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CHAPTERASSESSMENTSection 34.1 Evaluating HousingAlternatives● Advantages of owning a house include the abilityto do with it as you wish, the gradual buildup ofequity in the property, and the ability to deducttaxes and interest from your income tax return.Disadvantages include the inconvenience andcost of upkeep and the inability to move easilyand quickly.● Down-payment requirements vary between zeroto 30 percent of the purchase price depending onthe type of loan for which you qualify. Qualifiedveterans can obtain a Veteran’s Administration(VA) loan to buy a house up to $203,000 with nodown payment. Mortgages backed by federalagencies, such as Fannie Mae and Freddie Mac,are available with a 3 percent down payment.FHA loans (loans insured by the Federal HousingAdministration) can be obtained with a downpayment of 3 to 5 percent. Conventional bankloans require down payments ranging from 10 to30 percent. The amount you can borrow alsovaries depending on how much you earn. A lenderwill also judge your ability to repay your loanbased on your credit report and your debt ratio.Your debt ratio is the amount of your monthlypayments compared to your monthly income.● The types of home ownership include a singlefamilyhome, a multifamily home, a mobilehome, a cooperative, and a condominium. Singlefamilyhomes are the most popular type of home.They offer the most privacy and usually havemore overall usable space than other types ofhousing. Multifamily homes are less expensiveto own because of the income from nonowneroccupiedunits. The owner’s monthly mortgageand tax payments can often come from rentalincome. Mobile homes, also known as manufacturedhomes, are less expensive to purchase thanother types of houses and cost less to keep up. Acooperative is a form of home ownership inwhich buyers purchase shares in the corporationthat owns an apartment building and holds themortgage on it. In a condominium, each ownerhas an absolute individual interest in an apartmentunit and an undivided common interest in thecommon areas of the condo project.Section 34.2 The Home Buying Process● The purchase and sale agreement should besubject to your getting a mortgage and should bereviewed by a lawyer before being signed.● The types of mortgages include conventional,fixed rate, adjustable rate, graduated payment,and balloon payment.● Co-owners may take title as tenants in common,joint tenants, or if husband and wife, as tenantsby the entirety. Tenancy in common is a type ofownership in which two or more people own aninterest in the whole property. An owner’s heirsinherit that person’s share of the property upondeath. Joint tenancy is a type of ownership inwhich two or more people own an interest in thewhole property. Upon the death of one jointtenant, the entire ownership goes to the otherjoint tenants. Only a husband and wife can ownproperty by tenancy by the entirety. In theory,each spouse owns the entire property, whichneither can transfer without the other’s consent.● The principal kinds of deeds are a generalwarranty, a special warranty, a bargain and saledeed, and a quitclaim deed. A general warrantydeed contains express warranties that title to theproperty is good. A special warranty deedcontains express warranties that no defect arosein the title during the time that the grantor ownedthe property, but not before. A bargain and saledeed grants no warranties. A quitclaim deedreleases the grantor’s rights to the property.● Property owners can lose title to their propertyby eminent domain, adverse possession, and bygiving easements to others.746 Unit 7: Planning for the Future