Housing

1. Housing A Place to Call Home

2. Exploding Myths • In an apartment, you are free to live any way you want. • If you can afford the monthly loan payments, you can afford to buy a house. • When you shop for an appliance, higher price always means better quality.

3. Decision Making Project Your group will decide what type of housing you could rent for $400 a month each. You will also make a list of household chores that need to be done and rules. How are you going to furnish your living space.

4. Your Housing Options • Types of Housing • Your Parent’s Home • Dormitories • They are buildings with rooms that colleges rent to students at reasonable prices. • Apartments • Apartment Building or Complex • Large or Small • An efficiency apartment is the smallest and the least expensive apartment

5. Your Housing Options cont. • A duplex is an apartment with rooms on two floors of a building. • Furnished or Unfurnished? • Houses • Condos • A condominium is an apartment that you own rather than rent. • Mobile Home • A mobile home is a small house on wheels, designed so that the owner can transport it to rented space.

6. Buy or Rent? • Advantages of Renting • Lower Cost • Less Responsibility • Mobility • Disadvantages of Renting • No Ownership • More Restrictions • Shared Space

7. Buy or Rent? Cont. • Advantages of Buying • Ownership • Value • Your Own Space • Fewer restrictions • Tax deductible • Disadvantages of Buying • Down Payment • High Cost • Property Taxes • Restricted Mobility • More Responsibility

8. Income Needed to Qualify for a Mortgage

9. Sharing Housing Cost • Agree on Rules of Behavior • Neatness • House guest • Quiet time • Personal Space • TV and Stereo use • Phone use • Pets

10. Sharing Housing Cost • Divided Responsibilities • Cooking • Dishwashing • Apartment cleaning • Grocery shopping • Expense – rent, utilities, phone, groceries • Choosing and paying for apartment furnishing and decorations • Make a written agreement • Especially were money is involved

11. A lease is the legal contract you sign that gives you the right to live in the apartment for a specified time period.

12. Decision Making Project Your group will decide what type of housing you could rent for $400 a month each. Find a place to live: • http://www.apartments.com/ • http://www.forrent.com/ • http://www.apartmentguide.com/ • http://www.homerentalads.com/

13. Questions • What are some advantages to living in a college dormitory? • What choices do you have in types of apartments? • Why might someone rent a furnished apartment? • What issues should you discuss with a prospective roommate to minimize possible conflicts?

14. Questions • What is a lease? • What kinds of agreements with a roommate should be put in writing?

15. How to Rent an Apartment • How to Find and Evaluate Apartments • Budget trade-offs • Price • Convenience • Neighborhood • Environment • Size and Condition • Facilities • Pets

16. Where to Find Leads • Family and Friends • Newspaper Ads • Internet • Real Estate Agencies • Apartment Managers

17. How to Evaluate an Apartment • What is the monthly rent? • Does the rent include heat, electricity, gas, and water? • How long is the term of the lease? • At the end of the lease, must I sign a new lease, or can I rent month-to-month? • What facilities do they provide? Laundry? Cable? Parking?

18. How to Evaluate an Apartment • What rules or restrictions do you have? • Can I have pets? If so, is there an extra charge? • What type of security do you provide?

19. The Lease in Moving In • The lease details you rights and responsibilities as a tenant and those of your landlord. • Your landlord is the owner. • Always read a lease before you sign it. • If you see a clause you don’t like, ask if it can be changed. • Get any changes in writing.

20. Lease Terms • Length of time the lease runs • Rent amount and due dates • Amount of your Security Deposit, or money the landlord holds to cover any damages to rental property. • Who is responsible for paying utilities such as heat. • Rights to use the facilities. • Restrictions, such as whether or not you can have pets.

21. Lease Terms Cont. • Rules of conduct, such as rules concerning parties or loud music. • Landlord’s responsibility to make repairs. • Conditions under which the landlord can enter your apartment. Must permission be asked before entering, except for emergency? • Notice you are required to give before moving out.

22. Addition to Project Your parents are so excited that you are leaving that they have given you $1500 each to buy furniture and appliances (if you need them). You will also be able to take one thing other then your cloths from your house. Add this to your project: You will let me know what you are taking from your house and what you are buying. Romano Sofa ($999)

23. Moving Expenses • Packing • Truck? • Are you packing? • Is it during a holiday season? • Get bids • Mail • Stop a day or two before • Utilities • Turn off

24. Questions • What factors affect the price of an apartment? • How can you find out what apartments are available in an area? • How can a checklist help you evaluate apartments? • What are your responsibilities regarding a security deposit? • What should you have the right to expect from you landlord?

25. How to Buy a Home • Cost of Home Ownership • A loan to buy real estate, such as land or a house, is called a mortgage. • Mortgage Payment • A mortgage has two parts: principal and interest. • The principal is the amount you borrow. • You will have to pay a specified percentage of the purchase price up front as the down payment.

26. How your Credit Score Affects the Mortgage Rate You Pay

27. Cost of Home Ownership • Points • Most mortgage lenders change a service fee in the form of points. • Each point equals 1 percent of the principal • Points are essentially additional interest. • Closing cost • When you sign the final paperwork for the loan, you will be required to pay closing cost • Closing cost are a collection of fees to cover tasks the lender must do related to your loan. • For example, the lender hires specialist to estimate the property’s value.

28. Initial Cost

29. Amortization Schedule Example

30. Cost of Home Ownership • Homeowner’s Insurance • Most lender require you to carry homeowner’s insurance. • It protects you against loss from fire, theft, or other hazards. • Property Taxes • You local government will charge property taxes based on the value of your property. • The lender may require you to pay a portion of your taxes and homeowners insurance each month in your mortgage payment. • These amounts are held in an escrow account.

31. Private Mortgage Insurance • Private mortgage insurance ( PMI) is obtained from a private company. • The largest private mortgage insurer is the Mortgage Guaranty Insurance Corporation ( MGIC, pronounced “ magic”). • The cost of PMI varies from 0.25 to 2.0 percent of the debt, depending on the degree to which the loan-to-value ratio exceeds the lender-desired percentage.

32. PTI example • The loan-to-value ratio is 86.5 percent ($ 160,000  $ 185,000) and the lender required 80 percent ( 20 percent down). • As a result, the annual private mortgage insurance premium is 0.4 percent of the mortgage loan ( 0.004 x $ 160,000) and is $ 640, or $ 53.33 per month which is ($640 12).

33. Cost of Home Ownership • Mortgage Insurance • If you have a government-issued loan or borrow more than 80% of the worth of you house you will have to have insurance on your mortgage.

34. Types of Mortgages • Fixed Rate Mortgage • Charge the same interest rate for the entire mortgage • Adjustable Rate Mortgage • Interest rates go up or down as rates in the economy rise or fall. • Insured Mortgage • First time buyers • Lowers down payment • Called FHA mortgage

35. Other Mortgages • VA mortgage • If you are a veteran • The loan is insured by the Veteran’s Administration • Graduate-payment mortgage • Small payments for the first couple of years • Much larger ones later • Interest Only Loan • You pay interest on the loan only.

36. The Home Buying Process • Unlike many purchases, a home can also be a good investment. • A house often appreciates-grows in value over time. • You can also use the equity in your home to borrow money for other purchases. This is called a home equity loan. • Know what you want.

37. Steps in the Process of Buying a Home

38. The Home Buying Process • Know what you can afford. • In general you can afford a house that cost 2.5 times your gross income. • If you make $48,000 per year, you can afford a house that cost $120,000 • Work with a real estate agent • When you have chosen a house you want to buy, you make an offer. • An offer is a proposal to buy the house for a stated price.

39. The House Buying Process • How to complete the deal • After you and the seller agree on the purchase price, you will be expected to pay a deposit. • This deposit, or earnest money, is proof of your intention to buy at the agreed-upon price.

41. Second Mortgages

43. How to Furnish Your House • Prioritize your wish list into three categories: • Things you want immediately • Things you want soon • Things you would like to have eventually • What can you borrow? • What can you buy used? • How can you buy new affordably?

44. Furniture • Materials • Higher quality – hard wood o such as maple or oak • Soft wood come from trees like cedar and pine. • Construction • Sit level? • Drawers move easily • Finished smoothly • Springs feel firm, no poking

45. Things to look for in appliances • Consumer Reports • Energy Labels • Cost per year for appliance • You need a water heater • One model is $250 and energy cost is $75 • The other model is $350 and its energy cost is $55 • Over 15 years you would pay $1125 for the 1st model and $825 for the second. • A difference of $250

46. Things to look for in appliances • Options • High cost does not mean better quality • It usually means more options • Warranties • Appliances should come with a written warranty • A warranty is a guarantee that the product will fulfill the use for which it is intended.