Home buying process and its financial impacts Essay

Home buying process and its financial impacts - Essay Example Buying a house can be the largest amount invested or spent upon any asset by the individual and so a careful investigation is necessary about the pros and cons of a home buying process 1. What are some common opportunity costs associated with the selection of housing? While selecting a house which an individual wants to buy he/she takes into consideration the apartment or the house first and then the individual also takes a look at the residential area in which he plans to dwell. However selecting the option of housing means that the individual has to bear some underlying costs or in some cases has to let out some opportunities in his/her way. In one word it can be termed as opportunity costs undergone during the process of housing. While buying a house it is compulsory that a fair amount needs to be given out as down payment. The individual has to pay a considerable sum of money as security deposit even with the consideration of renting an apartment. In both the cases one has to let out the savings interest that could have been earned the money being kept in a bank. The brokerage fee is another cost involved looking for a house which could have been spent elsewhere. If the house selected is few miles away from the workplace the individual has to take the pain of a long journey every day. In case the individual is renting a house he is losing out the advantages of tax obtained from buying a house. But at the same time the person has to bear sufficient trouble to build a house of his choice and needs (Kapoor, 2009, p. 272). 2. What are the advantages and disadvantages of owning a home? Home Ownership has been considered as the rational form for housing with more than 70% of the British households having houses in their list of assets. Such ownership statistics for the year 1991 reveal 59% for USA and 40% for Switzerland. Home ownership is advantageous as houses are saleable assets. Increasing market value of homes has enhanced this merit. It also eliminates the trouble of monthly rental payments. Statistical evidences suggest that homeowners are much better than individuals renting an apartment. But the disadvantage is that few people have the money for buying a home and they go for borrowing options or mortgage. This is again a liability. Owning a home involves maintenance costs unlike renting where landlord bears all the cost for renting (Gordon, n.d). 3. How can the quality of a school system benefit even homeowners in a community who do not have school-age children? A recent study has shown that home owners send their teenage children to school more frequently than those parents living in rented apartments. Behavioral characteristics of homeowners have been attributed to this fact. Homeowners are mostly financial stable and from good background who do not tolerate bad behavior of their children. Again the findings reveal that residential stability has a positive impact on children’s education. There appears to be a positive rela tion between homeownership and educational outcomes. Renting individuals may change their houses quite often which in turn lead to changing schools keeping in mind the distance factor. This is not the case for home owners. Changing schools prove detrimental to a child’s education (Social Benefits of Homeownership and Stable Housing, 2010). 4. What factors affect a person's ability to qualify for a mortgage? Any bank or financial institution while mortgaging a house from an individual does a careful assessment of his/her gross income. The amount offered on mortgage depends a lot on the individual’s gross income. Hence first of all a person needs to be financially stable in order to qualify for mortgage. Sudden inheritance of a large sum of money can also be favorable for qualification. Some institutions also prefer to see the loan history of the individual before giving out the mortgage amount. This is done to prevent default risks. In recent times many mortgage product s have come up in housing markets easing the process of