A New House - Risks and Benefits

In: Business and Management

Submitted By Tam0555
Words 377
Pages 2
A New House - Risks and Benefits
May 13, 2011

A New House - Risks and Benefits
A few of the government bodies that influence national fiscal policies that potentially affect the housing market are: Federal Reserve System (FED), Housing and Urban Development (HUD), and the Federal Emergency Management Agency (FEMA). “The Federal Reserve System of the U.S. is the central banking system of the U.S., comprised of the Federal Reserve Board, the 12 Federal Reserve Banks, the Federal Open Market Committee, and the national and state member bank. Its Primary purpose is to regulate the flow of money and credit in the country” (InvesgtorWords.com, 2011). The federal secure interest affects variable interest rates of mortgages by using the interest only loans, which you just pay the interest and no principal, so when the housing price falls, refinancing is impossible. The reason refinancing is impossible, is because there is no equity or profit made and the house value diminishes and there is no way to refinance when the house is worth less than the mortgage amount. When the value of your home goes up, then you can refinance. The HUD Act affects mortgages for “single-family and multifamily dwellings and extending loans for home improvements and for the purchase of mobile homes; channeling funds from investors into the mortgage industry through the Government National Mortgage Association; and making loans for the construction of rehabilitation of housing projects for older and handicapped persons” (The Free Dictionary, 2011).
The best recommendation for buying a home is to purchase it at the lowest interest rate possible and to know what the taxes, monthly utility bills, insurance rates, maintenance, and other fees will amount to. There are fees associated with owning a mobile home, condo, and a townhome that accrue monthly and or yearly that can and up…...

Similar Documents

A New House Decision

...When it comes to buying a house the economy is the first issue that one would take in to consideration. Due to the fact that if the economy is bad then it may not be the best investment to take or if the economy is doing well it would be the best road to take. The marginal benefits and cost on the decision to purchase a home would have to consider the changes that might happen in one’s life style. The two elements will play a huge role in buying a new home one would still have to keep in mind the upkeep, insurance, interest and principal of the new home. It would also be based on where the home is located and the property that comes with it if any at all. One would want it to be close to the school that children would be going to if that was the case. All of these things would be considered the marginal cost. The benefits would be making sure that the economy is healthy and the wages will make up the expenses of the new home. The removal of the tax interest would affect the housing market by reducing the rates. This would hurt the housing market when it was down but that could be a good thing or a bad thing. It makes people think really hard about whether or not to buy a house when it is low or wait till the prices rise again and that would make it even harder. Most of the deduction only helps the richer people to say, but in any case it will affect the decision of any person. The government goes up on the economy and increases it because the jobs, unemployment and the......

Words: 375 - Pages: 2

A New House Economy

...A New House-Economy Checkpoint Chante Yokley XECO/212 December 11, 2011 John McGee A New House-Economy The FED impacts national fiscal policies through interest rates, which impacts the demand in the housing market (Mankiw, N. G., 2007, p. 657). The Department of Treasury introduced a refinancing program that allows consumers to refinance mortgages to take advantage of lower interest rates. The Fiscal Policy impacts prime lending rates, which are the determining factor in consumer borrowing. The higher lending rates mean a higher price paid for a new home. As rates increase, demand decreases causing a decline in the housing market and an overall lag in the economy. A contractionary fiscal policy would provide a short-term decrease in the money supply but would provide lower inflation in the long-run, reducing lending rates and increasing the aggregate demand in the housing market (Mankiw, N. G., 2007, p. 778, pp. 5). The strength of the economy would create an increase in marginal benefits, exceeding marginal costs by strengthening home owner’s equity. The government offers programs and tax incentives (deductions) that subsidize home ownership, making it affordable to be a homeowner. One in particular is the Mortgage Interest Deduction (MID), a popular tax break for middle to higher class citizens; research shows that the beneficiaries from the MID are in these societal classes (Stansel, Dean & Randazzo, Anthony, 2011, executive summary, p. 6).......

Words: 330 - Pages: 2

A New House Decision

... successful on any new venture. Number one on the principle list is trade-offs. A trade-off is anything that you must give up to obtain what you want. A new home will be quite a costly venture so the need for efficiency will come into play, meaning getting all that you can out of your resources. Once it has been figured out what you will need to purchase a new home, you can figure out what you will be willing to give up to accomplish a goal. This brings into play the second principle which is, “The cost of something is what you are willing to give up to get it.” The opportunity cost it may take to get into the financial status needed to start looking for a house may be time as a second job may be needed to reach the financial goals necessary. It may entail saying goodbye to that new car in the parking lot down the road that has been waiting for you to decide to make the purchase. Since there is a new baby on the way these options may have to be considered. Lifestyle changes will be necessary to save money for the upcoming events and this may include giving up other objects or dreams that you once had in order to get your home and life ready for a newborn. Thinking as a rational person, the financial goals set aside may not be able to be reached in a short amount of time. People that think rationally will systematically work on each goal until they have been accomplished. Weigh the costs and benefits of each choice you make and make sure it is the best choice for......

Words: 1918 - Pages: 8

A New House – Readiness

...A rational person thinks at the margin. The marginal benefits from moving to a house are good ones. We will have more rooms. We will live closer to local schools and services. With the market being low at the moment we could buy a house at a lower cost with lower percentage rates keeping our over- all cost down. With buying a home we can get a discount or even refund from the interest on the house. Trade can make everyone better off. I am going to trade paying rent, which is someone else’s mortgage to buy a home and pay my own mortgage. I am saving in the long run because I am not paying someone else a profit to rent their apartment. I am making an investment by purchasing my own home and can benefit from it later. Society faces a short run trade- off between inflation and unemployment. I do worry that with the economic situation in the U.S. today could cause me to have to pay more for my home in the long run, I do believe that it is a good investment. I believe that my job is not in danger and I will not be forced to be unemployed anytime soon. I think that the good of buying a house our weighs the bad about it. From an investment and financial point of view, buying a home would be better for us. Buying a home while only a small step in the recovery of the economy, it is a positive one in the way that it could boost it a little....

Words: 269 - Pages: 2

New House

...The International Trade Debate | April 6 2012 | By: Soyazhe Bowman | XECO 212 | Tariffs and quotas are tools that are used by our government to help control imported goods from foreign countries. We use this type of control trade to help our manufactures protect our economy. With everyone having a certain products they produce and sell that benefit other countries, they can benefit from it by selling it to other who have a higher demand since the product they manufacture may be better than the competitor. Tariffs and quotas can be used to maintain balance in our economy. The imported and exported goods are ruled in this way for this reason. When selling domestic goods to foreign countries, the home company can gain higher revenue because that particular good is not sold in that country. A good example of this is today’s technology. We get many our latest gadgets from Japan. When selling products to another country they can mark up the price. This provides an economic advantage. It protects the income for any given country. I think this trade is not as beneficial to the United States. This is because a large percentage of the products we sell come from other countries. It more beneficial to domestic corporations that create competing goods because they have the ability to inflate prices for services products and products created as a result of the tariffs and quotas in place. The international trade can be viewed as an economic stimulator by the consumer....

Words: 250 - Pages: 1

A New House

...A New House – Decision Dolphinette Williams XECO/212 August 14, 2011 Hamsa Wilson Purchasing a home is one of the most vital choices one can make in their life. It is an exceptionally suitable area for the principles of economics to be taken into account to bring forth a good decision. This method calls for evaluation of marginal benefits and marginal costs. It also demands that one would consider their individual pros and cons attached to the decision. Personally, one would take their own family’s needs and welfare into thought during this course in their lives. Five of the principles well suited to the guiding of a home purchase are: “People Face Trade-offs”. Most people have to make choices in their lives if they are going to purchase and pay for a new house. Then we have “The Cost of Something is what you Give Up to get it”. The next principle that is believed to be relevant to purchasing a home is “Rational People Think at the Margin”. In order to make a successful action plan in this situation there are marginal changes that would have to be made (Mankiw, 2007). The last two principles that would be used here are “People respond to Incentives” and “Trade Can Make Everyone Better Off”. There are a large variety of incentives that prompts one to make a home purchase. Some of these incentives are instant and some are long-standing advantages. One would want to think about price as one of the largest factors in their choice for a home purchase. One would want...

Words: 1919 - Pages: 8

New House

...Purchasing a new home is a major decision requiring a substantial financial outlay where the wrong decision could have long-term financial consequences. In addition, two principles that play a major role in this decision include principle number two the cost of something is what you give up to get it, and principle number three rational people think at the margin. The role of principal number two the cost of something is what you give up to get it, puts in perspective what a person must give up to purchase a home. For example, most people have to give up frivolous spending to save money for a down-payment. This includes buying expensive groceries, going on vacations, and buying brand new vehicles. Generally speaking, people give up their normal spending habits and live below their means for a period of time. Principle number three rational people think at the margin also plays a large role in the decision to buy a home. For instance, people do the best they can to achieve their goals given the opportunities they have. In the case of buying a home people will think at the margin and decide that buying a home is not only a place to live but an investment. Both principal’s influences the marginal benefits and marginal costs associated with the decision to purchase a home. For example, some houses are in foreclosure and are examples of how banks think at the margin. For instance, instead of selling the house at the market price banks often sell the house at lower prices to......

Words: 274 - Pages: 2

New House Readiness

...Checkpoint: New House - Readiness Of the 10 Principles of Economics that would play a major role in a house buying decision, the most outstanding is The Cost of Something Is What You Give Up to Get It. Setting aside the obvious financial sacrifices that are made to buy a home, people also give up the inanimate that is not always easily identified such as the worry about the decision itself, the worry of making the monthly mortgage payment, the worry of upkeep and maintenance, and the worry of resale of the home should it ever be needed. Making sacrifices and foregoing luxuries such as vacations are the animate part of giving up something to get a home. It accompanies the inanimate of stress and worry. An example of decision making is People Respond to Incentives. Today’s housing market favors the buyer as there are many homes in foreclosure or homes are being sold to avoid foreclosure. This provides an incentive for those who can afford it to buy a home to live in and for those who can afford a second home to rent the home. The rental market is at a premium in many areas as homeowners who are being forced out of the home they tried to own now need to rent. Trade Can Make Everyone Better Off as an example of interaction is easily explained by expounding on the homeowner’s loss of a home and the subsequent need to rent. By having rental properties available by people who are able to own more than one home creates the scenario where people are better off by trading...

Words: 484 - Pages: 2

A New House - Risk and Benifits

...A New House Mark Anderson XECO/212 April 5, 2013 Anna Gonzalez A New House One government body that influences national fiscal policies is the Federal Reserve. The Federal Reserve is the central banking system of The United States. The Federal Reserve influences the interest rates on home loans through the buying and selling of bonds and securities. If the Federal Reserve purchases a large amount of bonds and securities interest rates on home loans will lower; causing a rise in home sales. A recent national fiscal policy that effected mortgage rates, housing starts and housing prices is the bond buying stimulus plan that the Federal Reserve implemented in 2008. The bond buying stimulus plan is a plan where the Federal Reserve purchases bonds in an effort to keep long-term rates down. The bond buying plan was started in an effort to help spur investment and consumption in the economy. There was a drop in interest rates shortly after the implantation of the Federal Reserves new policy. A rise in housing starts and home sales can be attributed directly to the lowering of interest rates. When it comes to weighing the risks and benefits of purchasing a home I would recommend a person find out as much information as they could on their own before consulting a professional. They should look at interest rates and determine if they are trending up or down. Look to see if the Federal Reserve is buying or selling bonds and securities in order to...

Words: 380 - Pages: 2

A New House Decision

...Final Project Week 9 A New House – Decision By Barbara Rosol Due, Sunday, April 14, 2013 XECO/212 - Terry R. Blankenship, MBA, CBB Wanting to be a home owner is a very scary, unknowing and risky venture unless you have the right tools and the proper knowledge to make it a smooth transition and one you will be committed to for many years to come. This happened to me when I was young and thought it was time to move out of a small space I was renting. The choices that best describe my decision to purchase a new home would be based on the following principles. I could not imagine starting over again but I do know that by following the 10 principles of economics and analyze the markets for home purchases, you will see how easy it is to measure the benefits versus the costs. For me just starting a family and having little money to start, the best we could do is look for a home within our means. We rented a small 2 bedroom apartment with no garage and it was miles from schools and local grocery stores. We needed to raise our children in something nicer and with lots of yard space for the children to safely play. But how do we do it? We here the interest rates for mortgages are great now but the market price where I want to live must be in my budget and in a decent neighborhood, free of crime and must be close to grocery stores. I would need to seek the help from a bank that can finance and pre approve a loan for me so a realtor can start showing me my...

Words: 1808 - Pages: 8

A New House

...A New House - Economy James Sathre University of Phoenix XECO/212 Anna Gonzalez, Ph.D. September, 3 2013 Buying a house is a large financial decision. Taking on that kind of debt can be a large burden or it could be a blessing. When you buy a house you trade a payment for stability and ownership or,you over spend. Your decision has to based on what you can afford and what the economy is doing around you. When my wife and I bought our house 4 years ago we were able to deduct the interest from our payments on our yearly taxes, allowing for a larger refund and helping us create more equity in our home. It was always a pleasure to get that check and think about what project we wanted to do next. But that has all changed because of the lift on the Bush tax cuts. When this happened it heightened the amount of money that is taken from our checks, taken the child tax credit away from us, and we cannot deduct our yearly interest paid. There are people that look to that refund based on what they have to pay in or just to buy necessities. My in-laws are traditional blue collar people. They make just enough to live well but also just enough to have to pay in to the government every year, rather than get a check back. So they are continually looking for new ways to find deductions on their taxes. With the tax deduction on mortgage interest paid gone, there is one less way to help them lower their payment to the government. For some people loosing this deduction...

Words: 546 - Pages: 3

A New House

..., because you are going to have to pay a mortgage and you are going to be responsible for the repairs yourself versus you renting from someone else and they have to pay or do all the repairs. When purchasing a home you want to look into a good location with great schools, a family oriented neighborhood, as well as being a secure area. There are various principles of economics that can be applied to a decision to purchase a new house. First, one of the principles will be that of trade-offs which people have to face. Every decision comes at a cost. In this case, the decision to purchase a new house will deplete people of a large proportion of their savings. The tradeoffs which they face will be alternatives which they get to enjoy with the same amount of money. For example, the same amount of money spent on a new house can be used on sending a child to university, going on a long holiday or purchasing a new vehicle. Thus, a person will need to weigh the pros and cons of these alternatives against the decision to purchase the new house. This will involve identifying the benefits of the purchase of the new house. An example of a benefit will be a newer and cleaner environment which will be beneficial to the health of children. In addition, larger space will mean additional storage for the family and a more comfortable living environment. Thus, consumers will make the decision to purchase a new house when he or she feels that it is worth it to give up the alternatives for the......

Words: 1281 - Pages: 6

New House

...A New House – Risks and Benefits Terrance Lundy XECO/212 1/19/13 The national fiscal policy is the use of government revenue collection (taxation) and expenditure (spending) to influence the economy. They also find influences the economic status in order to affect the rates of the housing market. I don’t believe there are too many different government bodies that have a big effect on the national fiscal policies but one of the main ones to influence is the Federal Reserve which determines the direction in which the interest rates will go. This means that they control whether they rise or fall. When there are lower interest rates it will increase the demand for houses in the market. This is when is the most predictable to buy a house because they are not as much as it would normally be. Federal banks can affect mortgage rates and housing prices because they decide how much interest rates will be. This will be then change the mortgage rates as well when the house is all paid off. You do not want to be paying more than the house is actually worth so mortgage rates and interest rates are something you have pay attention to. During the economy now if anyone has the opportunity to buy a home they should do so because it is lower than it is at most times of the year. All of these play a big role in decisions to buy houses because wrong choices mean financial consequences for a long period of time. You have to make sure the market is good to buy a house to you get the best......

Words: 276 - Pages: 2

A New House Decision

...Michelle Corniciuc | A New House | Decision | 9/30/2012 | It is always a better idea to purchase your own home rather than pay for someone else’s with your rent payments. Owning an asset in the long run is better than a lease. There are many variables to consider before making your final decision. We as Americans find home ownership to be a valuable goal. Even this year’s national elections are using real estate as one of the most important issues. So, the decision to purchase a home is based on our country’s economy as well as your own. Of course the location of the real estate is a factor as well as the size of the lot and the condition of the building. What would you be willing to trade off or give up for the privilege of being the owner of your own home? What do you get in return for these tradeoffs? Now you must use the principles of economics to figure out some of the answers to your questions. You may have to use what you have available in savings to make a down payment and you may have to work more hours to afford your payments. In the long run you are placing all of those finances back into a type of savings for yourself and your family. These are only marginal changes that you will have to make. They are only small incremental adjustments that would be made to an original plan of action. Some people may find purchasing a new home a frightening experience. Spending your savings, moving into a new neighborhood, can be scary. You must take a look at...

Words: 1389 - Pages: 6

New House

...Reserve requirements help to maintain a stable banking system and ensure that banks are able to conduct day-to-day, cash-withdrawal transactions. By lowering the requirements, it will help the banks have a higher reserve because they will have more money on hand. The more money there is to spend on goods and services will help the economic growth. Economic growth is important if businesses are to grow and prosper. It relates to growth in the size and quality of the economy as a whole. Growth is measured as the change in the gross domestic product of a country minus inflation. Without economic growth it is very difficult to make any meaningful and sustained reduction in poverty. This is especially important in developing economies because it reduces unemployment, budget deficits and it enables an increase in social spending without an increase in tax rates. I believe my rationale for the use of the reserve requirements should be used only when needed. Lowering the requirements will increase the money supply, which may cause inflation. The alternative is to risk the money supply being too small and having a recession. Discount rate is the rate that banks pay to borrow from the Federal Reserve System. A lower rate makes borrowing easier, so banks are able to make loans to ordinary people and businesses. This stimulates the economy. When the discount rate is high it makes borrowing harder for banks. They then don't give as many loans out to people. This slows down the economy...

Words: 533 - Pages: 3