Ch.7 Housing

What factors affect a person's ability to qualify for a mortgage?

*Income *Other debts *The amount for a downpayment *The length of the loan *Current mortgage rates

What factors affect the selling price of your home?

*Location *Size *Conditions *Features *Current market demand

What actions are recommended when planning to sell your home?

*Make needed repairs *Consider new paint *Clear out living and storage areas *Remove unnecessary furniture and other items

How do discount points affect the cost of a mortgage?

Discount points increase the initial cost for a mortgage; however, paying points result in obtaining a lower mortgage rate

How can the quality of a school system benefit even homeowners in a community who do not have school-age children?

By maintaining quality schools, all homeowners in an area benefit from stable and increasing property values.

True or False: A lease is mainly designed to protect the rights of the landlord.

False

True or False: Cooperative housing involves the purchase of an individual living in a multiunit complex or building.

False

True or False: Most mortgage rates are established by government agencies.

False

True or False: There are several financial benefits associated with renting your place of residence

False

A common advantage associated with home ownership is

Financial Benefits

Multiunit Dwellings

More than one living unit EX: duplex or town house.

What are some common opportunity costs associated with the selection of housing?

Opportunity costs include lost interest on a down payment or security deposit and travel time to work when living in the country.

What does a lower mortgage rate indicate?

Planning to live in the house for a long time (over five years)

What does a higher mortgage rate indicate?

Planning to sell the home in the next few years

What are points?

Prepaid interest as a percentage of the loan amount.

What are the advantages of owning a home?

Pride of Ownership, financial benefits, and lifestyle flexibility.

What is Private Mortgage Insurance(PMI)?

Protects the lender from financial loss due to default if the downpayment is less than 20%

What is a reverse mortgage?

Provides elders (62+) with tax-free income based on their home equity

What is the Homeowner Protection Act?

Requires a PMI to be terminated when equity reaches 22%

What is the Real Estate Settlement Procedure Act?

Requires that loan applicants be given an estimate of the closing costs before the actual closing.

What is the home-equity loan also known as?

Second mortgage

What components of a lease are likely to be most negotiable?

Some will say everything in a lease is negotiable; however certain things are more flexible than others. Negotiable Items: Rent, Security Deposit, Start Date of Lease, and Decorating.

What are the four steps to buying a home?

Step 1: Assess homeownership needs Step 2: Locate and evaluate the selecting properties Step 3: Pricing the desired property Step 4: Obtain financing

True or False: Financial risks are associated with the purchase of a home.

True

What are the disadvantages of owning a home?

financial uncertainty, limited mobility, and higher living cost.

Single-Family Dwelling

housing unit that is detached from other units; previously owned/new/built house

Manufactured Home

a housing unit that is fully or partially assembled in a factory before being moved to the living site EX: trailer or mobile home

What guidelines could be used to determine the amount that individuals should spend for a home purchase?

a person should make payments on the purchase of a home that involve about 25 to 30 % of their income.

The major factor that affects a person's qualification for a mortgage is

the applicants credit rating

When shopping for a home, what should your price range be?

2-3 times your annual income

How much of your net pay should be paid towards your housing expenses?

25-33%

Most lending institutions believe that person can afford a monthly payment of about ______ percent of gross income less any long-term debts

35

Cooperative Housing

A form of housing in which the units in a building are owned by a nonprofit organization.

How does a person's employment and household situation influence the selection of housing?

A person who works at home would, for example, require home facilities different from a single person or a household with several small children.

What services are available to home buyers from real estate agents?

A real estate agent can help assess housing needs and determine the amount a person can afford to spend. Agents also have information on available homes and obtaining a mortgages.

How does a seller's market differ from a buyer's market?

A seller's market occurs when demand for homes are high with few available for sale. A buyer's market is when many homes are available for sale with relatively low demand.

What is a security deposit?

An advance payment usually required when you sign a lease that covers anything beyond normal wear and tear on the unit --equivalent to one month rent

Condominium

An individually owned housing unit in a building with several such units

How do changing interest rates affect the amount of mortgage a person can afford?

As interest rate declines, home buyers can afford to take on a larger mortgage

What are the main benefits and drawbacks of renting a place of residence?

Benefits: mobility, fewer responsibilities, and lower initial costs. Drawbacks: few financial benefits, restricted lifestyle, and legal concerns.

How do closing costs affect a person's ability to afford a home purchase?

Can add several thousand dollars to the expense of buying a home. These are funds that the homebuyer must have available to complete the real estate transaction.

What are the main sources of money for a downpayment?

The main sources of a down payment are personal savings, pension plan funds, investments, and assistance from relatives.

How can points be risky?

They try to collect the money upfront and are more expensive based on your home value

Under what conditions might an adjustable rate mortgage be appropriate?

When interest rates are relatively high and they are expected to decline. This situation would benefit the borrower as rates decline, or the homeowner may refinance when rates drop at a lower-rate, fixed-rate mortgage.

When might refinancing a mortgage be adviseable?

When interest rates decline and a homeowner plans to stays in the house long enough for the savings from the lower mortgage payments to recover the cost of refinancing.

What gives you a better shot of being improved for a mortgage loan?

When your housing cost and other debt is between 33-38% of your gross income

What is a home-equity loan?

allows homeowners to borrow on the paid up value of the property and to deduct the interest on the federal income tax return

What is an appraisal?

an estimate of the current value on a property

What is a buy-down?

an interest rate subsides from a home builder/burrower/real state developer that decreases the mortgage payments during the first few years of the loan.

Most real estate professionals believe that the most important factor in selecting a home is

location

A ______ mortgage allows a person to borrow on the paid-up value of a home.

second

What's the difference between fixed-rate mortgages and adjustable payment mortgages?

Fixed rate mortgages stays at the same monthly price Adjustable payment mortgages have initially lower rates, but they do not stay the same (based on the prime rate)

What should you consider when deciding whether to sell your home on your own or use the services of a real estate agent?

If you decide to sell by owner, you will need to price, advertise, and show the house. -Saves money If you decide to use a real estate agent, they would take on these duties and make the home inspection.

What is renter's insurance?

Insurance for people who rent their living space. Coverages include personal property, additional living expenses, and liability.