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Chapter 9 Buying a Home
Introduction
Be it ever so humble, the “biggest” purchase you ever make may be your home. Unlike
most other consumer purchases, a home is expected to be more than a living space; it is
also an asset that stores and increases value. The house has a dual financial role as both
a nest and a nest egg.
There are substantial annual operating expenses for repairs and maintenance,
insurance, and taxes. Maintenance preserves a home’s value, insurance protects that
value, and taxes for community services both enhance and secure its value.
A home purchase is typically financed with debt that creates a significant monthly
expense, the mortgage payment, in your budget. A mortgage is a long-term debt that
obligates your cash flows for a long time, perhaps even reducing your choices of careers
and your mobility.
Your choice of home reflects personal factors in your life. These factors include your
personal tastes, your age and stage of life, your family size and circumstances, your
health, and your career choices. These factors are reflected in your decision to own a
home, as well as in the location, size, and use of your home.
9.1 Identify the Product and the Market
LEARNING OBJECTIVES
- Describe the different building structures for residential dwellings.
- Describe the different ownership structures for residential dwellings.
- Identify the factors used by lenders to evaluate borrowers for mortgage credit.
- Identify the components of the mortgage affordability calculation and calculate estimated
mortgage affordability.- Identify the components of a buyer’s inspection checklist.
- Explain the potential effects of business cycles, unemployment, and inflation on the housing
market.- Analyze the effects of the demand for housing financing on the housing market.