COA test 2 study guide complete Housing and Transportation Things to know 67 of Americans households own their own homes Home equity accounts for 23 5 of household net worth 30 of new cars are leased Main expense for a family is 1 house and 2 transportation Average family budget o Housing 32 most expensive o Transportation 18 2nd most expensive o Food 15 o Utilities 5 Renting Vs Owning Rent payment for us of property o Security deposit payment required in advance to cover wear on unit o Lease legal document between renter and landlord 1 year lease is usually 1st months rent the most typical Only stay in a rental for 3 years or less Pro not stuck there can move Con no tax benefits o Sublease property can be leased to another o Tenant rights how to get out of a lease a fair treatment and the landlord s responsibility to provide a habitable property If a rentals unit it left clean and undamaged then tenants have the right to a prompt return of their security deposits Renter should give at least one month in advance notice of Before you buy a house moving out o Know your income information o Know the 2 time rule multiply income by 2 which equals how much you pay for the house AKA Conservation estimates Most people say 3 4 times instead of 2 o Budget items Housing mortgage rate it 3 98 today Transportation Formulas 25 40 of your take home pay Owning o Appreciation increase in value o Pro build equity o Con tied down o Steps in buying a home 1 Determining financial readiness P I T I principle interest taxes and insurance o Makes up your monthly payments with these 4 factors divided Median price of a house o Tallahassee 156 000 o Miami 206 000 Midwest is the cheapest Northeast and western are the most expensive 2 Making an offer Real estate agents Binder security deposit from the buyer as evidence of a serious offer comes off mortgages AKA earnest money 3 Down payment Make sure everything s in order Turn over keys transferring AKA closing 4 Getting financing from the bank or credit union Mortgage loans to purchase real estate o Based off of P I T I o Fixed rate conventional mortgages these are fixed rate fixed term fixed payment loans usually carried for 15 or 30 years o Adjustable rate mortgages ARMS interest rates that fluctuate with the movement in the economy o Convertible mortgages adjustable loans that can be converted to a fixed rate o Two step loans adjustable loans with built in rate increase after 5 or 7 years o FHA and VA loans if the lender determines that a person qualifies for federal housing administration or veterans administration government backed loans o Owner financing the property owner offers this to who will take all or part of the mortgage at a rate higher than average and for 2 3 years o Assumable mortgages allow buyers to assume the original mortgage from the seller of the home If you move and the person has a lower mortgage this can happen 5 Closing meeting in which real estate is transferred from seller to buyer Points fees paid to the lender at the closing Things to know Housing down payment 20 used to be 10 Mortgage interest is 3 5 4 5 o They are low right now which is a good thing First time home buyers 40 Most people own about 4 5 homes in a lifetime Average person looks at 17 houses before buying and usually picks the first 3 that were looked at Realtors ask for about 6 of the sale negotiable Owning a home Property taxes property o Fair market value what a willing buyer would pay a willing seller for o Assessed value a percentage of fair market value o Refinance revising a payment schedule to reduce monthly payments and to modify interest charges o 2nd mortgages and home equity loans homeowners take out a 2nd mortgage to get money in a lump sum for home improvements or other expenses Risky 125 loans home equity loans that allow the homeowner up to Reverse mortgages arrangement wherein owner borrows 125 of the home value against home equity Selling a home Setting the price Marketing a home Realtor Things to know Property taxes are paid one time a year o Some people will try and sell their house before April 15th taxes due People try to sell their homes themselves first but don t really work out then they hire a realtor o About 10 of hom esales are made by the owners each year o Issue doing it yourself cant prescreen who comes into your home o Expensive houses you want a relator for protection Multi units apartments town homes duplexes 2nd most wanted Condominiums individually owned units Homeowner s fees monthly fees paid by home owners Cooperative housing units owned by the co ops not the homeowner only own shares in the building o You have to be voted into the place Manufactured housing units assembled at a factory and moved to a building site Single family homes houses detached from others most wanted Cost of providing care You need to know Middle class income parents spend 300 000 to raise a child 0 18 years o Urban cost more expensive than rural subsequent child are less costly 35 million auto accidents a year in the U S Disney wedding is 100 000 fairy tale wedding Almost 1 in 12 dollars in the U S economy is spent on insurance Cost of Children Childbirth 6500 10000 C section 5000 6000 Mothers stay in hospitals after birth for 24 hours Children are financially independent at age 18 21 years old o age of majority when young adults can access custodial accounts in their name 18 21 o They are kept on parents taxes until age 24 o Kiddie Tax taxed filed by parents for the investment income of childbirth under age 14 At age 14 children are taxed differently o Uniforms transfer gift to minors act provide simple ways to transfer wealth to minors without a formal trust o Parents can protect their kids with custodial accounts and trust funds Time horizon factor number of years until money is needed how many years until the child goes to school to save up Post up something has happened illness lottery 1500 for simple one Marriage penalty effect of tax code that makes married people pay more than 2 single people Wedding Average cost 30 000 Reception is the most expensive part Destination weddings are becoming more popular and they are very expensive Prenuptial agreement legal contract between a future husband and wide about the spilling of assets in the event of a divorce o Good idea financially esp if there are children from previous relationship o Last about 5 to 10 years Age of first divorce o Men 30 34 women 25 29 o Usually a 2 year age difference between
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