Chapter 03

The Housing Decision:

Factors and Finances

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Chapter 9
Learning Objectives

LO9-1 Evaluate available housing alternatives.

LO9-2 Analyze the costs and benefits associated with
renting.
LO9-3 Implement the home-buying process.
LO9-4 Calculate the costs associated with purchasing
a home.
LO9-5 Develop a strategy for selling a home.
9-2
 Housing Alternatives
Learning Objective 9-1:
Evaluate available housing alternatives.

•YOUR LIFESTYLE AND YOUR CHOICE OF

HOUSING

•OPPORTUNITY COSTS OF HOUSING CHOICES

•HOUSING INFORMATION SOURCES

9-3

Housing Alternatives
Learning Objective 9-1:
Evaluate available housing alternatives.

•YOUR LIFESTYLE AND YOUR CHOICE OF

HOUSING

–Your lifestyle

–Personal preferences, financial factors

9-4
 Housing Alternatives
• OPPORTUNITY COSTS OF HOUSING
CHOICES
– Interest earnings lost

– Time, cost, money, effort

– Tax advantages

9-5

Housing Alternatives
Learning Objective 9-1:
Evaluate available housing alternatives.

•HOUSING INFORMATION SOURCES

 Newspaper articles

 Other people

 Government agencies

 In Viet Nam?

9-6
 Housing Rental Activities

9-7

Renting Your Residence

– Legal Details Of A Lease

o Description and address of property

o Name and address of the owner/landlord
(lessor)
o Name of tenant (lessee)
o Effective date and length of the lease
o Amount of security deposit
o Amount and due date of rent

9-8
 Renting Your Residence

o Location where rent is due

o Date and amount for late rent payments
o List of included utilities and appliances
o Restrictions on certain activities (pets,
remodeling)
o Tenant’s right to sublet the rental unit
o Charges for damages or for moving out
later (or earlier) than lease expiration date
o Conditions where landlord may enter
rental unit

9-9

Home Buying Process

9-10
 Home Buying Process
Learning Objective 9-3:
Implement the home-buying process.
STEP 1: DETERMINE HOME OWNERSHIP NEEDS
•Benefits of Home Ownership
– Pride of ownership
– Financial benefits
– Lifestyle flexibility

9-11

Home Buying Process

o What delays in the construction process
will be considered legitimate?
o Is the contractor licensed and insured?
o Is the contractor willing to provide names,
addresses, and phone numbers of
satisfied customers?
o Are there any complaints about this
contractor?
o Written contract should have a time
schedule, cost estimates, description of
work, and a payment schedule.

9-12
 Home Buying Process

STEP 2: FIND AND EVALUATE A PROPERTY TO

PURCHASE
•Selecting a Location
• Using a real estate agent
• Conduct a home inspection or hire an
inspector
• Mortgage company will want an appraisal

9-13

Home Buying Process

STEP 3: PRICE THE PROPERTY
• Determining the Home Price
– Consider recent selling prices in the area, current
demand for housing, the length of time the home
has been on the market, the owner’s need to sell,
financing options, and features of the home
• Negotiating the Purchase Price

9-14
 The Finances of Home Buying
Learning Objective 9-4:
Calculate the costs associated with
purchasing a home.
STEP 4: OBTAIN FINANCING
•Determine the amount of the down payment
– Private Mortgage Insurance (PMI) is required if
down payment is less than 20% (Homeowner
Protection Act 1998)

•Investigate the rates, types, & terms of

mortgages
•Apply for a mortgage and evaluate types of
mortgages. Guidelines for affordability of housing
costs are 33% to 38% of gross income 9-15

The Finances of Home Buying

• Qualifying and Applying for a Mortgage
– includes your income, debts, credit history,
down payment amount, length of the loan, and
current mortgage rates
o Prequalification
o Finding a property including appraisal
o Fee Payment and commitment
• Points are prepaid interest as a % of the loan
amount and represent the premium you pay to
obtain a lower mortgage rate

9-16
 The Finances of Home Buying
STEP 5: CLOSE THE PURCHASE TRANSACTION
• Documents signed; meeting of buyer, seller, and
lender
• Closing costs (Settlement costs) include...
– Title insurance and Title search fee 1
– Attorney’s and Appraisers fees
– Property survey; Termite inspection
– Deed recording fees; Transfer taxes
– Credit report; Lender’s origination fee
– Escrow account for tax and insurance reserve
– Pre-paid interest; Real estate commission

9-17

Selling Your Home

Learning Objective 9-5:
Develop a strategy for selling a home.
•PREPARING YOUR HOME
– Repair, repaint, and clean
– Clear the garage
– Keep the lawn cut
– When showing home, turn on lights and open
drapes
– Bake bread or make coffee for a welcoming
smell

9-18
 BT Exel
• BT Exel 40-17

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