finances of housing
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Finances of Housing. Chapter 7. Lifestyle and Choice of Living. How you spend your time and money will affect where you live Ask yourself How close do you want to live to work? How long you plan to stay in one place? How much privacy would you like to have?. - PowerPoint PPT PresentationTRANSCRIPT
Finances of HousingChapter 7
Lifestyle and Choice of Living How you spend your time and money will
affect where you live Ask yourself
How close do you want to live to work? How long you plan to stay in one place? How much privacy would you like to have?
Opportunity Costs of Housing Choices
Housing decisions require trade-offs or opportunity costs
Consider what you might be giving up Buying a “handyman’s special” Building a new house Renting an apartment or house
Renting vs. Buying Based on your lifestyle – young, single, couple
with children, retired Housing for Different Life Situations
Based on financial factors Renting
Young adults, mobility, little maintenance, cheaper Buying
Stability, privacy, freedom, tax advantages, long-term investment
Advantages/Disadvantages of Renting/Owning
On-Campus Housing Dormitories
have roommate, or to self for extra charge lounges for TV and laundry convenient location, eating facilities small rooms
Sororities and Fraternities may require certain GPA or community service must be invited
Housing Cooperatives available on large campuses share in cleaning, cooking, maintenance rent less than regular dormitories
Central Michigan University
One Semester
Year
Tuition $5,370 $10,740
Room and Board
$4,106 $8,212
Total $9,476 $18,952
Based on 30 credit hrs, unlimited meal plan, $100 flex money
Does not include books, supplies, personal items $1,500+
Carey, Cobb, Troutman, Wheeler
•Coed by room •7 floors; elevators •1-bedroom suite shared by 4 people
•Private bathroom •Single beds
Campbell, Kesseler, and Kulhavi
Coed by room 5 floors; elevators 4 person, 4 bedroom, 2
bathroom suite Tobacco-Free Accessible accommodations
available
Movable bedroom furniture that may be lofted
No university furniture in shared living room
Air conditioned 30% additional room charge First-year students are not eligible for
this hall
Expanded Occupancy Rooms For a variety of reasons, there is a possibility that a residence hall
may have expanded occupancy at the beginning of the fall semester. This means that five students may be assigned to suites. If a student is assigned to a five-person room, a daily rebate of 20% of the room charge will be credited to each student's account, until the fifth person is offered the opportunity to move to a four-person room.
Reduced Occupancy Rooms If space is available, reduced occupancy may be an option at an
additional charge. The rates for 2004-2005 were:3 people in a 4 person suite: $1047.20 per academic year2 people in a 4 person suite: $1540.00 per academic year
SINGLE ROOMS A very limited number of rooms have been designated for single
occupancy. These rooms are rented at the single room rate of one and one-half times the regular room rate.
SVSU
Year (28 credits)
Tuition $7,312
Room and Board$8,000
Books $1,200
Total $16,512
http://www.svsu.edu/housing/cost-payment-schedule.html
Michigan State University
In State Out of State
Tuition (15 credits/semester) $12,822 $31,692
FM Radio Tax $6 $6
Undergrad Tax $36.00 $36.00
State News Tax $10 $10
Housing $8,204 $8,204
$21,078 $39,948
Housing Information Sources Libraries Newspapers Internet Friends and family Real Estate agent Government agencies
Selecting a Rental Unit Size - bedrooms, bathrooms, closets, storage
space Cost – rent, security deposit, utilities, length of
lease Location – schools, work, shopping, public
transportation, recreation Facilities – amenities, pool, washer/dryer, storage
units Conditions – appliances, windows, floors, locks,
doors
Advantages of Renting Greater mobility – don’t have to sell house
which could take months Fewer responsibilities – maintenance,
property taxes and insurance Low initial costs – no large down payment,
only deposit and first and last months rent
Disadvantages of Renting Financial restrictions – no tax deductions,
nothing to show for over time, rent could go up
Lifestyle restrictions - limited on what can be done in house; parties, noise, redecorating
Legal issues – sign a lease, legally binding contract; need to understand and agree with
Landlord/Tenant Responsibilities Landlord
Exterior is water and weather proof
Floors, walls, ceilings, stairs, railings are in good repair
Fire, safety, plumbing, electrical, heating, etc. regulations are met
Adequate door and window locks
Adequate water supply Buildings and grounds are
clean and sanitary
Tenant Read, understand, and
follow lease Pay the rent on time Give 30-60 days notice Keep premises in good
and clean condition Use premises for only what
is intended Allow landlord access to
make repairs or improvements
Obey the rules of the complex or living area
Rental Inventory Done to assure that you are not accused of
breaking, damaging, or taking inventory Inventory should list and describe the
conditions of the property Take inventory with landlord when you
move in and when you move out – each get a copy
Rental Inventory
Cost of Renting Location – the closer you are to conveniences the
more expensive Living space – larger means more $$, may have
to get a roommate Utilities – some included in rent Security deposits – pay when move in, get back if
there are no damages or unpaid rent Renters insurance – cheap, covers the cost of
property damages by fire, flood, etc – not covered by the landlord’s insurance
Home Buying Process Step 1: Determine your needs Step 2: Find and evaluate a property to
purchase Step 3: Price the property Step 4: Obtain financing Step 5: Close the transaction
Advantages of Owning Stability – no landlord to raise rent, sell, or
make you leave Sense of pride Freedom – can decorate, entertain how you
want Financial benefits – tax deductibles for
interest charges and property tax Investment – build equity, can always sell
Disadvantages of Owning Financial – have to save for down payment
and property value can go down Limited mobility – may take a long time to
sell High expenses – house payment,
insurance, taxes, maintenance and repairs
Types of Housing Single-family homes – most popular in US, most private,
most expensive Multiunit dwellings – duplexes and townhouses Condominiums – apts. or townhouses that are owned, pay a
monthly fee for maintenance, improvements, and insurance Cooperative housing – apt style building owned by nonprofit
group, monthly fee covers rent and operating expenses Prefabricated homes – manufactured and partially assembled Mobile homes – fully preassembled, very cheap, maybe
unsafe, and do not increase in value
Affordability and Your Needs Price and Down Payment
Down payment 10-20% of cost of house Amount depends on interest rates and economic
conditions Taxes and insurance
Size and Quality May have to start small and lower quality
Trading Up Experts say buy what you can afford, not necessarily what
you want, later after building equity “trade up”
Find and Evaluate Purchase Select location – country, city, neighborhood,
recreation, school system Hire a real estate agent – help you find home,
negotiate price, arrange financing, usually represent seller on a 3-6% commission
Conduct a home inspection – required in some states, check for problems, may also get an appraisal that does a value estimation of house Repair/Replacement Costs
Top 10 Defects Roof leaks due to flashing and valley problems Water penetration in the basement or crawlspace Electrical
safety issues due to age of home Deterioration of the wall material or substrate behind ceramic
tile in shower and tub areas Roof material failure due to age and deterioration Heating unit and distribution system inequities due to age and
workmanship or system compromises Structural issues due to improper construction and/or
alterations, or excessive unbalanced load (ie. Failing concrete block foundation wall)
Fire safety issues related to fireplace chimneys Termite and other wood destroying organisms On-site waste (septic) system failures usually due to lack of
maintenance
Determine Price of Home How long house has been on market? What have similar homes in area sold for? Is it a “seller’s market” or “buyer’s market”? Do the current owners have to sell in a
hurry? How well does the home fit your needs? How easily can you get good financing?
Negotiate Price Offer a price, owner may counteroffer –
always make first offer lower than what the most you would pay is
Sign a purchase agreement May have to pay “earnest money” to show
that offer is serious
Determine Amount of Down Payment
10-20%, may come from savings accts, sales of investments or assets, or gifts
Pay less than 20% down payment – will pay PMI insurance to protect lender if buyer cannot make payments
PMI is dropped once 20 – 25% of purchase price is paid
Qualifying for a Mortgage House loan paid back in 15, 20, or 30 years Lenders take your debt, income, and
savings and put it in a formula to see if and for how much you qualify for
Mortgage size can depend on interest rates which will affect the amount of your monthly payment
Mortgage Payments Payment was $739.02 Payment 1 - $646.88 went to interest, $53.14 to
principal, and mortgage insurance is $39.00 Payment 180 - $700.02 - $508.50 in interest,
$191.52 to principal , and mortgage insurance is none
Payment 359 - $700.02, $9.84 to interest and $690.18 to principal, no mortgage insurance
Mortgages Payments Greatest financial obligation most people
make in lifetime Amount of payment first applied to interest
owed, then to principal Can pay off early – paying an extra $25 per
month on a 30 year, 10 percent mortgage of $75,000 will save more than $34,000 in interest and will repay the loan in 25 years
Fixed-Rate Mortgages Also called a conventional mortgage Interest rates charges never vary over time Offer the peace of mind that monthly
payments will always stay the same
Adjustable-Rate Mortgages These interest rates will vary according to
economic factors so loan payments will change also
Rate caps available to prevent rates from rising or falling to far
May get convertible ARMs which could allow you to convert to a fixed rate for an added fee
Government Financing Programs
FHA Federal Housing Administration and VA Veterans Administration help buyers obtain low-interest, low down payment loan
They do not lend money but help qualified buyers get loans and guarantee repayments
Home Equity Loans Based on the difference of the amount
owed on mortgage and the current market value of home
Can provide money for improvements, education, doctor bills
Taking out too many can put people in debt for much more in the long run
Refinancing Obtain a new mortgage to replace the old
one Only an advantage when interest rates fall
more than 2% and owner is going to stay in for at least two years longer
Must pay extra fees to do this – could be several thousand dollars
Closing Closing costs:
Title insurance to insure no problems with ownership and estate taxes
Survey Deed which transfers ownership to you Appraisal Credit report Lender’s fee Real estate commission
My Closing Costs in 2000
Loan Origination Fee $400 Appraisal Fee $250 Credit Report $42 Flood Zone Determination $21 Hazard Insurance Premium $450 Hazard Insurance Reserves $37.50 County Tax Reserves $375.00 Title Insurance $200.00 Recording Fee to Register of Deeds $33.00 Total $1808.50
Escrow Account Account where money is held by lender to pay for
property taxes and house insurance Sometimes optional depending on loan and
lender Amount of money to cover escrow is added to the
mortgage payment Advantage is you do not have to set money aside
to pay for taxes twice a year or for house insurance once a year
Elements of Buying a Home Location – Where you buy geographically may
determine the cost of the house Down Payment – How much can you afford to
pay upfront Mortgage Rates – What are the rates and how will
it affect your payments Closing Costs – May range 2-6% of what you
borrow, may have to pay upfront Monthly Payments – Do not buy more than you
can afford Maintenance Costs – Set aside money for repairs
Prepare a Home for Selling Nicer it looks, better it will sell – may add on extra
features (bathroom or deck) Determine a price, set higher than what you want Choose a real estate agent or sell yourself (10%
of homes sold this way) to save money but yourself it may be more work to determine selling price, attract buyers, show your home, and handle financial aspects
What Home Owners Say About…… Their Neighborhood
80% of Americans believe their own community is “a great place to raise a family”
Nearly 50% worry about overdevelopment with chain stores and restaurants
Home Improvement In last year, 11% spent between $1000 and $1500 in
repairs and upgrades Nearly 1/3 invested more than $5000 in painting, buying
furniture and landscaping.
What Home Owners Say About……
The Internet Nearly 66% access info. thru the Internet as
opposed to a broker Nearly 58% feel the Internet is diminishing their
reliance on a broker 27% cannot imagine buying or selling a home
without one
What Home Owners Say About……
Commuting 63% of homeowners would trade in square
footage or less time on the road
Their Dream House Top of list is beachfront mansion on the OC and
the Walton’s farmhouse No. 1 factor in next home purchase is a
“spacious, modern kitchen”
Outlook for 2006 Median price for US home rose 13.6% to
$213,900 Northeast: NYC and Boston slow, while
Scranton, PA and Rochester, NY prices go up 7% to 8%
West: LA slowing and LV prices could slide 8%, although Albuquerque, NM rises 6.5%
South: Costal Florida homes are taking longer to sell, however El Paso and San Antonio see gains of 8%
Midwest: Michigan, Illinois, Indiana, Wisconsin, and Ohio saw slowest rate of price growth in last few years, but certain Midwest areas could increase 5% or more
Four Reasons to Downsize Less Financial Stress – Family of three sold five-bedroom,
three story Victorian for $765,000, twice what they paid for it Less Maintenance – Older couple sold 2,800 sq. foot home in
country for an 1,800 sq foot home in town – no more large driveway to shovel, yard to rake
More Freedom – Cookie cutter home in development that dictated what color blinds could be hung and gave tickets when parked on street, traded for smaller home with a bigger lot
More Comfort – Family went from formal ballroom and five porches to a home with a comfortable family room
What You Get For $100,000 in
What You Get For $100,000 in
What You Get For $100,000 in
What You Get For $100,000 in
What You Get For $100,000 in
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What You Get For $300,000 in
What You Get For $300,000 in
What You Get For $300,000 in
What You Get For $300,000 in
What You Get For $300,000 in
What You Get For $500,000 in
What You Get For $500,000 in
What You Get For $500,000 in