The Housing Decision: Factors and Finances

Housing Alternatives

Different options for living arrangements available to individuals.

Opportunity Costs

Potential benefits lost when choosing one housing option over another.

Renting

Paying to occupy a property without ownership.

Home Buying Process

Steps involved in purchasing a residential property.

Lease Agreement

Legal document outlining rental terms and conditions.

Mobility Advantage

Ease of moving without property ownership concerns.

Security Deposit

Initial payment to secure a rental unit, refundable under conditions.

Home Ownership Benefits

Includes pride, stability, tax deductions, and equity growth.

Financial Uncertainty

Risk of fluctuating costs associated with home ownership.

Types of Housing

Includes single-family, multiunit, and cooperative housing.

Manufactured Homes

Homes built in factories and transported to sites.

Prefabricated Homes

Components built in factories, assembled on-site.

Mobile Homes

Manufactured homes typically under 1,000 square feet.

Building a Home

Process of constructing a house with a contractor.

Contractor Qualifications

Experience and reliability of the builder for home construction.

Home Improvement Costs

Expenses related to upgrading or maintaining a property.

Tax Advantages

Deductions available for mortgage interest and property taxes.

Equity Growth

Increase in property value contributing to homeowner wealth.

Legal Restrictions

Limitations on activities within rental agreements.

Renter's Insurance

Insurance covering personal belongings in a rental unit.

Commuting Costs

Expenses incurred traveling to work from a residence.

Home Selling Strategy

Plan developed for effectively selling a residential property.

Real Estate Agents

Professionals assisting in buying, selling, or renting properties.

Government Housing Agencies

Organizations providing resources and regulations for housing.

Written Contract

Includes time schedule, cost estimates, and payment schedule.

Down Payment

Initial payment affecting mortgage affordability and terms.

Prequalification

Initial assessment of borrowing capacity without charge.

Home Inspection

Assessment of property condition before purchase.

Purchase Agreement

Formal offer made to buy a property.

Counteroffer

Response to an offer proposing different terms.

Earnest Money

Deposit showing buyer's serious intent to purchase.

Contingency Clause

Condition that must be met for sale to proceed.

Private Mortgage Insurance (PMI)

Required if down payment is less than 20%.

Mortgage

Long-term loan secured by real estate.

Affordability Guidelines

Lenders use 33% and 38% of income for housing costs.

Monthly Mortgage Payment Calculation

Subtract debts from gross income multiplied by 38%.

Points

Prepaid interest charged by lenders, 1% of loan amount.

Fixed-Rate Mortgage

Home loan with constant interest rate and payments.

Adjustable-Rate Mortgage (ARM)

Interest rate varies with market rates, has caps.

Interest-Only Mortgage

Lower initial payments; higher later payments.

Buy-Down

Interest subsidy reducing initial mortgage payments.

Reverse Mortgage

Loan for elderly homeowners based on home equity.

Refinancing

Obtaining a new mortgage to lower interest rates.

Closing Transaction

Final meeting to sign documents and transfer ownership.

Closing Costs

Fees associated with finalizing a real estate transaction.

Home Selling Preparation

Repair, clean, and stage home for potential buyers.

Appraisal

Estimate of property value for selling price determination.

Real Estate Agent

Professional assisting in buying or selling property.