Скачать презентацию 7 Selecting and Financing Housing Evaluating Renting and Скачать презентацию 7 Selecting and Financing Housing Evaluating Renting and

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7 Selecting and Financing Housing Evaluating Renting and Buying Alternatives • Your lifestyle and 7 Selecting and Financing Housing Evaluating Renting and Buying Alternatives • Your lifestyle and your choice of housing – How you spend your time and money – Every buying decision = lifestyle statement • Personal preferences vs. financial factors • Traditional financial guidelines: – Spend no more than 25 -30% of take-home pay on housing, or – No more than 2 1/2 times your annual income – More difficult to do in inexpensive urban areas 7 -1

Objective 1 Assess Costs and Benefits of Renting Choice should be based on: – Objective 1 Assess Costs and Benefits of Renting Choice should be based on: – Lifestyle (do you like or want to do maintenance tasks? ) – Financial factors (e. g. , affordability, tax deductions, equity) – Mobility vs. permanence (are you able to “settle down”? ) – Renting = less costly in short run (monthly payment) – Home ownership =long-term financial advantages (tax deductions and equity growth over time) 7 -2

Renting vs. Buying Housing 7 -3 Renting vs. Buying Housing 7 -3

What Do You Know About Your Apartment Lease? • Length of lease (dates)? • What Do You Know About Your Apartment Lease? • Length of lease (dates)? • Security deposit? • Pets allowed? • Ability to sublet? • Utilities included in rent? • Other?

Legal Details of a Lease • Description and address of property • Name and Legal 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 • Date and amount for late rent payments • List of included utilities, appliances, etc. • Restrictions on certain activities (e. g. , pets, remodeling) • The right to sublet the unit; transfer clause • Conditions under which landlord may enter unit 7 -5

Renting an Apartment Video https: //www. youtube. com/watch? v=Kc. LAq_ c. NYX 4 Renting an Apartment Video https: //www. youtube. com/watch? v=Kc. LAq_ c. NYX 4

Objective 2 Implement the Home-Buying Process 7 -7 Objective 2 Implement the Home-Buying Process 7 -7

What Are Your “Must Haves” When Buying a Home What Are Your “Must Haves” When Buying a Home

Home Buying Activities Step 1: Determine Homeownership Needs Advantages of Homeownership – Stability of Home Buying Activities Step 1: Determine Homeownership Needs Advantages of Homeownership – Stability of Residence • American dream/norm (personalized living location) – Financial Benefits • Deduct property taxes, mortgage interest • Potential increase in value of your home • Building equity in your home – Lifestyle Flexibility – Can Express Your Individuality 7 -9

Drawbacks of Homeownership – Financial Uncertainty • Obtaining money for the down payment • Drawbacks of Homeownership – Financial Uncertainty • Obtaining money for the down payment • Obtaining mortgage financing • Home values could drop; can go “underwater” and lose money – Limited Mobility • Can take time to sell your home – Higher Living Costs (Than Renting) • Maintenance, repainting, repairs, and home improvements • Rising real estate taxes

Home Buying Activities Types of Housing Available • Single-Family Dwelling • Multi-Unit Dwelling – Home Buying Activities Types of Housing Available • Single-Family Dwelling • Multi-Unit Dwelling – Duplex (two homes) – Townhouse (2, 4, or 6 units) • Condominium – Individual ownership of a unit in a building – “Condominium” ≠ a type of building structure – “Condominium” = a legal form of homeownership • Cooperative Housing – Units owned by a non-profit organization – Shareholders purchase stock for right to live in unit in building with multiple units 7 -11

Types of Housing Manufactured Homes – Fully or partially assembled in a factory, and Types of Housing Manufactured Homes – Fully or partially assembled in a factory, and then moved to the housing site – Prefabricated = components factory-built and assembled at site – Mass production under factory conditions keeps costs lower than site-built homes Mobile Homes • Type of manufactured home, often <1, 000 sq. ft. • Same basic features as a conventional house • Safety is debated • Tend to depreciate in value (like cars) • Owners must own the land or rent the “pad” on which mobile home is placed

Home Buying Activities Determine What You Can Afford – Consider both price and quality Home Buying Activities Determine What 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 – Have a loan officer prequalify you • Front-End Ratio- monthly payment for PITI should not exceed 25% to 29% of gross income • Back-end Ratio- monthly payment for PITI plus ALL CONSUMER DEBTS should not exceed 33% to 41% of gross income – Purchase what you can afford NOW - you can always move up – Buy a “fixer-upper” at a lower price ONLY if you have the time, skills, and money to fix it up 7 -13

Home Buying Activities Step 2: Find and Evaluate a Home • Select a location, Home Buying Activities Step 2: Find and Evaluate a Home • Select a location, location – Be aware of zoning laws – Assess the school system-if you have children OR not • Services of real estate agents – Will show homes that meet your needs, present your offer, negotiate the price, assist in obtaining financing, and represent you at the closing – Commission paid by seller; built into price – Seller’s agent, Dual agent, or Buyer’s agent • The Home Inspection – Conduct a home inspection or hire an inspector – Mortgage company will require an appraisal 7 -14

Home Buying Activities Step 3: Price the Property • Determine the Home Price – Home Buying Activities Step 3: Price the Property • Determine the Home Price – Price affected by selling prices in the area – Current demand for housing – Time home has been on the market – Owner’s need to sell – Financing options – Features and condition of the home • Negotiate the Purchase Price – Counteroffers are common – Earnest money • Portion of the price deposited as evidence of good faith – Contingency clause • Offer dependent on certain events: – Obtaining financing – Sale of current home 7 -15

Objective 3 Determine Costs Associated with Purchasing a Home Step 4: Obtain Financing • Objective 3 Determine Costs Associated with Purchasing a Home Step 4: Obtain Financing • Mortgage = Long-term loan on a specific piece of property (e. g. , primary home or other real estate) – Usually 10, 15, 20, 25, or 30 year mortgages • Determine down payment amount – Large (> 20%) down payment makes the process easier • Mortgage insurance if < 20% down (PMI) – Automatic PMI termination when equity =>22% – Required by Homeowners Protection Act • Feature of a mortgage: LEVERAGE (using other people’s money; magnifies a home’s gain or loss) 7 -16

Home Buying Activities The Mortgage • Qualifying for a mortgage includes: – Income – Home Buying Activities The Mortgage • Qualifying for a mortgage includes: – Income – Debts – Credit history (700+ score) – Down payment amount – Length of the loan – Current mortgage rates • “Points” = prepaid interest as a % of loan amount – Each point =1% of the loan amount – Premium paid to obtain a lower mortgage rate 7 -17

Home Buying Activities The Mortgage • Loan for which you qualify will be greater Home Buying Activities The Mortgage • Loan for which you qualify will be greater when rates are lower • Calculating the monthly principal and interest payment: • • – Exhibit 7 -7 = Mortgage payment factors (page 230) – Example: • 30 -year, 7%, $223, 000 mortgage • Monthly payment = 223 X $6. 65 = $1, 482. 95 • Payment = Principal repayment + interest • PITI = payment + taxes + insurance Fixed-Rate, Fixed-Payment Mortgage – Fixed rate, fixed payment, amortized – 5%, 10% or 20% down – 15, 20 or 30 years of fixed payments Government-Guaranteed Financing Programs – Veterans Administration (VA) – Federal Housing Authority (FHA) – Lower down payment than conventional 7 -18

Home Buying Activities Types of Mortgages • Adjustable Rate Mortgage (ARM) – Flexible-rate or Home Buying Activities Types of Mortgages • Adjustable Rate Mortgage (ARM) – Flexible-rate or variable-rate mortgage – Interest rate varies over the life of the loan – Rate cap restricts amount of change in rate – Payment cap restricts amount of change in payment • Can result in negative amortization • Convertible ARM – Allows conversion to a fixed rate during a certain period • Balloon Mortgage – Fixed monthly payments – Large final payment after 3, 5, or 7 years • Interest-Only Mortgage – Lower payments for the first few years – Payments go towards interest only 7 -19

Home Buying Activities Other Financing Options • Shared Appreciation Mortgage (SAM) – Borrower gets Home Buying Activities Other Financing Options • Shared Appreciation Mortgage (SAM) – Borrower gets a lower interest rate – Agrees to share appreciated value of home with the lender • Second Mortgage – Home equity loan (fixed payments) or HE Line of credit to tap – Home = collateral • Reverse mortgages – Provides homeowners who are 62+ with tax-free income based on home equity; high up-front costs Mortgage Repayment Strategies • Refinancing – Consider costs of refinancing in decision • Making extra payments – Reduces payoff time and interest paid 7 -20

Home Buying Activities Step 5: Close the Purchase Transaction • Make arrangements for a Home Buying Activities Step 5: Close the Purchase Transaction • Make arrangements for a walk through – Last-minute items for negotiation • Closing – Meeting including buyer, seller, lawyers (if any) and sometimes lender – Document signing – Last-minute details settled; expense payments – Closing costs = settlement costs – Real Estate Settlement Procedures Act • Requires buyers be given closing costs estimate before the closing 7 -21

Home Buying Activities Closing Costs • • • Title insurance and search fee Attorney’s Home Buying Activities Closing Costs • • • Title insurance and search fee Attorney’s and appraisers fees Property survey Recording fees Transfer taxes Credit report Lender’s origination fee Escrow account for tax and insurance reserve Pre-paid interest Real estate broker’s commission • Title Insurance – Title company defines boundaries of property – Title search to insure property is free of claims – Protects against future defects in title • Deed – Document that transfers ownership • Escrow Account – Money deposited with lending institution for payment of taxes and insurance 7 -22

Objective 4 Develop a Strategy for Selling a Home Preparing your home – Repair, Objective 4 Develop a Strategy for Selling a Home Preparing your home – Repair, repaint, clean, reduce clutter – “Stage” home and enhance “Curb appeal” – Lawn, landscaping, outdoor clutter, exterior paint • Determining the selling price – Appraisal = estimate of the current value • “For Sale by Owner” – Use a lawyer or title company – Time consuming for seller • Listing with a real estate agent – Consider agent’s knowledge of community and services – Screens potential buyers 7 -23

Activity: Calculator Clues • Home Affordability Calculator (Realtor. com): https: //www. google. com/? gws_rd=ssl#q=home+buying+calculator Activity: Calculator Clues • Home Affordability Calculator (Realtor. com): https: //www. google. com/? gws_rd=ssl#q=home+buying+calculator • How Much House Can I Afford? (Nerd. Wallet): https: //www. nerdwallet. com/mortgages/how-much-house-can-i-afford • Affordability Calculator (Zillow): https: //www. zillow. com/mortgagecalculator/house-affordability/ • How Much House Can I Afford? Calculator [Includes Monthly Expenses, Property taxes, and Homeowners Insurance] (Bankrate): http: //www. bankrate. com/calculators/mortgages/new-house-calculator. aspx • How Much House Can You Afford? Calculator (CNN): http: //money. cnn. com/calculator/real_estate/home-afford/ • Debt to Income Ratio Calculator (Money-Zine): http: //www. moneyzine. com/calculators/loan-calculators/debt-to-income-ratio-calculator/