Chapter 3 - Concepts and Responsibilities of Home Ownership

Question 1

Condominium

Answer 1

Ownership is of the interior airspace. A form of ownership of real property recognized in all states that consists of individual ownership of some aspects and co-ownership in other aspects of the property.

Question 2

Cooperative

Answer 2

Similar to condo. Owner does not own the unit itself but owns shares of stock within the co-op (corporation) and has a lease of the space being occupied.
Not a form of real property

Question 3

Townhouses

Answer 3

The owner here owns the ground beneath but can sometimes have a common wall. If does not own the land, then it is a condo

Question 4

Planned Unit Development (PUD)

Answer 4

projects that consist of common-areas but is owned and maintained by an organization. A form of cluster zoning providing for both residential and commercial land uses within a zoned area.

Question 5

Converted-Use Properties

Answer 5

Commercial buildings that have been converted into some form of residential use (usually older buildings), or vice versa. Schools, warehouse, factories

Question 6

Mixed-Use Property

Answer 6

Combines condo/townhome with shopping/commercial properties

Question 7

Manufactured/Mobile Homes

Answer 7

A structure transportable in one or more sections, designed and equipped to contain not more than two dwelling units to be used with or without a foundation systems. Sold by Manufactured home dealerships

Question 8

Time-Share

Answer 8

A license or contractual or membership right of occupancy in a project which is not coupled with an estate in the real property.

Question 9

Five Major Factors of Location Influence

Answer 9

1) Employment Opportunities (Commercial)
2) Cultural Advantages (School Districts, Church, Sport)
3) Gov’t Structure (Police/Fire protection)
4) Social Services (Hospitals, Clinics, etc)
5) Transportation

Question 10

Subdivision

Answer 10

the act of dividing land, or a building into individual pieces, which can be sold or owned separately. Land can be divided into plots or parcels, buildings into apartments or units.

Question 11

Four Primary Types of Subdivision

Answer 11

1) Condominiums
2) Cooperatives
3) Time-Shares
4) Cluster Housing

Question 12

Capital Gain

Answer 12

The profit realized from the sale of real estate or other investment. Capital loss occurs when an investment property or another type of investment is sold at a loss.
Up to $500K owned as principle residence of 2 of last 5 years before sale of prop is able to be excluded. $250K for an individual

Question 13

Five Deductions for Income Tax Purposes

Answer 13

1) Mortgage Interest Payments (1st & 2nd Homes)
2) Real Estate Taxes
3) Loan Origination Fees
4) Loan Discount Points
5) Mortgage Insurance

Question 14

Random Note

Answer 14

First-Time homebuyers can deduct from IRA to purchase first home, penalty free

Question 15

Homeowners Policy

Answer 15

Will cover a number of risks bundled into one policy.
1) Home Damage
2) Personal Property
3) Liability coverage in case of owner being sued
4) Medical Payments for anyone hurt on site
5) Loss of Use - if something happened to prop and became inhabitable

Most do not cover flooding. This is generally separate policies in Tx

Question 16

Replacement Costs

Answer 16

The insured is covered and reimbursed for the actual cost of replacing the damaged property.

Question 17

HOA Insurance Policy

Answer 17

provides limited cash value of home and contents within. Only Includes the specific items listed in the policy.
Claims: Replacement costs minus Depreciation. They only pay out the actual cash value

Question 18

HOB Insurance Policy

Answer 18

The most common in Tx. Replacement costs coverage for most types of items on property -provides cash value coverage for personal property. More expensive than HOA
Claims: Replacement Costs coverage

Question 19

HOC Insurance Policy

Answer 19

The most extensive and expensive policy available.
Claims: Replacement Costs Coverage

Question 20

PITI

Answer 20

An acronym denoting that a mortgage payment includes, principal, interest, taxes, and insurance.

Question 21

The CLUE Reports

Answer 21

lists property insurance claim by houses and individuals for the preceding 3 years. A claim typically impacts this report connected to insurance premiums

Question 22

National Flood Insurance Program (NFIP)

Answer 22

the body of this is FEMA and established the rates

Question 23

Front-End Ratio (Lender)

Answer 23

Cost of home does not exceed 25-28% of buyers gross monthly income (PITI)

Question 24

Back-End Ratio (Lender)

Answer 24

Includes payments on all debts (cars, student loans, etc..) added to the anticipated monthly house payment, should not exceed 33-36% of gross monthly income (PITI)

Question 25

Budget Mortgage Components

Answer 25

1) Principal + Interest
2) Monthly Budget for Taxes
3) Monthly Budget for Home Insurance

Most Common

Question 26

Non-Budget Mortgage

Answer 26

does not have taxes or insurance budgets. But, the annual payment will be the same as Budget Mortgage

Question 27

Chapter Objectives

Answer 27

1) Identify at least four types of subdivisions, and explain the ownership structure of each.
2) Define capital gains.
3) List at least two tax benefits to owning real property.
4) Explain what is covered under homeowners insurance.