Utilities not covered in rent payment
Renter’s insurance
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11. Objective 2 Implement the Home-buying Process
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12. Home Buying Activities Step 1: Determine Homeownership Needs
Evaluate Home Ownership
Stability of residence
Financial benefits
Lifestyle flexibility - express your individuality
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13. Home Buying Activities
Drawbacks of Homeownership
Financial uncertainty
Limited mobility
Higher living costs
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14. Home Buying Activities Types of Housing Available
Single-family dwelling
Multi-unit dwelling
Condominium
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15. Home Buying Activities Types of Housing Available
Cooperative housing
Manufactured homes
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16. Home Buying Activities Types of Housing Available
Mobile homes
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17. Home Buying Activities Types of Housing Available
Building a custom home:
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18. Home Buying Activities Building a Custom Home
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19. Home Buying Activities Determine What You Can Afford
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20. Home Buying Activities Step 2: Find and Evaluate a Home
Select a location, location, location
Services of real estate agents
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21. Home Buying Activities Step 2: Find and Evaluate a Home
The Home Inspection
See Exhibit 7-5
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22. Home Buying Activities Step 3: Price the Property
Determine the home price
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23. Home Buying Activities Step 3: Price the Property
Negotiate the purchase price
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24. Objective 3 Determine Costs Associated with Purchasing a Home
The Finances of Home Buying
Step 4: Obtain Financing
Determine down payment amount
Mortgage insurance if < 20% down (PMI)
Automatic PMI termination when equity =>22%
Required by Homeowners Protection Act
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25. Home Buying Activities The Mortgage
Long-term loan on a specific piece of property
Usually 10, 15, 20, 25, or 30 years
Three main phases
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26. Home Buying Activities The Mortgage
Qualifying for a mortgage includes:
“Points” = prepaid interest as a % of loan amount
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27. Home Buying Activities The Mortgage
Loan for which you qualify will be greater when rates are lower
Calculating the monthly principal and interest payment:
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28. Home Buying Activities Types of Mortgages
Fixed-Rate, Fixed-Payment Mortgage
Government-guaranteed financing programs
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29. Home Buying Activities Types of Mortgages
Adjustable rate mortgage (ARM)
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30. Home Buying Activities Creative Financing
Convertible ARM
Balloon mortgage
Growing-equity mortgage (GEM)
Interest-only mortgage
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31. Home Buying Activities Other Financing Options
Shared appreciation mortgage (SAM)
Second mortgage
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32. Home Buying Activities Other Financing Options
Reverse mortgages
Refinancing
Making extra payments
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33. Home Buying Activities Step 5: Close the Purchase Transaction
Make arrangements for a walk through
Closing
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34. Home Buying Activities
Closing Costs
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35. Home Buying Activities Closing Cost Components
Title Insurance
Deed
Escrow Account
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36. Objective 4 Develop a Strategy for Selling a Home
Preparing your home
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37. Selling Your Home Determining the selling price “For Sale by Owner”
Listing with a Real Estate Agent
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