Securing a Living space

1.9.5.G1 © Family Economics & Financial Education – November 2005 – Housing Unit – Securing a Living Space – Slide 2 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Application form  Once a person finds and inspects a living space, they should complete an application form Application form is a document used to determine a person’s credit history, financial stability, and references  Before returning this form, a person should know: Is there an application fee and if so, how much is it? Will the fee be returned if the application is denied? Is the person required to rent the living space if the application is accepted?

1.9.5.G1 © Family Economics & Financial Education – November 2005 – Housing Unit – Securing a Living Space – Slide 3 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Renting  Rent is a payment made in exchange for occupying another’s land or property  Payments can be made to either a landlord or a property manager by the tenant Tenant-the renter, is the person who rents the property Landlord is the person who owns the rental unit Property manager is a person who works for the owner  Finds and screens tenants  Collects rent  Maintains and secures the property  Responds to tenants’ needs and complaints

1.9.5.G1 © Family Economics & Financial Education – November 2005 – Housing Unit – Securing a Living Space – Slide 4 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Types of Rental Agreements  Lease agreement- Written contract specifying the legal responsibilities of both the tenant and landlord  No-lease agreement- Month to month agreement Not in writing Risky

1.9.5.G1 © Family Economics & Financial Education – November 2005 – Housing Unit – Securing a Living Space – Slide 5 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Types of Rental Agreements Continued  Written agreement- Short written agreement which is less formal and easier to understand than a lease  Rent month to month  Allows the renter to make changes to the lease  Oral agreement- Verbalized by the renter and the landlord/property manager  Risky

1.9.5.G1 © Family Economics & Financial Education – November 2005 – Housing Unit – Securing a Living Space – Slide 6 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Lease Agreements  A lease must identify the following before signing: Rent amount Payment procedure Late rent payment penalties  Sometimes tenants can be evicted. Eviction occurs when the tenant does not voluntarily move out after the landlord has given required notice to the tenant Security deposit amount  A security deposit is a one time fee paid in advance to moving into a living space to cover the costs of repairs or damages to the space beyond normal wear and tear

1.9.5.G1 © Family Economics & Financial Education – November 2005 – Housing Unit – Securing a Living Space – Slide 7 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Lease agreements continued Length of the lease Number of people in the rental unit Names on the lease Payment responsibilities for all amenities  Amenities in a living space include water, garbage, electricity, heat, telephone and internet service, and television.

1.9.5.G1 © Family Economics & Financial Education – November 2005 – Housing Unit – Securing a Living Space – Slide 8 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Lease Agreements Continued Responsibility for repairs and maintenance Eviction procedures What happens when the lease ends What happens if the lease is broken early Furnishings available Pets Landlord’s access rights to the property Parking Moving-out procedures

1.9.5.G1 © Family Economics & Financial Education – November 2005 – Housing Unit – Securing a Living Space – Slide 9 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Lease Agreements Continued  Items to identify in lease agreements include: Hanging pictures on the walls Policy on overnight guests Subleasing  Subleasing is when the tenant allows someone else to move in and take over the rent payments Allowing the landlord to cancel the lease without notification

1.9.5.G1 © Family Economics & Financial Education – November 2005 – Housing Unit – Securing a Living Space – Slide 10 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Lease Agreements Continued Allowing the landlord to hold the tenant liable for the remaining lease balance if one day late with payment Allowing landlord permission to enter rental unit when tenant is not there Holding the tenant liable for repairs and maintenance

1.9.5.G1 © Family Economics & Financial Education – November 2005 – Housing Unit – Securing a Living Space – Slide 11 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Security Deposits  Security deposit is money paid in advance of moving into a living space to the landlord to be used for repairs or damage done beyond the expected normal wear and tear Be sure to know the terms regarding the security deposit  Examine the living space and create a list of all existing damage Take pictures or use a video camera

1.9.5.G1 © Family Economics & Financial Education – November 2005 – Housing Unit – Securing a Living Space – Slide 12 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Security Deposits Continued  Steps to take to get a security deposit returned: Send a certified letter to landlord/property manager stating the desire to have deposit returned Send copies of all documents (rental agreement, copy of security deposit receipt, list of previously existing damage, and pictures) Take the individual to small claims court  Remember, having everything in writing is the best way to ensure the return of a security deposit

1.9.5.G1 © Family Economics & Financial Education – November 2005 – Housing Unit – Securing a Living Space – Slide 13 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Renter’s Insurance  Renter’s insurance is not required of tenants, but recommended Renter’s insurance is used to protect the tenants’ personal belongings when renting from a landlord Can protect against theft, fire, or vandalism A person should ask themselves if they could afford to replace their belongings if a fire destroyed everything-If not, they should purchase renter’s insurance

1.9.5.G1 Needs and Wants  Space  Location  Amenities  Parking  Miscellaneous

1.9.5.G1 Space  How many rooms are needed? Will there be roommates? Monthly charges are typically more affordable when people share the cost  Size of the rooms (total square feet)  Number of bathrooms  Garage What is the size of the garage?  Storage Space  Yard

1.9.5.G1 Location  Distance from work, schools, shopping, laundromat Consider the walking/biking distance from school or work Minimize transportation expenses  Neighborhood Safety Quality of schools, streets, and homes Presence of police, fire, and emergency services  Geographic location Urban vs. rural

1.9.5.G1 Amenities  Amenities include utilities like heat, electricity, garbage, water, and other features like Internet and telephone service  Heat- Examples include electric, gas, and radiant Different heating sources cost different amounts of money  Power- Examples include solar, gas, electric, and wind Different power sources cost different amounts of money and have different affects on the environment  Who is responsible for paying each bill? Landlord is the person who owns the rental unit Tenant, or renter, is the one who rents the property

1.9.5.G1 Parking  Location/size  Number of vehicles allowed (for self and guests)  Permits needed

1.9.5.G1 Miscellaneous  Washer and dryer Are hookups or machines provided?  Dishwasher Are hookups or machines provided?  Smoking  Pets  Fireplace  Hot tub  Snow removal and lawn maintenance

1.9.5.G1 Determining Housing Costs  Important to choose a rental unit one can afford Create a spending plan  Spending plan is a financial statement used to assist in money management and track income and expenses  Based on this, determine what can be spent on rent and amenities Rent is the payment made in exchange for occupying another’s land or property, usually paid to landlord or property manager  Property manager is a person who works for the owner to find/screen tenants, collect rent, maintain property, and respond to tenants’ needs

1.9.5.G1 Housing Costs continued  General rule: Households should spend 30% or less of their net income on housing, not including amenities  Things to keep in mind when determining costs: Determine maximum monthly amount (including amenities) you can afford and stay below that Compare the costs of living spaces  One space may not include amenities in the rent, where another space will. Add in expected costs to compare the two

1.9.5.G1 Housing Options  Houses-Single housing units usually surrounded by a yard, varying in size  Apartments-Sets of rooms on one floor or a building used as separate residence spaces  Studio apartments-Usually one room with separate space for kitchen and bathroom  Mobile homes-Manufactured house that is capable of being moved

1.9.5.G1 Housing Options Continued  Condominiums-Single apartment in a multiple housing structure, that can contain multiple stories, garages, and yards  Duplexes-Two apartments, situated side-by-side  Rooms-Private rooms located within another structure  Residence halls-Usually located on college or university campuses and available for attending students

1.9.5.G1 Housing: Largest Expense for Most Prices vary greatly SizeLocationAmenities Choose housing that fits your personal needs and spending plan

1.9.5.G1 Purchasing a Home Real estate agent Licensed individual representing a buyer or seller in a contractual transaction to purchase real property Helps buyers: Find a property that addresses their needs and wants Find a property that fits their spending plan Work through the contract and closing process

1.9.5.G1 Home Loan Lender evaluates many factors including: Credit history IncomeNet worth Income and expense statement Most use credit to purchase a home Lender determines the maximum amount that can be borrowed and the credit terms

1.9.5.G1 Two Significant Initial Expenses Down Payment Portion of the purchase price not borrowed Typically 5-20% of purchase price Mortgage insurance – protects the lender if the borrower provides less than 20% down payment Closing Costs Fees and charges associated with the purchase of a property Typically 1-4% of purchase price

1.9.5.G1 Mortgage Payment Mortgage payments typically include: Cost of the home Interest Funds to pay property taxes Funds to pay homeowners insurance Mortgage: A payment to pay off the loan used to purchase housing

1.9.5.G1 What are typical home ownership expenses? Utilities Household Furnishings Special Assessments Homeowner’s Association Dues Maintenance and repairs Communications (Internet, television, phone) Housing expenses: MORTGAGE

1.9.5.G1 Purchasing a $250,000 Home 20% Down Payment 5% Down Payment Down Payment$50,000$12,500 Monthly Mortgage Payment$1,158.51$1, Total paid$417,062.18$477, Scenario 1: Down Payment 3.5% Interest Rate  30 Year Loan 780 Credit Score720 Credit Score Interest3.3%3.5% Monthly Mortgage Payment$1,136.33$1, Total paid$409,077.76$417, $8, paid for mortgage insurance! Scenario 2: Credit Score $50,000 Down Payment  30 Year Loan $7, Additional interest paid Source: mortgagecalculator.org

1.9.5.G1 Rent vs. Own Activity  Set-up: work in groups of 2-3  Supplies: piece of butcher paper and markers  Activity: For both renting and owning, brainstorm: 2 Pros 2 Cons RentOwn ProsConsProsCons

1.9.5.G1 RentOwn ProsConsProsCons Lower move-in cost Subject to terms of the rental agreement Potential to gain equity May have significant negative effects on credit history is home loan is not paid according to the terms of the loan Easier to move May have restrictions such as no pets Tax benefits Large initial cost (down payment, closing costs) No (or little) maintenance and repairs Few or no opportunities for home improvements (appliances, paint, etc.) May improve credit history if the home loan is paid according to the terms of the loan Additional expenses Less responsibilityNo equity is gained Free to make home improvements More risky than renting Typically less expensive than home ownership No tax benefits No restrictions (unless restricted by the specific homeowner’s association) Usually requires additional resources (time, money) to maintain Utilities are sometimes included in rent payment Not as easy to move