Housing

Legal and Financial Decisions.

Lease

Lease – Legal document between the owner of the property and the person wishing to occupy the property. Includes length of the lease, address of the property and monthly rental cost.

The terms of the lease cannot change until the lease has expired. The rent cannot be raised until the lease is over.

If the terms of the lease are notmet by the renter they can be evicted. • Not paying rent • Extensive damage to the property • Having pets when the contract says the

cannot. • Breach of Contract – not doing what you

agreed to the contract.

Lease

Assigning a LeaseIf the owner agrees, a lease can be assigned to another party. Releases obligations of original leaser from liability for remainder of lease.

Subletting is when a renter allows someone to live in their rental for a specific amount of time but the persons name on the lease is still liable.

InsuranceFinancial protection or reimbursement against losses (fire, flood, damage or theft) from an insurance company.

Home Owners Insurance – Covers the house, the land and the belongings on the property.

Renters Insurance – Covers the belongings of the renter inside the property.

Credit Report

A report which gives the financial history of a person. Includes payments made on time, late and payments not made.

Before a person can purchase a home or sign a lease a credit check is usually done.

Application

Before you can rent a home you must: Fill out an application - personal informationPay an application fee – this ensures the applicant is serious about the home. Credit check – to check payment historyAdvance on Rent – Paying the first and last months rent.

Owner/Landlord

The owner has some legal responsibilities to renters: Keeping the apartment in good shapeMaking structural repairsRepairing appliances, plumbing, heating and cooling

Renters

The renter has responsibilities to the owners: Pay rent on timeTake care of the homeFollow the terms of the lease

Utilities

Utilities – electricity, water and sewer may not be included in the rent. Renters may have to pay these separately.

Rental Payments?

How much rent can you afford?

Standard is 28%.

Example – Income = $2100Rent = $2100 X 28% = $588

Do the Math

Income is $1,900 month28%.

Payments to landlord

How much do you need to pay to rent a home? First Months Rent: $650Security Deposit: $250Pet Deposit: $250

Total Due:$1150

Do the Math

First Months Rent: $800Security Deposit: $200Pet Deposit: $100

Total Due:$

How much do you need to pay to rent a home?

Buying a Home

Mortgage – Loan given to qualified buyers to purchase a home

Buying a Home FHA Loan Program – Guarantees mortgages for people with low to moderate credit ratings.

VA Loan – Veterans Administration Loan – A loan available to military personal.

Conventional Loan- Pay a fixed interest rate for 15-30 years (length of loan). Your loan payment does not change.

Buying a Home

Agreement of Sale – A contract between a buyer and a seller agreeing to certain terms to purchase a home.

Earnest Money- the money given to the realtor to show interest in purchasing a house.

Origination Fee – Monies paid to the bank to process the loan.

How much can you afford?

2 ½ times total annual income

Annual Income: $60,0002 ½ times annual income: $150,000

You can afford a home selling for $150,000.

Do the Math

How much home can you afford?

Annual Income: $120,0002 ½ times annual income:

You can afford a home selling for:

How much can you afford? Monthly Payment

28% total monthly income

Monthly Income: $4,200 28% if Monthly Income: $1,176

Do the Math

How much can you afford? Monthly Payment

28% total monthly income

Monthly Income: $4,100 Payment:

Down Payment

Home Price: $110,000

Down payment: 5%

110,000 X 5% = $5,500

Do the Math

Down Payment Home Price: $150,000

Down payment: 5%

=

Before You BuyInspections – Professional come to the home to insure the home is a good purchase.

General Home Inspection – checks the foundation, roof and electrical systems to ensure they meet code. Termite Inspection: checks the foundation for damage from termites.

Before You Buy

Title Search - a search to make sure the seller actually owned the property and no one else had a claim to that property.

Appraisal - an evaluation of the property that determines the value of the property.

Equity

The portion of the value of the home an person owns. A mortgage is a loan on a home – the mortgage is

owned by the bank.

Value of the home is $200,000

The Mortgage is $100,000

So the Equity is $100,000 the portion the homeowner owns.

Do the Math – Equity

Value of the home is $250,000

The Mortgage is $125,000

Equity=