COA 4131: Housing and Transportation Budgets and Real Estate Transactions - Prof. Elizabet, Study notes of Economics

Download COA 4131: Housing and Transportation Budgets and Real Estate Transactions - Prof. Elizabet and more Study notes Economics in PDF only on Docsity! Test Review for COA 4131 Chapters 6-10 Chapter 6 1. Average family budget a. 32% for housing b. 18% for transportation c. 15% for food d. 5% for utilities 2. Rent: payment for use of property 3. Security Deposit: payment required in advance to cover wear on unit a. Example: if first month’s rent is $1000 then the security deposit is also $1000 so the renter would pay a total of $2000 dollars before moving in 4. Lease: legal document between renter and landlord 5. Sublease: property can be leased to another 6. Benefits to owning a house a. Build equity i. Equity: the value of an ownership interest in property after all liabilities are paid off b. Tired of leasing c. Tax deductions on mortgage interest d. Tax free capital gains e. Appreciation (increase in the home’s value) 7. Way to wealth in America : Own things that increase in value over time 8. Mortgages: loans to purchase real estate 9. PITI: principal, interest, taxes and insurance 10. Housing a. Condominiums: the homeowner has the title to his/her unit and jointly owns common areas b. Cooperative housing: Units owned by the co-op, not the homeowner who owns shares in the building c. Manufactured housing: Units assembled at a factory and moved to a building site 11. Real estate agents make a 6% commission 12. Binder or earnest money: security deposit by the buyer as evidence of a serious offer 13. Escrow: Earnest money held by the mortgage lender until closing 14. Amortization: Process of paying off a loan through a series of payments 15. Fixed rate, conventional mortagages: usually carried for 15 to 30 years a. 30 year: 8% interest rate b. 15 year: 4.16% interest rate c. If your fixed mortgage is too high REFINANCE to reduce monthly payments and to modify interest charges i. Revising a payment schedule 16. Adjustable Rate mortgages: 6.3% interest 17. 125 loans: Home equity loans that allow the homeowner up to 125% of the home’s value 18. Reverse mortgages: Arrangement wherein owner borrows against home equity 19. 28/36 Ratio: lender prefers buyers to spend no more than 28% to 36% of their monthly gross income on housing 20. Appraisal: Estimate of home’s current value 21. Adjustable mortgage: 3-8% 22. Loans through GOV’T a. FHA: low income b. VA: Veteran’s Affairs 23. Closing: meeting in which real estate is transferred from seller to buyer 24. Points: fees paid to the lender at the closing Transportation and vehicles 25. Leasing: Contractual agreement outlining monthly payments, security deposit, and terms of lease 26. Advantages of leasing a. Leasing is less money upfront b. Monthly payments may be less for leasing than for owning c. Leasing may be paid for by a business or may be favored for business purposes d. No trade-in or resale worries following leasing 27. Disadvantages of leasing a. The vehicle is not owned b. Extra costs for mileage, repairs, and turning the vehicle in early or moving to another state 28. 3 Types of Leases a. Close-ended: leaser returns the vehicle at the end of the lease period b. Open-ended or finance leases: may require the leaser to pay difference between the expected value of the leased automobile and the amount for which the leasing company sells it c. Single payment lease: allows the customer to obtain a discount on the motor vehicle rental agreement 29. Invoice Price: Cost of the car for the dealer 30. Sticker Price: Price listed on the car 31. Depreciation: Loss of the vehicle’s value due to time and use, LARGEST FIXED EXPENSE 32. 67% of American households own their homes Review Questions 33. Condominiums are units, usually apartments in cities that are owned by a corporation, not directly by the buyer. a. FALSE