Chapter 6 Housing and Transportation 67 of Americans own their own home most people own their home Consumers drive 70 of US economy housing transportation everything we buy Housing should be 32 of your budget Renting vs Owning Rent cost or payment for using property o Security deposit required by the landlord before you move in usually 1 months rent if you give them back the property in the same condition you get the money back o Lease legal contract to document between the landlord rights and obligations o Sublease Property can be leased to another Sublease conditions should be stated in the lease o Tenant rights landlord has to let you know pluming and electric etc all works Budget Don t own if you think you ll only be there 3 years or less hesitate before you buy Pros of renting o Easy to buy a house selling is very hard o Pools services landlord to take care of maintenance and repairs no lawn care low move in cost o People like renting for the security and community Cons of renting o No tax deduction property goes up in value you do not benefit you have no control over the cost of rent no garage no storage laundry may or may not be in your apartment Pros of owning a house o Build equity o You have an asset o Pride of ownership o Monthly payments are stable fixed mortgage o After a couple of years you can borrow money against the equity no interest or low interest what you want o Yard more room do anything you want to the home inside basically do o Stronger credit rating when you own a house makes you look good o Laying down roots in the community Cons of owning a house o Down payment typically 20 o Tied down to a location o Cost of repairs you own it you fix it o Home owners association fees could be 0 or very expensive you pay it once a year to keep the community pool planting and trees o Biggest housing and transportation Pg 136 137 math difference of what it would be like to rent or own o Style location HGTV housing likes and dislikes on TV o Property tax Budget items What do you like What can you afford o Formulas 2 times multiple your income by 2 times 25 40 of your take home pay 40 is pushing it places like LA Washington NYC etc Typically is 32 KNOW Depends on circumstances career other expenses Median House Prices o Tallahassee 156 000 o Miami Ft Laud Miami Beach 206 000 US average is 169 000 Tallahssee is lower Miami little higher MW 132 000 Best housing values are in the Midwest KNOW SO 146 600 WE 237 600 Expensive Certain urban areas within these places will be higher like Chicago DON T worry about the numbers for test just the idea Typical house what makes it more expensive o Windows cost more than walls o An extra gable on roof o Square heat means the heated and cooled area not garage or porch etc o Curve into the garage is more expensive than straight o Tubs are 5 ft o House should have 3 exits o Vaulted entry vaulted ceiling o 9 ceilings o kitchen is the room that will sell the house o more cabinet shelving the better o Shapes of kitchens U shape best L shape 2 wall 1 wall o Storage cost money Owning o Appreciation increase in value o Reasons for buying Types of Housing pg 139 o Single Family Dwelling o Duplex Multi units o Town house cheaper because share of walls smaller roof o Condominiums individually own your unit pay home owners fee for the area around you monthly fee o Cooperative housing CO OP cooperative housing you buy a share in the building bigger your apartment the more shares you own if someone buys or sells it s discussed amongst everyone Monthly fee o Manufactured housing assembled in a factory and then moved to the site could be deluxe or could be a trailer o And others Steps In Buying a Home Step 1 Determining Financial Readiness o Determining Financial Readiness How much house you can afford Bank and lender will do it for you o PITI Principle Interest Taxes and Insurance Monthly payments o Median price of a house See above o Mortgage Step 2 Determining Preferences o Renting is fine for 2 5 years o Security cash cd s savings bonds enough insurance o Real estate involves more risk but maybe a greater return over time o Building a down payment normally 10 now 20 of the price of the house Step 3 Finding a home making an offer o Making an offer Done directly through real estate agent realtor or buyer s agent Haggling over price counteroffers Binder Security deposit by the buyer as evidence of a serious offer If the offer is not accepted the check is returned If accepted the check will come off the price of the house Going to contract buyer seller outline the terms of the sale includes closing date and down payment o Real estate agents Seller pays the real estate broker s commission Typically makes 6 of the sold home Buyers agent in a market with few choices you pay them 1 2 Some agents will over price the house o Binder You got a buyer earnest money write check to hold house while the background check check will come off the price of the house or give it back and rip it up STAGING HOUSES FILLING HOUSES WITH FURNATURE TO SELL IT TRICK PUT IN SMALL FURNITURE Step 4 Getting Financing pg 141 know title Title legal right to owning the property Have to transfer the title from one person to another Abstract written history of previous owners No claims by any other owner Deed Document that transfers property ownership issue a deed that transfer ownership to you o Getting Financing Mortgage loan Want the best deal Down payment 5 20 typically 10 Sources of loans Come from banks brokerage firms credit unions mortgage finance companies insurance companies private investors pension plans savings and loan associations In person through toll free phone calls internet loans can be transferred Types of loans Fixed rate also called conventional o 15 30 years same fixed payment every month Adjustable rate mortgages ARMS o High interest rates that fluctuate with the movement of the economy o Payment cap interest cannot increase past a point o Low initial teaser rate interest consumers but they need to realize how high the final interest rate may climb FHA and VA o FHA low income borrowers lower interest rate o Va veterans administration Giving you a better rate maybe no down payment at all Owner financing o Loan offered by the property owner Assumable mortgages o Allows buyers to assume the original mortgage from the seller of the home o Interest rates change bank will adjust mortgage o Getting a lower rate and better deal Step 5 o Closing Meeting in which real
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