Chapter 3 - Concepts and Responsibilities of Home Ownership Flashcards
Condominium
Ownership is of the interior airspace. A form of ownership of real property recognized in all states that consists of individual ownership of some aspects and co-ownership in other aspects of the property.
Cooperative
Similar to condo. Owner does not own the unit itself but owns shares of stock within the co-op (corporation) and has a lease of the space being occupied.
Not a form of real property
Townhouses
The owner here owns the ground beneath but can sometimes have a common wall. If does not own the land, then it is a condo
Planned Unit Development (PUD)
projects that consist of common-areas but is owned and maintained by an organization. A form of cluster zoning providing for both residential and commercial land uses within a zoned area.
Converted-Use Properties
Commercial buildings that have been converted into some form of residential use (usually older buildings), or vice versa. Schools, warehouse, factories
Mixed-Use Property
Combines condo/townhome with shopping/commercial properties
Manufactured/Mobile Homes
A structure transportable in one or more sections, designed and equipped to contain not more than two dwelling units to be used with or without a foundation systems. Sold by Manufactured home dealerships
Time-Share
A license or contractual or membership right of occupancy in a project which is not coupled with an estate in the real property.
Five Major Factors of Location Influence
1) Employment Opportunities (Commercial)
2) Cultural Advantages (School Districts, Church, Sport)
3) Gov’t Structure (Police/Fire protection)
4) Social Services (Hospitals, Clinics, etc)
5) Transportation
Subdivision
the act of dividing land, or a building into individual pieces, which can be sold or owned separately. Land can be divided into plots or parcels, buildings into apartments or units.
Four Primary Types of Subdivision
1) Condominiums
2) Cooperatives
3) Time-Shares
4) Cluster Housing
Capital Gain
The profit realized from the sale of real estate or other investment. Capital loss occurs when an investment property or another type of investment is sold at a loss.
Up to $500K owned as principle residence of 2 of last 5 years before sale of prop is able to be excluded. $250K for an individual
Five Deductions for Income Tax Purposes
1) Mortgage Interest Payments (1st & 2nd Homes)
2) Real Estate Taxes
3) Loan Origination Fees
4) Loan Discount Points
5) Mortgage Insurance
Random Note
First-Time homebuyers can deduct from IRA to purchase first home, penalty free
Homeowners Policy
Will cover a number of risks bundled into one policy.
1) Home Damage
2) Personal Property
3) Liability coverage in case of owner being sued
4) Medical Payments for anyone hurt on site
5) Loss of Use - if something happened to prop and became inhabitable
Most do not cover flooding. This is generally separate policies in Tx
Replacement Costs
The insured is covered and reimbursed for the actual cost of replacing the damaged property.
HOA Insurance Policy
provides limited cash value of home and contents within. Only Includes the specific items listed in the policy.
Claims: Replacement costs minus Depreciation. They only pay out the actual cash value
HOB Insurance Policy
The most common in Tx. Replacement costs coverage for most types of items on property -provides cash value coverage for personal property. More expensive than HOA
Claims: Replacement Costs coverage
HOC Insurance Policy
The most extensive and expensive policy available.
Claims: Replacement Costs Coverage
PITI
An acronym denoting that a mortgage payment includes, principal, interest, taxes, and insurance.
The CLUE Reports
lists property insurance claim by houses and individuals for the preceding 3 years. A claim typically impacts this report connected to insurance premiums
National Flood Insurance Program (NFIP)
the body of this is FEMA and established the rates
Front-End Ratio (Lender)
Cost of home does not exceed 25-28% of buyers gross monthly income (PITI)
Back-End Ratio (Lender)
Includes payments on all debts (cars, student loans, etc..) added to the anticipated monthly house payment, should not exceed 33-36% of gross monthly income (PITI)
Budget Mortgage Components
1) Principal + Interest
2) Monthly Budget for Taxes
3) Monthly Budget for Home Insurance
Most Common
Non-Budget Mortgage
does not have taxes or insurance budgets. But, the annual payment will be the same as Budget Mortgage
Chapter Objectives
1) Identify at least four types of subdivisions, and explain the ownership structure of each.
2) Define capital gains.
3) List at least two tax benefits to owning real property.
4) Explain what is covered under homeowners insurance.
