Question

Buying a home is likely the largest purchase you will make during your life time. Unlike any other type of purchase, home buying is typically an involved, long process that may take months to complete. A significant amount of research, learning, and negotiation takes place during that process.

As part of your overall financial planning for the future, you start exploring the idea of home ownership. During this process you learn more about home ownership options and sources of funding. Research your preferred neighborhood real estate market and explain the difference between a coop, a condo, and a house. Also, detail three different types of mortgages and explain which type of real estate and mortgage would be best for you. What are your 5- and 10-year goals that will get you closer to achieving your goal of home ownership? Be specific and use actual numbers reflecting current market state and your financial plan.

the market price for real estate in the throngs neck neighborhood is $500,000.

Answer 1

Cooperative apartments (“coops”) differ from condominiums (“condos”) in several ways. When you buy a coop, you buy stock in the corporation that owns the apartment building. The building then “leases” the coop to the buyer under a long-term proprietary lease. Coop owners pay monthly maintenance to the building corporation for items such as the expenses of maintaining and operating the building property, property taxes and the underlying mortgage on the building (if any).

When you buy a condo, you buy an individual parcel of real property, like a house or townhouse. The condo building is divided into individual condos and a common area. A condo owner owns its apartment and an undivided interest in the common area and is responsible to pay its own real estate taxes and its share of the common charges for the expenses to maintain and operate the common areas. Unlike a coop building, there is no underlying mortgage on a condo building.

Generally, a condo has a higher value than a comparably sized coop; however, a condo buyer has additional closing costs for title insurance and mortgage recording taxes. Depending on the coop building, the tax deductibility percentage of the monthly maintenance charges may differ.

A house is a whole condo owned by you, you are the owner and you don't need to share it with anyone like a condo.

Three types of mortgages are

1. Conventional mortgages

A conventional mortgage is a home loan that’s not insured by the federal government. There are two types of conventional loans: conforming and non-conforming loans.

A conforming loan simply means the loan amount falls within maximum limits set by Fannie Mae or Freddie Mac, government agencies that back most U.S. mortgages. On the other hand, loans that don’t meet these guidelines are considered non-conforming loans. Jumbo loans are the most common type of non-conforming loan.

Generally, lenders require you to pay private mortgage insurance on many conventional loans when you put down less than 20 percent of the home’s purchase price.

2. Jumbo mortgages

Jumbo mortgages are conventional loans that have non-conforming loan limits. This means the home prices exceed federal loan limits. For 2018, the maximum conforming loan limit for single-family homes in most of the U.S. is $453,100, according to the Federal Housing Finance Agency. In certain high-cost areas, the price ceiling is $679,650. Jumbo loans are more common in higher-cost areas and generally require more in-depth documentation to qualify.

3. Fixed rate mortgages

Fixed-rate mortgages keep the same interest rate over the life of your loan, which means your monthly mortgage payment always stay the same. Fixed loans typically come in terms of 15, 20 or 30 years.

A coop will be good for me as the prices of house here are very high so an apartment costs much lesser than that. Fixed rate mortgage will be best for me as there will be stability in the repayment of mortgage and I'll have an idea as of how much I'm saving after the mortgage.

My 5 year plans include to get a coop in a good locality and to settle down there.