The Buying Issue The Buying Issue www.fcef.com

Principles Discussed Protection Under Federal Law Renting a Home Advantages Disadvantages Buying a Home Which Choice is Right for You? The Buying Issue www.fcef.com

Protection Under Federal Law The Fair Housing Act The Equal Credit Opportunity Act The Fair Housing Act and the Equal Credit Opportunity Act were created to protect the rights of homebuyers, renters, and landlords, as well as to provide equal opportunity for home purchasing and renting and mortgage lending. Prohibited practices outlined by these acts are listed in this module along with resources for obtaining additional information and reporting violation of these laws. Certain rights and responsibilities deal specifically with the landlord/tenant relationship. These are usually outlined in a rental agreement, commonly referred to as a lease. The lease provides detailed information about what is expected from each party. It is signed by the renter and landlord and is therefore a binding contract. Though many of the rights and responsibilities may be the same in different locations, landlord/tenant laws vary from state to state and should be researched based on your location. The Buying Issue www.fcef.com

Renting a Home The Buying Issue www.fcef.com

Advantages of Renting Minimal maintenance costs Flexibility to move without having to find another renter Ability to establish your credit rating Some of the advantages of renting a home are: Minimal maintenance costs All a renter has to do is pay rent and deposits, and move in. Repairs, maintenance, yard work, taxes, and, on occasion, some utilities are usually the responsibility of the landlord rather than the renter. Ability to relocate If a renter chooses to move, there are few strings attached; the remainder of the lease may be negotiated with the landlord. There is no burden to find a buyer. If your career or life choices cause you to move frequently, renting may a better choice. Renter builds a credit rating By paying rent and utility bills on time, a renter builds a positive credit history. The Buying Issue www.fcef.com

Disadvantages of Renting Have to make monthly payments based on the price set by the owner of the property Earn no equity No tax advantages Limitations in making improvements or changes to the property Monthly payments Rent is determined by the landlord, who can change the amount. No equity A renter doesn’t establish or benefit from any equity or ownership position in the property.   No tax advantages A renter cannot claim tax deductions for rental payments. Limitations Renters are limited in making improvements or changes to the property. The Buying Issue www.fcef.com

Buying a Home The Buying Issue www.fcef.com

Advantages of Buying You have an investment You can build equity You receive tax advantages You may make property improvements and changes subject to building codes Investment (building equity) After years of paying rent, a renter has little to show for it. After the same period of paying a mortgage, a homeowner has invested in a property with a strong potential for the home’s value and equity to increase.   Tax advantages Certain items, such as interest on mortgage payments, can be deducted from a homeowner’s taxable income. Flexibility A homeowner can make design and structural improvements, subject to local building and housing codes. The Buying Issue www.fcef.com

Disadvantages of Buying Your equity and investment will fluctuate You are responsible for property taxes, maintenance, insurance, etc. You have little flexibility in moving until you find a buyer for your home Equity/investment They are subject to fluctuation based on market conditions. Sometimes neighborhoods decrease in popularity and value can decline.   Maintenance costs All maintenance, repairs, upgrades, taxes, insurance, and other costs are the homeowner’s responsibility. Difficulty relocating If a homeowner needs to relocate on short notice, moving may be delayed until a buyer is found for the home. The Buying Issue www.fcef.com

Which Choice is Right for YOU? The Buying Issue www.fcef.com

Determine Your Options Some things to determine: Your dwelling needs, not wants Your lifestyle, based on reality and practicality What you can reasonably afford All the costs associated with your choice Once the decision to purchase a home is made, you should calculate the cost of home ownership and the impact it makes on your budget.   Your first step is to determine your needs. If you only consider your wants, you might pass up a great opportunity for a house that meets your needs, or struggling to pay for more home than is really right for you. Look at your lifestyle and determine what’s realistic based on your income and expected expenses. What has to change in your lifestyle for you to be able to afford this new home? Consider all your costs and look for a place that you can reasonably afford. The Buying Issue www.fcef.com

Things to Consider Down Payment Income Mortgage Rate Homeowners’ Insurance Loan Period Utilities Property Tax There are other things to consider when buying a home, besides the down payment and mortgage payments. Your current and projected income The down payment for the home The mortgage rate The length of the loan The taxes on the property as determined by your local government The cost of utilities The cost of homeowners’ insurance The Buying Issue www.fcef.com

Which Option is Best…for You? To rent or buy a home depends on: Your lifestyle Your preparation Your finances Your goals The decision to purchase a home is not an easy choice to make, but with thorough preparation, research, and planning, the transition from renter to owner can be made smoothly. Be sure to analyze your desire to purchase a home so you can be certain that homeownership is right for you. Review your finances, income, expenses, and debts to confirm you have the means to accommodate a mortgage and the other costs of owning a home. The Buying Issue www.fcef.com

Questions First Command Educational Foundation 1 FirstComm Plaza Fort Worth, TX 76109-4999 Toll Free: 1-877-872-8289 www.fcef.com The Buying Issue www.fcef.com