Slide 1Evaluating Housing AlternativesSlide 3Rent versus Own: Evaluating Housing AlternativesHousing Rental ActivitiesLegal Details of a LeaseSlide 7Home Buying Process Step 1: Determine Homeownership NeedsSlide 9Slide 10Assess Types of Housing AvailableAssess Types of Housing Than Can be PurchasedAssess Types of Housing Than Can be PurchasedSlide 14Home Buying Process Step 2: Finding and Evaluating a Property to PurchaseHome Buying Process Step 3: Pricing the PropertyHome Buying Process Step 4: Obtaining FinancingType of MortgagesSlide 19Slide 20Slide 21Overview of the Main Elements of Buying a HomeSelling Your HomeComparison of 15 and 30 Year MortgagesComparison of Different RatesOnline ActivityChapter 9The Housing Decision: Factors and FinancesThe Housing Decision: Factors and FinancesMcGraw-Hill/IrwinCopyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved.Evaluating Housing Alternatives•Your lifestyle and your choice of housing.How you spend your time and money, affects your housing choice.Personal preferences are modified by financial factors.•Traditional financial guidelines suggest you spend no more than 25-33% of take-home pay on housing, or no more than 2 1/2 times your annual income.9-2•Opportunity costs of housing choices include some common trade-offs.Interest earnings lost on money used for a down payment or the interest on a security deposit for an apartment.Time and cost of commuting to live in an area that offers less costly housing or more space.Renters lose tax advantages and equity growth.Time and money you spend to repair and improve a lower-priced home.Time and effort when you have a home built to your personal specifications.Evaluating Housing Alternatives9-3(continued)Rent versus Own: Evaluating Housing Alternatives•Advantages of renting.Fewer maintenance and repair responsibilities.Easier to move. Lower initial costs.•Disadvantages of renting.No tax benefits.Limitations regarding remodeling.Restrictions regarding pets and other activities.Legal concerns of a lease.Costs including a security deposit, utilities and renter’s insurance.9-4Housing Rental Activities•The search.Select an area and rental cost for your needs.Compare costs and facilities between units.Talk to current and past residents.•Before signing a lease.Verify the lease dates, costs, and facilities.Talk to a lawyer about unclear lease clauses.Note in writing, signed by the landlord, the condition of the rental unit.Any person who signs a lease is responsible for the full rent.9-5Legal Details of a Lease•Description and address of property.•Name and address of the owner/landlord (lessor).•Name of tenant (lessee).•Effective date and length of the lease.•Amount of security deposit.•Amount and due date of rent.•Location where rent is due.•Date and amount for late rent payments.•List of included utilities, appliances.•Restrictions on certain activities.•The right to sublet the unit.•Conditions where landlord may enter rental unit.9-6Housing Rental Activities•Living in rental property.Keep all appliances and facilities in good condition.Contact the owners regarding needed repairs.Respect the rights of others (stereo and parties).Obtain renter’s insurance.•At the end of the lease.Clean and leave unit in same condition you got it.Provide landlord with new address for deposit.Require than any deductions from security deposit be documented.9-7(continued)Home Buying Process Step 1: Determine Homeownership Needs•Benefits of Home Ownership Pride of ownership.•American dreamFinancial benefits.•Deduct property taxes and mortgage interest.•Potential increase in value of your home.•Building equity in your home.Lifestyle flexibility - express your individuality.9-8Home Buying Process Step 1: Determine Homeownership Needs•Drawbacks of Homeownership.Financial uncertainty.•Obtaining money for the down payment.•Obtaining mortgage financing.•Home values could drop.Limited mobility.•Can take time to sell your home.Higher living costs.•Home improvements.•Rising real estate taxes.9-9(continued)•Assess Types of Housing Available Single-family dwelling.Multi-unit dwelling.•Duplex, townhomesCondominium.•You own your unit in a building of units.•It is not a type of building structure, but rather a form of homeownership.Cooperative housing.•Non-profit organization - members own shares and rent a unit in a building with multiple units.9-10Home Buying Process Step 1: Determine Homeownership Needs(continued)Assess Types of Housing Available•Manufactured homes.Fully or partially assembled in a factory, and then moved to the housing site.Prefabricated type has components built in the factory and assembled at the site.Mass production under factory conditions keeps costs lower than site built homes.•Mobile homes.A type of manufactured home, often <1,000 sq. ft.Offer same features as a conventional house.Safety is debated and they tend to depreciate.9-11•Building a homeDoes the contractor have needed experience?Does contractor have a good working relationship with architect, suppliers, electricians, plumbers, carpenters and others?Assess Types of Housing Than Can be Purchased 9-12Assess Types of Housing Than Can be PurchasedWhat assurance do you have about quality?What are payment arrangements?What delays will be considered legitimate?Is the contractor licensed and insured?Are there any complaints about this contractor?Contract should have a time schedule, costestimates, description of work, and a payment schedule.9-13(continued)Home Buying Process Step 1: Determine Homeownership Needs•Calculate how much you can afford.Consider both price and quality.Look at your income, your current living expenses, and how much you have for a down payment.Pre-qualify for a loanPurchase what you can afford - you can always move up.9-14Home Buying Process Step 2: Finding and Evaluating a Property to Purchase•LocationBe aware of zoning laws.Assess the school system if you have children.•Consider using a real estate agent.They present your offer, negotiate the price, assist you in obtaining financing, and represent you at the closing.•Conduct a home inspection or hire an inspector.•Mortgage company will want an appraisal.9-15Home Buying Process Step 3: Pricing