Ch7: Selecting and Financing Housing Flashcards
How much of your take home pay should be spent on housing?
25-30%
how much of your yearly income should be used as a limit for housing costs?
2.5 times
What should you consider before deciding to rent or buy?
lifestyle, finances/cost, mobility, financial benefits
What are some advantages of renting?
easy to move, fewer maintainance responsibilities, minimal financial commitments
disadvantages of renting?
no tax benefits, limitations on remodeling, limitations on pets and other activities
what is a lease?
a legal document that defines the conditions of a rental agreement
What is included in a lease?
description and address of property name and address of landlord name of tenant effective date and length of lease amount of security deposit amount and due date of rent included utilities restriction right to sublet, transfer clause conditions under which the landlord can enter the unit
How much is a security deposit?
one month’s rent
What are the conditions of a security deposit?
held in the event of damages, returned at the end of the lease, deductions must be documented
Renter’s insurance
covers contents of a rental property
Utilities are not included if you are ______
renting a house
What are the financial benefits of owning a home
property taxes and mortgage rent are tax deductable, potential increase in value of property, build equity
types of housing
single-family housing multi-unit housing condo cooperative manufactured
What is a condominium?
individual ownership of a unit in a building
NOT a building structure
What is cooperative housing?
units owned by non-profit; shareholders purchase stock to live in building
What are manufactured homes?
usually less than 1000 square feet fully or partially assembled in a factory and moved to site–land can be leased or bought
Thoroughly investigate the quality and relationships of the ___________ before building a home
contractor
What should a contract include when building a home?
time schedule (including estimated delays), cost estimates, description of work, pay schedule
Consider your ______, ________ expenses, and how much you can have for a _____ ________ before buying a home
income, living, down payment
Seek _______ through a ____ _______ to finance a home
preapproval, loan officer
The Home Buying Process
- Determine homeownership needs
- Find and evaluate a home
- Price the property
- Obtain financing
- Close the transaction
When selecting a location for your home…
consider zoning laws and school disticts
Real estate agents can…
- show you homes that meet your needs
- present your offer to sellers
- negotiate price
- Assist in obtaining financing
- represent you at the closing
what is an appraisal?
assessment of market value; required by mortgage company to obtain a loan
What can affect the price of a home?
selling prices of homes in the area, demand for housing, length of time on the market, owner’s need to sell, financing, features and condition of the home
What is a purchase agreement?
a buyer’s legan offer to purchase a home
Where do property taxes go?
school funding (which is why poor neighborhoods have poor schools)
What is a counteroffer?
the seller’s response to a buyer’s offer and vice versa as part of the negotiation process
_____ _______ is deposited in good faith of a future purchase. No progress will be made in the selling process until the buyer follows up with funding or another condition.
Earnest Money
A contingency clause is…
an offer dependent on some type of specification–usually obtaining funding or selling of the buyer’s home
Mortgage insurance is required if….
the buyer makes a downpayment < 20%
The Homeowners Protection Act requires that…
PMI is terminated when equity in the home exceeds 22%
What is private mortgage insurance?
covers losses if a homeowner defaults on payments and the bank loses equity when selling
What is a mortgage?
long-term loan on a specific property; usually 10, 15, 20, 25, or 30 years
Phases of a mortgage
- meeting for application and qualification with lender
- lender verifies qualification with credit report
- approval or denial–rate locked for 60-90 days
Factors to qualify for a mortgage
income, debts, credit history (620< ), down payment (20%), length of loan, current mortgage rates
___ are prepaid interest as a percent of loan amount
points; 1 pt = 1% of loan
