2 Location, Location, Location Your housing location may be determined largely by what you are doingWhere 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?
3 Factors Affecting Location Employment OpportunitiesCost of LivingClimateLifestyleNeighborhoodCommunity Facilities and ServicesSchools
4 Types of Housing Apartments Condominiums Cooperatives Lease (rent) from the owner of the complexCondominiumsA form of home ownership where a person owns the unit he or she occupiesOwnership of the surrounding building and grounds is sharedYou pay a monthly maintenance fee to cover the costs of upkeep on the propertyYou obtain a mortgage and have the same tax and equity benefits as a home ownerCooperativesA form of home ownership in which a person buys shares in a corporation that owns the propertyIn return, the buyer lives in a designated unit and becomes a member of the cooperativeYou pay a monthly fee that covers your share of maintenance and service costs; the fee also cover building mortgage and taxes
5 Types of Housing (continued) Single-Family HomesCustom-built housesTract housesThese are neighborhoods of new homes built by developers who build many houses at once within a given areaThese houses are built from similar plans in order to keep costs downModular and Kit HousesPartially built in factoriesThey are moved in sections to the home site for completionTown HomesSingle-family units that share one or both sidewalls with other town housesUnits are usually built at the same time from similar blueprints
6 Types of Housing (continued) Manufactured HomesSingle-family house built in a factory and shipped to the home siteLess expensive than other types of housingLow maintenance costsCan decrease in value rather than increase
7 Housing CostsAccording to financial advisors, your total MONTHLY housing costs should total no more than 1/3 of your take-home payExample: 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 paymentUtilitiesMaintenance of the property/homeProperty taxesHomeowner’s insurance
8 Renting Versus Buying Advantages of Renting Fewer financial responsibilitiesNo down payment neededRents are generally lower than mortgage payment (but not always!)You do not pay for major repairs or for new appliancesMore free timeYou are not responsible for lawn maintenance or home repairsLess financial riskYou do not have to worry about property valuesYou do not have to worry about a mortgage paymentGreat mobilityYou can move at the end of your lease/rental agreement
9 Renting Versus Buying (continued) Disadvantages of RentingNo buildup of equityLittle control over living spaceNo tax benefits
10 Renting Versus Buying Advantages of Buying a Home Can increase wealth You build equity in your homeCan resell at a profitTax benefitsMortgage interest and property taxes are deductible on your tax formGreater controlYou have freedom to make decisions concerning your propertyCareful though; some subdivisions have rules regarding property
11 Renting Versus Buying Disadvantages of Buying a Home Greater costs and financial responsibilityMay require a significant down paymentMortgage payment has to be paid as well as home insurance and property taxesYou must maintain your property and make repairsLess mobilityIf you need to move, you have to sell your house; this may take a long time depending on the marketGreater financial riskTypically, property values rise over timeHomeowners can lose money if property values decrease or if they cannot make the mortgage payment
12 Renting Rental Application Rental Lease A form you complete requesting to rentSecurity deposit will be requiredPet deposit/fee may be requiredRental LeaseA contract that specifies the conditions, terms, and rent for the use of an assetYou, the renter, are the lesseeThe person who owns the property being leased, is the lessorExplains the legal rights and responsibilities of both a tenant (you) and the landlord (owner)
13 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?
14 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?
15 Renter ProtectionFederal, State, and Local Laws and Regulations Protect RentersTitle 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 dwellingYou cannot be discriminated against by race, color, national origin, religion, sex, familial status, or disabilityOther 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.
16 Renter Protection (continued) Federal, State, and Local Laws and Regulations Protect Renters (continued)Rent cannot be raised until the lease period is overSome cities have laws that limit how much landlords can raise the rent on tenantsLandlords are required to have fire alarms in their rental propertiesTenant rights can be found atConduct an inspection at the property and make notes of problems or repairs that need to be madeGet renters insurance on your personal property!
17 Renting as a Young Adult What should you discuss with your roommate before signing a lease?What will be each person’s 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?
18 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?
19 Buying a Home (continued) Real estate brokerA person licensed to arrange for the purchase and sales of real estate for a fee or commissionFor their services, brokers and agents receive a commission, usually between 3 and 6 percent of the home’s final sale priceSeller usually pays the commissionExclusive buyer agentsA person who works for the buyer and not the seller
20 Buying a Home (continued) NegotiatingHome buyers do no usually pay the asking price for a homeSeller and buyer will usually go back and forth with counter offersAs a buyer, you should conduct thorough research about the home, neighborhood, comparable houses in the neighborhood before making an offer
21 Buying a Home (continued) Negotiating (continued)You may decide to offer less than the asking price ifthe property needs repairsthe home has not sold despite being on the market a long timeother comparable homes nearby sold for much lessthe seller is desperate to sellyou are flexible about the move-in datethe market for selling homes is bad and there are many homes on the market
22 Buying a Home (continued) Purchase AgreementWhen the buyer agrees to buy the house and the seller agrees to sell it, they both sign a contract called a purchase agreementSometimes it is called a sales agreementThe agreement should stateAll of the conditions and terms of the saleAmount of earnest money requiredEarnest 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 saleIt is applied toward the down paymentA buyer can forfeit (lose) earnest money if the buyer does not go through with the agreement
23 Buying a Home (continued) Home InspectionBefore finalizing the sale, the prospective home buyer will ask for a home inspection to be performedFor a fee, a home inspector will examine the home for problems that may affect the value of the home or require costly repairsExamples to look for includeCracks in the foundationLeaky roofPlumbing problemsElectrical problemsFaulty appliancesTermite damage
24 Buying a Home (continued) Home MortgageA mortgage is simply loan to buy a homeIt 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 interestThe amount is paid in fixed monthly installments over a period of time, usually 15 to 30 yearsIf a borrower fails to make the mortgage payment, the lender can repossess (or foreclose on) the house
25 Buying a Home (continued) Home Mortgage (continued)A mortgage is simply loan to buy a homeIt 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 interestThe amount is paid in fixed monthly installments over a period of time, usually 15 to 30 yearsIf a borrower fails to make the mortgage payment, the lender can repossess (or foreclose on) the house
26 Buying a Home (continued) Types of MortgagesFixed RateGuarantees a fixed or unchanging interest rate for the life of the loanAdjustable Rate Mortgage (ARM)Allows the interest rate to be adjusted up or down periodically; adjustments are made according to a national rate index; be careful—these 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
27 Buying a Home (continued) Financing a HomeFHA-insured loanGuaranteed by the Federal Housing Administration (FHA) and helps lower- and moderate-income people purchase homesThe FHA does not make the loan; it insures lenders (bank or mortgage company) against borrowers’ if they default (don’t pay their mortgage)Down payments can be as low as 3 percentThe house must meet FHA standardsVA-guaranteed loanInsured by the Veterans AdministrationOnly veterans of the U.S. Armed Forces are eligibleThe VA sets the ratesNO DOWN PAYMENT REQUIRED
28 Buying a Home (continued) Closing CostsSettlement charges paid before the sale of a home is finalGood Faith EstimatePointsAppraisalTitleAbstract of titleDeedLoan applicationCommission/feesEscrow account (property taxes, insurance)PMI (private mortgage insurance)