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Chapter 6

Chapter 6. Buying the Necessities: Housing and Transportation. Housing Information. Average American Family spends ¼ of income on home 60% of housing units are owned by the people living on them. Section 1 Types of Housing. Single-Family Houses House separated by neighboring homes

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Chapter 6

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  1. Chapter 6 Buying the Necessities: Housing and Transportation

  2. Housing Information • Average American Family spends ¼ of income on home • 60% of housing units are owned by the people living on them

  3. Section 1 Types of Housing • Single-Family Houses • House separated by neighboring homes • Most expensive to buy and maintain • Real Estate Taxes: Taxes paid on land and buildings • Symbolizes the “American Dream” • Town Houses • Home with individual front and back yards, but common side walls • Usually cheaper • Size and noise can be issues

  4. Types of Housing (Cont.) • Condominiums • Single unit in a complex that is individually owned • Monthly fees are paid for “common area” upkeep • Mobile Homes • Least expensive to buy and maintain • Suffer greater damage during storms • Depreciate: Decline in value

  5. Single-Family Houses

  6. Town Houses

  7. Condominiums

  8. Mobile Homes

  9. Sharing an Apt. or House • Pros? • Someone to share Responsibilities • Cheaper • Rent • Utilities • Cable/Internet • Furnishing • Cons? • What if the roommate is irresponsible? • They do not pay their share of the rent • They do not help clean/help with other responsibilities

  10. Lesson 2 To Rent or Buy ADVANTAGES DISADVANTAGES RENT BUY

  11. Lender’s Buying Rules • Purchase Price/Annual Income = 2.0 or less • Mortgage Payment/Monthly Take-Home Income = Less than 33% • Loan Amount/Value of the Home = 95% or less

  12. Types of Mortgages • Standard Fixed-Rate • Flexible Rate • Federal Housing Administration (FHA) • Graduated Payment (GPM) • Veteran’s Administration (VA)

  13. Standard Fixed Rate • Interest Rate and Monthly Payments remain the same over the term of the mortgage • Term is fixed • Usually 15-30 years • Interest Rate, Monthly Payment, and Term all stay the same

  14. Flexible Rate • Interest Rate and Monthly Payments change with interest rates in general • Can only increase by a few percentage points over the course of the mortgage • No limit on the amount of decrease • Monthly payment, term, and interest rate can all change

  15. Federal Housing Admin. (FHA) • The FHA insures entire amount of its mortgages • Allows buyers to obtain a larger loan than they could with an uninsured mortgage • Interest Rate, Monthly Payment, and Term all stay the same

  16. Graduated Payment (GPM) • Interest rate and Term are usually fixed • Monthly Payments are small at the beginning and increase gradually over the years • GPMs are used for people to expect their income to increase steadily year to year

  17. Veteran’s Administration (VA) • Can be obtained only by qualified veterans or their widows • Interest Rate is generally lower • VA guarantees a large percentage of the loan • Loans with no down payment are possible under the VA program

  18. Other Costs of Buying a Home • Down Payment • Money paid up front • Putting more money down can have benefits • Better Rates • More you put down = better rates and terms from the lender • Less Interest • By lowering the amount of the loan you will pay less interest in the future • No extra cost for insurance • If you put down 20% you will not be required to buy Private Mortgage Insurance

  19. Other Costs of Buying a Home (cont.) • Closing Costs • Miscellaneous fees charged by the lender for processing the loan • Title, paperwork, Inspections, Application fees, etc. • Taxes • Property Taxes

  20. Renter’s Rights & Responsibilities • Tenant Rights • Privacy • Tenant Responsibilities • Pay rent on time • Care for property/notification of problems • Follow leasing limits • Give notice • Landlord Responsibilities • Minimum services required • Safety laws followed

  21. Costs of Renting • Bismarck/Mandan • http://www.move.com/apartmentsforrent-search/bismarck_nd?source=web • http://www.showmetherent.rentlinx.com/Listings.aspx?State=ND&City=Mandan&PropertyType=Apartments • Various Cities • http://stpaul.apartments.com/

  22. Buying and operating an Automobile Lesson 3

  23. Questions • What are the costs of owning a car? • Do you automatically think that you “need” a car? • How much insurance does a car owner need? • How much does a car depreciate? • What are the alternatives to using a car?

  24. Important Car Buying Trade-Offs • The smaller the engine, the less gas it burns • Give up better acceleration and power • Newer Automobiles Cost more • Require fewer repairs • Smaller vehicles are more energy efficient; easier to move and park • Larger vehicles protect people better

  25. Costs of Buying an Automobile • Opportunity Costs of Buying • Money and Time spent shopping • That money could be used on other things • Opportunity Costs of the Car Loan • The loan with interest added

  26. Costs of Operation • Registration Fee • Annual fee paid to state government to run a vehicle • Costs depends on many factors • Maintenance/Repairs • Minor Maintenance: Oil Changes • Frequent service=longer lasting vehicle • Major Maintenance • HIGH COST!! • Extended Warranty • Can help protect against the high costs of major maintenance

  27. Costs of Operation (cont.) • Depreciation • Decline in value over time • Age, obsolescence, wear and tear • Insurance • Liability Insurance: Insurance if YOU cause the accident • This insurance will pay the other party’s bills • Full Coverage: Covers Everything

  28. Factors Affecting Insurance • Type of car you drive • Where you drive • What you use the car for • Marital Status • Safety Record • Number of Drivers

  29. Making the Best Choice • Talk to Friends • Read Consumer Reports • Comparison Shop between Dealers • Warranty Comparison • Test Drive • Safety Features • Get Used Cars Inspected

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