Housing Decision: Factors and Finances Flashcards
The place where you live reflects what?
- Lifestyle
- Needs
- Values
- Beliefs
- Attitudes
What are some trade-offs you may face when selecting housing?
- Losing interest earnings on down payment for house/ security deposit for apartment
- Loss of home-buying tax advantages and equity growth when you rent
- Time and money for repairing/ improving a lower priced home
- Time and effort involved when having a home built to your specifications
What are the advantages and disadvantages of renting an apartment?
Advantages: Easier to move and take care of. Minimal financial commitment
Disadvantages: No tax benefits, limitations on remodeling and privacy, may have restrictions on pets and other activities
What are the advantages and disadvantages of renting a house?
Advantages: Easy to move, less maintenance, more room than an apartment, minimal financial commitment
Disadvantages: Higher utility costs than apartment, limitations regarding remodeling and privacy
What are the advantages and disadvantages of owning a new house?
Advantages: No previous owner, established neighborhood, tax benefits
Disadvantages: Financial commitment, higher living expenses, and limited mobility
What are the advantages and disadvantages of owning a previously owned home?
Advantages: Pride of ownership, established neighborhood, tax benefits
Disadvantages: Financial commitment, possibility of repairs or replacements, limited mobility
What are the advantages and disadvantages of owning condominium?
Advantages: Tax benefits, fewer maintenance responsibilities, good accessibility to recreation and business districts
Disadvantages: Less privacy, financial commitment, uncertain demand affect property value, assessment fees
What are the advantages and disadvantages of owning a cooperative?
Advantages: Ownership in form of nonprofit organization, stable property values
Disadvantages: Difficult to sell, potential disagreements among other members, other members have have to cover costs of unrented units
What are the advantages and disadvantages of owning a mobile home (manufactured home)?
Advantages: Less expensive than other ownership options, flexibility in selection of home features/appliances
Disadvantages: May be difficult to sell in future, financing can be difficult to obtain, construction quality may be poor
What % of US households live in rental units?
35%
What are five factors to consider when selecting an apartment?
Location, building exterior, building interior, financial aspects, and layout/facilities
What does it mean to consider the “building exterior”?
Condition of building/grounds, parking facilities, and recreation.
What does it mean to consider the “building interior”?
Look at exits/security, hallway maintenance, condition of elevators, access to mailboxes
What are the three main advantages of renting?
- Moving is easier when a location change may be needed/ desired.
- There are fewer responsibilities involved
- There are lower initial costs (tenets need to pay just a security deposit)
What is the price-to-rent ratio?
It is the relationship between home prices and annual rents. Real estate advisors suggest a ratio of 18 or lower when you buy.
What are three disadvantages of renting?
- There are fewer financial benefits for tenants than homeowners (no tax deductions and little control over changes in rent)
- Renters are restricted in what they can do (ex. may not be allowed to have pets or decorations)
- Lease forms may contain conditions you might not want to accept
A lease contains information about……..
- Description/address of rental unit
- Name/address of landlord (lessor)
- Effective date of lease and length of lease
- Amount of security and pet deposit
- Amount and due date of monthly rent
- List of utilities, appliances, furniture, and other facilities included in rent
- Conditions under which the landlord may enter the apartment
What is subletting?
Allowing someone to else to take over rent payments and live in a rental unit if you must move before the lease expires.
True or False. You must accept every condition on a printed lease
False. You could negotiate a lower rent or reduced security deposit. You can also discuss any lease terms you deem unacceptable.
With an oral lease, one party must give a ______ notice to other party before terminating lease or charging a rent increase.
30 day
Why are leases important?
They provide protection to landlord and tenant
What is a security deposit? What does the security deposit cover?
It is usually one month’s rent. It covers the cost of any damage done to the rental unit during the lease period.
True or False. If money is deducted from your security deposit, you have the right to an itemized list of repair costs
True
What are three benefits of home ownership?
- Pride of Ownership (Getting to have a place to call your own).
- Financial benefits (ex. deductibility of mortgage interest/real estate payments, potential increases in value of property).
- Lifestyle flexibility (Owning a home allows you to express individuality through decoration and entertainment).
What are the drawbacks of home ownership?
- Financial uncertainty: There could be complications in obtaining money for a down payment or depletion of property value.
- Limited mobility: It takes more time to change locations if you own a home rather than rent
- Higher living costs: Owning a place is expensive since you are responsible for maintenance, repainting, repairs, and home improvements
Property taxes vary from area to area, but they are usually ___ to ____% of the market value of the home
2 to 4%
What are the steps you can take to appeal (try to lower) your property taxes?
- Know the appeal deadline - Call local assessor’s office and send appeal by certified mail.
- Check for errors - Some obvious mistakes are reporting incorrect square footage or a wrong number of rooms
- Determine issues to emphasize - Note items that could negatively affect the value of your home. Compare your assessment with homes of same age, size, and location
- Prepare for hearing - Gather evidence and prepare an organized presentation. Use photos of comparable properties. Suggest a specific corrected assessment and give your reasons.
List four types of housing for home buyers.
- Single-family dwellings (detached homes).
- Multiunit dwellings (Has more than one living unit).
- Condominiums (individually owned units in one building) Run by an association that owns the condos.
- Cooperative housing (Units in building are owned by non profit organization). Residents have right to stay in units as long as they own stock in the cooperative.
Mobile homes (trailer homes)
Housing units that are usually less than 1,000 sq. feet. Can have features like fully equipped kitchens, fireplaces, and cathedral ceilings.
What are some things to consider when selecting a contractor?
- Do they have the needed experience for the project?
- What arrangements are required for payments during construction?
- Is the contractor licensed and insured?
- Does the written contract include a time schedule, cost estimates, a description of the work, and a psyment schedule?
What are factory-built homes?
Living units that are fully or partially assembled in a factory and then moved to a living site. (ex. prefabricated home and modular home)
What are some factors that affect the amount you can afford for a house?
- Funds available for down payment
- Income level
- Current living situation
- Current mortgage rates
- Ability to make monthly mortgage, tax, and insurance payments
What is a handyman’s special?
A home that needs work and that you can get a lower price for.
What is one action you can take to determine how much you can afford to spend on a home?
Have a loan officer at a mortgage company or other institution prequalify you
What are zoning laws?
Restrictions on how the property in an area can be used.
When evaluating a home to purchase, what are two important things to consider?
Location and school system
What are five main services of real estate agents?
- Showing you homes in many areas based on your needs and preapproved mortgage amount
- Presenting your offer to the seller based on a market analysis
- Negotiating a purchase price
- Assisting you in obtaining financing
- Representing you at closing
Why is having a home inspection beneficial when buying a home?
It helps minimize future problems and avoid unexpected expenses