Types of Homes

What kind of home do you want? Let’s start with some definitions.

A single-family detached house is a dwelling that doesn’t share walls with another dwelling. It may also include a yard or garden. The homeowner owns both the structure and the property.

Condominiums (condos) are usually apartments or other dwellings that typically share adjoining walls with other units and share other common spaces. If you buy a condominium, you typically own your unit, the space inside your walls, and a portion of the common areas.

Cooperatives (co-op)s may look like condominiums, but if you buy a cooperative you buy stock in the company that physically owns the property. Since cooperatives usually require board approval for you to buy, they can be harder to finance because they can be harder to resell.

Manufactured housing is a dwelling built in a factory, transported to a site, and attached to a foundation. Units typically called mobile homes are the most familiar type of manufactured housing.

For each of these options, you may also choose from existing, newly constructed, or to be built homes.

Let’s look at each of these options in more detail.

Single-family detached

Single-family detached homes come in a large range of sizes and prices from the 800 sq. ft. mini to the multi-million dollar mansion. They offer the most privacy but can represent the most work for the homeowner. Some typical maintenance tasks may include mowing grass, raking leaves, maintaining gardens and landscape, shoveling snow, painting, cleaning out roof gutters, and much more depending on the home's age, geographical location, and property/lot size and features.

Condominium

The term condominium actually refers to the form of ownership not the type of structure. Condominiums can take almost any form: for example, a high-rise building or an old mansion divided into apartments. Or units in some cases may be free-standing (i.e., they don’t have to have shared walls) or townhomes. When you buy a condominium, you aren’t just buying your unit and a share of the common areas but you are “buying into” the community. Condo living may not be for you if you don’t want to participate in the community. Before buying, it is very important that you review the master deed (or enabling declaration), bylaws, and house rules at a minimum.

Cooperative

With a co-op, you are buying a share in a corporation not a piece of property. Financing for a co-op is not obtained through a traditional mortgage. Financing is usually in the form of a “share loan.” Information about obtaining a share loan for a particular co-op should be available in the co-op’s office.

Manufactured

Manufactured homes have come a long way from the simple, boxy single-wide mobile home. According to the Manufactured Housing Institute, construction costs per square foot for a new manufactured home average anywhere from 10 to 35 percent less than a comparable site-built home, excluding the cost of the land. Newer manufactured homes are typically built to more stringent construction and safety standards than in the old days, but many types may still be more prone to damage during severe weather. They are available in a variety of designs, floor plans, and amenities. A home may be placed on land you own or land you lease, but many communities and counties have precise, often broad restrictions on where and what type manufactured housing are permissible.

Existing

An existing home, particularly an older one, may be in an established neighborhood with varied architectural styles, broad range of colors, and building material. Homeowners may have added special features (which may be good or bad). The right older home may offer a number of benefits. Among the potential drawbacks of some existing homes are the following. Certain styles and sizes of older homes may have smaller rooms including the baths and kitchen and may lack storage space. Existing homes may require some renovation or remodeling to fit your needs, may require more ongoing maintenance and may require more immediate major repairs, such as replacing the roof or furnace or hot water heater.

Newly constructed

You will find the latest kitchen and bath designs and floor plans in newly constructed homes. All of the homes in a new subdivision may look very similar in architecture, color, and material. Room sizes may be larger than an existing home with more storage space, though this is not always the case. Many new homes are built to higher energy-efficient standards than older homes and potentially fitted with more energy efficient appliances. The housing development may also offer certain recreational facilities or other amenities. You should never assume, however, that new construction necessarily means a well-built home or a home without problems; smart buyers always have any home independently inspected.

Build your own

Building a home can provide you with more choices but can provide more stress. Whether you work with an architect and independent contractor or with a developer, you may have many options and choices or only a few. For example, a developer may offer the choice of many upgrades of their standard features—such as flooring, cabinets, or paint—but very little choice in changing the floor plan. A custom builder may give you more flexibility in floor plan and every part of your home. Depending on the developer or contractor, you may also be able to keep a close eye on progress and quality of the work during construction (good) or the builder may actively discourage homeowner involvement (red flag).

IQ Home Buying Guide is prepared by Remar Sutton and Associates and licensed to Educators Credit Union. Copyright 2007. All rights reserved.

Location, Location, Location

You think you just found your dream home and it’s also a bargain! Whoa! Why is it a bargain? Is it the neighborhood? The schools? Or the house itself? There are many factors that can affect the value of a home and also determine if the home is right for you.

The neighborhood, the area surrounding the neighborhood, the neighborhood schools, and the services provided can affect the value of a home. Here are some tips on how to find the best house that you can afford.

Drive around the area and get a feel for the different neighborhoods. Keep notes about what you like and don’t like about each area. Do you want a short commute to work? Kids to walk to school? Active homeowners association? Convenient public transportation? Make a list of what is important to you in a neighborhood. Specify what criteria are must haves (needs) and which would be nice to have (wants). Use the Neighborhood Needs vs. Wants worksheet as a starting point.

Zoning maps, land use plans, and comprehensive plans are just some of the documents that can help you check out an area. These types of documents can indicate what the plans are for development and growth in a particular area or neighborhood. If an area is just beginning to be developed, a zoning map can will indicate where the commercial and residential areas will be located. Use the following websites to checkout the communities in Educators seven county service area.

• City of Burlington — planning and zoning is under Government.


• City of Elkhorn — planning and zoning information is under Community Development located under City Services


• City of Kenosha — planning and zoning information is under City Development


• City of Milwaukee — the comprehensive plan is under Planning and Permits in the Department of City Development


• City of New Berlin — planning and zoning information is under Community Development located under Departments


• City of Racine — the comprehensive plan is under City Development located under Departments


• City of Waukesha — planning and zoning information is under Community Development located under City Departments

For information on other communities in the area, check out these county pages:

• Kenosha County


• Milwaukee County


• Ozaukee County


• Racine County — This site also has county planning and zoning information.


• Walworth County


• Washington County


• Waukesha County

For other areas of Wisconsin, visit the Wisconsin Counties and Wisconsin Cities, Towns and Villages pages which provides links to county and city, town and village governments.

The quality of the schools in an area can impact the value of your home. So even if you don’t have children, you should look at them. The Wisconsin Department of Public Instruction site is a good place to start. On the site you can find data about school performance and links to schools and school districts.

IQ Home Buying Guide is prepared by Remar Sutton and Associates and licensed to Educators Credit Union. Copyright 2007. All rights reserved.

What Do You Desire in a Home? Need vs. Want

Before you start looking for a home, you need to decide what it is you are looking for. You need to decide what items and features your home must have. You also have to decide which ones would be nice to have but aren’t absolutely necessary. Another list that is just as important are those items and features that you don’t want—these represent reasons to reject a particular home.

You might start your list by thinking what you liked and disliked about each the places you have lived to date. Also think about other homes in which you’ve visited. Think about your current situation too. The Home Needs vs. Wants worksheet will help you get started.

The composition of your household will also make a difference in how you look at your wants and needs. Do you have small children? Teenagers? No children? Plan to have children? Older family member living with you?

If you are buying the home with a spouse or partner, it is very important that each of you make a list and then discuss together your individual “wants” and “don’ts”— particularly the don’ts. Many a home purchase has been derailed by an objection coming out of the blue. Compromise will be a major component of a successful home purchase.

Driving through the area and visiting open houses and model homes can help you narrow your list.

Your needs and wants will also be driven by what you can afford. The next section helps you determine what you can afford to spend on a home.

IQ Home Buying Guide is prepared by Remar Sutton and Associates and licensed to Educators Credit Union. Copyright 2007. All rights reserved.

How Much Home Can You Afford?

Many lenders will talk of affordability in terms of a percentage of your gross monthly income (GMI) or X times your annual income. For example, you may have read that conventional loans typically allow you to spend 28 to 36 percent of your GMI. Or maybe some other source said “about 2.5 times your annual income.” But if you are going to be a smart shopper, your need to get more specific about how your current income, debt, and expenses affect your home-buying power.

To determine how much you can afford to spend on a home, you have to consider your entire financial situation. Because so many lenders talk about mortgage affordability in terms of a percentage of your gross monthly income, we’re going to talk about that also. But always remember this very important point: a monthly mortgage payment does not buy you a house or condo, it buys you a lump sum of cash—your loan—and usually includes money for other expenses such as property taxes and insurance. So to determine your price range of affordable home prices, get out your financial records, your calculator, and your pencil. Use the Income and Expenses worksheet to help you work through all the figures.

Before you begin remember that your monthly housing expenses will consist of the PITI (principal, interest, taxes and insurance), and possibly private mortgage insurance (PMI), plus utilities and maintenance.

Wait! What are all those things?

PITI is your monthly mortgage payment. Its components are:

• principal—this portion reduces the remaining balance of the mortgage
• interest—this is the borrowing fee
• taxes—this portion goes into the escrow account to pay the annual property taxes
• insurance—this portion goes into the escrow account to pay the hazard insurance (also called homeowner’s insurance). Not all lenders escrow your hazard insurance.

PMI, private mortgage insurance, is usually required by lenders when your down payment is less than 20%. This protects the lender against loss if you don’t make your mortgage payments. If PMI is required, then it is also part of your mortgage payment and also goes into the escrow account.

Utilities will be the bills for electricity, gas, water, sewer, and telephone. You may also consider cable/satellite TV as well as your ISP (internet service provider) to be utilities.

Maintenance covers any routine upkeep of the house and yard plus any repairs.

Note that there may be one additional monthly expense. If you buy a condominium, there is usually a condo fee that covers the maintenance & repair of the common areas and other expenses. Or if you choose a neighborhood or development with certain amenities or services there may be a homeowner’s association fee.

Down payment

A down payment is the money you use to lower the amount due on a purchase.

Do you need a down payment? If so, how much should it be?

The minimum down payment required will be determined by your lender and the type of mortgage you get. A VA loan doesn’t require a down payment, and some lenders offer down-payment assistance programs or 100% financing options. Other loans range from 3% to 20% of the purchase price. The larger the down payment, the smaller the loan. Thus a lower monthly mortgage payment and less interest paid over the life of the loan.

Get pre-approved for a mortgage

Getting pre-approved for a mortgage is the most accurate way to find out what price range of homes will fit your budget. For more information about pre-approval with Educators, read Chapter 3 of the IQ Mortgage Guide.

IQ Home Buying Guide is prepared by Remar Sutton and Associates and licensed to Educators Credit Union. Copyright 2007. All rights reserved.