1. Housing Alternatives

2. Location, Location, Location
Your housing location may be determined largely by what you are doing
Where are you working?
Are you attending college?
Do you want a short commute or do you mind driving a longer distance?
Want to live in the city, suburb, or the country?

3. Factors Affecting Location
Employment Opportunities
Cost of Living
Climate
Lifestyle
Neighborhood
Community Facilities and Services
Schools

4. Types of Housing Apartments Condominiums Cooperatives
Lease (rent) from the owner of the complex
Condominiums
A form of home ownership where a person owns the unit he or she occupies
Ownership of the surrounding building and grounds is shared
You pay a monthly maintenance fee to cover the costs of upkeep on the property
You obtain a mortgage and have the same tax and equity benefits as a home owner
Cooperatives
A form of home ownership in which a person buys shares in a corporation that owns the property
In return, the buyer lives in a designated unit and becomes a member of the cooperative
You pay a monthly fee that covers your share of maintenance and service costs; the fee also cover building mortgage and taxes

5. Types of Housing (continued)
Single-Family Homes
Custom-built houses
Tract houses
These are neighborhoods of new homes built by developers who build many houses at once within a given area
These houses are built from similar plans in order to keep costs down
Modular and Kit Houses
Partially built in factories
They are moved in sections to the home site for completion
Town Homes
Single-family units that share one or both sidewalls with other town houses
Units are usually built at the same time from similar blueprints

6. Types of Housing (continued)
Manufactured Homes
Single-family house built in a factory and shipped to the home site
Less expensive than other types of housing
Low maintenance costs
Can decrease in value rather than increase

7. Housing Costs
According to financial advisors, your total MONTHLY housing costs should total no more than 1/3 of your take-home pay
Example: Your net take-home pay for the month is $2100; so your monthly housing costs should not exceed $700 (2100/3)
A suggested formula for determining how much house you can afford is to multiply your ANNUAL SALARY by 2.5.
Example: You make $35,000 per year; so your max price for a house would be $87,500 (35,000 x 2.5)
Housing costs include:
Rent/mortgage payment
Utilities
Maintenance of the property/home
Property taxes
Homeowner’s insurance

8. Renting Versus Buying Advantages of Renting
Fewer financial responsibilities
No down payment needed
Rents are generally lower than mortgage payment (but not always!)
You do not pay for major repairs or for new appliances
More free time
You are not responsible for lawn maintenance or home repairs
Less financial risk
You do not have to worry about property values
You do not have to worry about a mortgage payment
Great mobility
You can move at the end of your lease/rental agreement

9. Renting Versus Buying (continued)
Disadvantages of Renting
No buildup of equity
Little control over living space
No tax benefits

10. Renting Versus Buying Advantages of Buying a Home Can increase wealth
You build equity in your home
Can resell at a profit
Tax benefits
Mortgage interest and property taxes are deductible on your tax form
Greater control
You have freedom to make decisions concerning your property
Careful though; some subdivisions have rules regarding property

11. Renting Versus Buying Disadvantages of Buying a Home
Greater costs and financial responsibility
May require a significant down payment
Mortgage payment has to be paid as well as home insurance and property taxes
You must maintain your property and make repairs
Less mobility
If you need to move, you have to sell your house; this may take a long time depending on the market
Greater financial risk
Typically, property values rise over time
Homeowners can lose money if property values decrease or if they cannot make the mortgage payment

12. Renting Rental Application Rental Lease
A form you complete requesting to rent
Security deposit will be required
Pet deposit/fee may be required
Rental Lease
A contract that specifies the conditions, terms, and rent for the use of an asset
You, the renter, are the lessee
The person who owns the property being leased, is the lessor
Explains the legal rights and responsibilities of both a tenant (you) and the landlord (owner)

13. Renting (continued) What should I know about the lease?
Rent. How much, when is it due, what is the penality for late payment?
Security deposit. Is one required, how much? Under what circumstances would you lose your deposit?
Utilities. Are any utilities included in rent? What should you expect to pay each month?
Furnishings, appliances, services. What furnishings and appliances are included? What facilities are available on the premises?
Lease period. What term or period of time does the lease cover? What are the beginning and ending dates of the lease? When do payments begin? When can you move in? When must you renew the lease or give notice that you plan not to renew? What happens if you need to move before the lease expires? Can you sublet or assign the lease to someone else? What are your responsibilities if the person taking over does not pay the rent?

14. Renting (continued) What should I know about the lease?
Upkeep, maintenance, repairs. Who is responsible for upkeep, maintenance, and repairs? What does the landlord maintain and what must you maintain? What happens if one or the other fails to carry out their responsibilities? Where and how do you contact the landlord or rental agent with questions, problems, or complaints?
Legal remedies. What can you do if the landlord breaks the lease in any way? What can the landlord do if you break the lease in any way? Who pays the legal costs?
Conditions of use. Can you paint, wallpaper, and decorate your living space? If you install carpet, shelving, or equipment can you get credit or take it with you? Can you have pets? Can you add a roommate later?

15. Renter Protection
Federal, State, and Local Laws and Regulations Protect Renters
Title VIII of the Civil Rights Act of 1968 (Fair Housing Act)
Prohibits discrimination against consumers who are looking to buy, rent, or get financing for a dwelling
You cannot be discriminated against by race, color, national origin, religion, sex, familial status, or disability
Other laws state that landlords cannot enter your dwelling except in the case of an emergency; landlord is required to give tenant notice before entering a rental property to make repairs or perform maintenance.

16. Renter Protection (continued)
Federal, State, and Local Laws and Regulations Protect Renters (continued)
Rent cannot be raised until the lease period is over
Some cities have laws that limit how much landlords can raise the rent on tenants
Landlords are required to have fire alarms in their rental properties
Tenant rights can be found at
Conduct an inspection at the property and make notes of problems or repairs that need to be made
Get renters insurance on your personal property!

17. Renting as a Young Adult
What should you discuss with your roommate before signing a lease?
What will be each person’s share of the rent and when is it due?
Is there a security deposit? How will that be divided if there are charges for damage to the residence?
How long will each person live in the dwelling? Who will pay the rent for the rest of the lease term if someone moves out?
How will utility bills be divided?
Will furniture, TVs, computers, appliances be shared? If they are damaged, who will pay for repair or replacement?
Will guests be allowed?
How will housework be divided?

18. Buying a Home Make a list of features you desire in the home
Which ones are most important?
How many bedrooms do you want?
Do you want a garage? basement? a garage apartment for parents or in-laws?
Do you want yard space or a fenced in yard?
Are you willing to make improvements before moving in?

19. Buying a Home (continued)
Real estate broker
A person licensed to arrange for the purchase and sales of real estate for a fee or commission
For their services, brokers and agents receive a commission, usually between 3 and 6 percent of the home’s final sale price
Seller usually pays the commission
Exclusive buyer agents
A person who works for the buyer and not the seller

20. Buying a Home (continued)
Negotiating
Home buyers do no usually pay the asking price for a home
Seller and buyer will usually go back and forth with counter offers
As a buyer, you should conduct thorough research about the home, neighborhood, comparable houses in the neighborhood before making an offer

21. Buying a Home (continued)
Negotiating (continued)
You may decide to offer less than the asking price if
the property needs repairs
the home has not sold despite being on the market a long time
other comparable homes nearby sold for much less
the seller is desperate to sell
you are flexible about the move-in date
the market for selling homes is bad and there are many homes on the market

22. Buying a Home (continued)
Purchase Agreement
When the buyer agrees to buy the house and the seller agrees to sell it, they both sign a contract called a purchase agreement
Sometimes it is called a sales agreement
The agreement should state
All of the conditions and terms of the sale
Amount of earnest money required
Earnest money is given to a seller to show that the buyer is serious about the purchase and prevents the seller from offering the home to someone else while you are finalizing the sale
It is applied toward the down payment
A buyer can forfeit (lose) earnest money if the buyer does not go through with the agreement

23. Buying a Home (continued)
Home Inspection
Before finalizing the sale, the prospective home buyer will ask for a home inspection to be performed
For a fee, a home inspector will examine the home for problems that may affect the value of the home or require costly repairs
Examples to look for include
Cracks in the foundation
Leaky roof
Plumbing problems
Electrical problems
Faulty appliances
Termite damage

24. Buying a Home (continued)
Home Mortgage
A mortgage is simply loan to buy a home
It is a contract between a borrower (the home buyer) and the lender (bank or mortgage company)
The home buyer promises to pay back the loan amount PLUS interest
The amount is paid in fixed monthly installments over a period of time, usually 15 to 30 years
If a borrower fails to make the mortgage payment, the lender can repossess (or foreclose on) the house

25. Buying a Home (continued)
Home Mortgage (continued)
A mortgage is simply loan to buy a home
It is a contract between a borrower (the home buyer) and the lender (bank or mortgage company)
The home buyer promises to pay back the loan amount PLUS interest
The amount is paid in fixed monthly installments over a period of time, usually 15 to 30 years
If a borrower fails to make the mortgage payment, the lender can repossess (or foreclose on) the house

26. Buying a Home (continued)
Types of Mortgages
Fixed Rate
Guarantees a fixed or unchanging interest rate for the life of the loan
Adjustable Rate Mortgage (ARM)
Allows the interest rate to be adjusted up or down periodically; adjustments are made according to a national rate index; be careful—these loans are often offered at a lower interest rate than fixed, but borrowers take the risk that interest rates will increase when the adjustment is made

27. Buying a Home (continued)
Financing a Home
FHA-insured loan
Guaranteed by the Federal Housing Administration (FHA) and helps lower- and moderate-income people purchase homes
The FHA does not make the loan; it insures lenders (bank or mortgage company) against borrowers’ if they default (don’t pay their mortgage)
Down payments can be as low as 3 percent
The house must meet FHA standards
VA-guaranteed loan
Insured by the Veterans Administration
Only veterans of the U.S. Armed Forces are eligible
The VA sets the rates
NO DOWN PAYMENT REQUIRED

28. Buying a Home (continued)
Closing Costs
Settlement charges paid before the sale of a home is final
Good Faith Estimate
Points
Appraisal
Title
Abstract of title
Deed
Loan application
Commission/fees
Escrow account (property taxes, insurance)
PMI (private mortgage insurance)