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Chapter 7 Selecting and Financing Housing McGraw-Hill/Irwin
Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.
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Selecting and Financing Housing Chapter Objectives
Assess costs and benefits of renting Implement the home-buying process Determine costs associated with purchasing a home Develop a strategy for selling a home 7-2
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Objective1 Assess Costs and Benefits of Renting
Evaluating Renting and Buying Alternatives Your lifestyle and your choice of housing Personal preferences vs. financial factors Traditional financial guidelines: 7-3
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Renting vs. Buying Housing
Choice should be based on: 7-4
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Rent vs. Buy Or Insert Exhibit 7-1 7-5
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Housing Rental Activities
7-6
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Rental Activities Selecting a rental unit Advantages of renting
Disadvantages of renting 7-7
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Selecting an Apartment
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Legal Details of a Lease
7-9
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Costs of Renting Utilities not covered in rent payment
Security deposit Utilities not covered in rent payment Renter’s insurance 7-10
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Objective 2 Implement the Home-buying Process
7-11
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Home Buying Activities Step 1: Determine Homeownership Needs
Evaluate Home Ownership Stability of residence Financial benefits Lifestyle flexibility - express your individuality 7-12
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Home Buying Activities
Drawbacks of Homeownership Financial uncertainty Limited mobility Higher living costs 7-13
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Home Buying Activities Types of Housing Available
Single-family dwelling Multi-unit dwelling Condominium 7-14
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Home Buying Activities Types of Housing Available
Cooperative housing Manufactured homes 7-15
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Home Buying Activities Types of Housing Available
Mobile homes 7-16
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Home Buying Activities Types of Housing Available
Building a custom home: 7-17
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Home Buying Activities Building a Custom Home
7-18
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Home Buying Activities Determine What You Can Afford
7-19
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Home Buying Activities Step 2: Find and Evaluate a Home
Select a location, location, location Services of real estate agents 7-20
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Home Buying Activities Step 2: Find and Evaluate a Home
The Home Inspection See Exhibit 7-5 7-21
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Home Buying Activities Step 3: Price the Property
Determine the home price 7-22
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Home Buying Activities Step 3: Price the Property
Negotiate the purchase price 7-23
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Objective 3 Determine Costs Associated with Purchasing a Home
The Finances of Home Buying Step 4: Obtain Financing Determine down payment amount Mortgage insurance if < 20% down (PMI) Automatic PMI termination when equity =>22% Required by Homeowners Protection Act 7-24
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Home Buying Activities The Mortgage
Long-term loan on a specific piece of property Usually 10, 15, 20, 25, or 30 years Three main phases 7-25
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Home Buying Activities The Mortgage
Qualifying for a mortgage includes: “Points” = prepaid interest as a % of loan amount 7-26
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Home Buying Activities The Mortgage
Loan for which you qualify will be greater when rates are lower Calculating the monthly principal and interest payment: 7-27
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Home Buying Activities Types of Mortgages
Fixed-Rate, Fixed-Payment Mortgage Government-guaranteed financing programs 7-28
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Home Buying Activities Types of Mortgages
Adjustable rate mortgage (ARM) 7-29
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Home Buying Activities Creative Financing
Convertible ARM Balloon mortgage Growing-equity mortgage (GEM) Interest-only mortgage 7-30
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Home Buying Activities Other Financing Options
Shared appreciation mortgage (SAM) Second mortgage 7-31
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Home Buying Activities Other Financing Options
Reverse mortgages Refinancing Making extra payments 7-32
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Home Buying Activities Step 5: Close the Purchase Transaction
Make arrangements for a walk through Closing 7-33
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Home Buying Activities
Closing Costs 7-34
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Home Buying Activities Closing Cost Components
Title Insurance Deed Escrow Account 7-35
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Objective 4 Develop a Strategy for Selling a Home
Preparing your home 7-36
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Selling Your Home Determining the selling price “For Sale by Owner”
Listing with a Real Estate Agent 7-37
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