TOPIC 1 selecting a home

professor penny

REALTORS® have spent millions of dollars to develop Multiple Listing Services (MLS) and other real estate technologies that make the transaction more efficient. An MLS is a private offer of cooperation and compensation by listing brokers to other real estate brokers.

Learning goals

By the end of this topic, you should be able to:

Investigate the decision of renting versus owning a home
Describe the factors that determine how much you can afford when buying a home
Explain the process of purchasing a home

section outline

Topic 1 Selecting a Home

1.1 Rent versus Own

1.2 Factors that Determine How Much You Can Afford

1.3 The Process of Purchasing a Home

Content Videos

The Gus A. Stavros Center for the Advancement of Free Enterprise and Economic Education at Florida State University is pleased to offer these resources. They were created by Teaching Professor Joe Calhoun.

The captions were created by a computer program so sometimes they may be inaccurate or contain spelling or grammatical errors.

You may alternate the views by clicking on the white icon on the top-right corner of the screen.

The videos should not be downloaded or distributed beyond this site.

Part a

Part b

key point

Before you start looking for a home to purchase, select a lender and get pre-approved for a loan amount.

Certified peer mentors

Mentors give presentations to groups about our topics. They also assist other students in personal finance matters and answer questions during individual meetings. To schedule a presentation or an appointment to discuss your situation email coss-financialpeermentor@fsu.edu or visit the Stavros Center financial wellness page.

a topical story

Madison made her way from the breakroom into the main lobby, apron and purse in hand. She was finally off after a seven-hour shift and excited to meet with the other girls at Momo’s pizza next door. As she walked over, she caught up with Isabella.

“Hey, where’s Jayla?”

“She’s inside, she texted and said she got a table already.” Isabella said.

“Okay, great. I’m so jealous she was off today. I worked seven hours. I’ve never been so exhausted. Just trying to remind myself why I’m working--so I can buy a house in Chicago, New York, or maybe LA or--”

The sight of Jayla at the booth by the window cut off her train of thought and they made their way over to her.

“Finally! I’ve been waiting.” Jayla said playfully.

“Sorry. Really long shift today. But as I was telling Isabella, it’s okay because soon I’ll have enough saved so I can buy a house or something. I can paint the walls and the murals, oh and I can put that sculpture I made last year in one of the rooms and-”

“Woah there. A house? Are you crazy?” Jayla asked.

“Well, yeah. I’ve done well saving and a mortgage isn’t much different than rent in a nice apartment, so might as well!”

“I think maybe you’re underestimating how many other costs there are when it comes to buying a house. Plus, with your art, you never know how long you’ll be in one place, especially straight out of college. Maybe you could rent? Then you could have the freedom of not living in an apartment, without all the other responsibility.” Isabella said.

“Well, yeah, I guess. But it’s an investment, right? Buying a house.”

“Well, not really. My parents made that mistake after one of their first ventures started taking off.” Isabella started. “They were making more money than they had when working an hourly job and thought it was time. But then, all of the other expenses started hitting them and they were upside down in charges. Don’t want you making that mistake,” she explained. She’d heard that story many times before and always thought that’s why her parents were so persistent about handling her money. They didn’t want her making the mistakes they had.

“What kind of other expenses?” Madison asked, clearly worried.

“Well, like association fees, repairs, insurance, taxes, and furniture, but that’s just a few. They add up fast.”

“I guess I didn’t really think about that. I could rent, but is that okay to do for just a year?”

“Yep!” Jayla interjected. “My family has rented a few times. I think it’s ideal for the short run, so less than three years. Buying a house is more for when you want to be settled there longer than that. But even when you are ready to buy a home, there’s so much that goes into it. When our family bought a house, my parents had us help and learn about it. Sometimes interesting, sometimes not.” Jayla said with a laugh.

The girls paused as the server came over with breadsticks and marinara sauce. They all thanked the server and dug in.

“So, what all goes into it?” Madison asked, reaching for a breadstick.

“From what I learned, there’s seven steps. Research, finding a lender and getting pre-approved, get a real estate broker, then you can finally look at houses and pick one, do an appraisal and inspection, negotiate your final price, and then” Jayla paused and thought to herself, “oh right, then you just close on it!”

“Wow, I guess I didn’t realize everything that went into buying a house. I thought if you could afford the mortgage you were good to go. Now enough house talk and let’s get into this pepperoni!” Madison said as she grabbed for the biggest slice, “Best pizza in Tallahassee.”

(Story created by Jasmine George, Ana Siqueira, Courtney Swanson and Alex Thompson)

related books

These books have a chapter directly related to this topic. Please read them for more details.

Chapter 12: Ramsey, Dave. Dave Ramsey's Complete Guide To Money. Ramsey Press, 2012.

Principles 25, 63, & 64: Siegel, Cary. Why Didn't They Teach Me This in School?: 99 Personal Money Management Principles to Live By. CreateSpace Publishing, 2013.

Chapter 3: Orman, Suze. The Road to Wealth. Penguin Publishing Group, 2010.

Chapter 7: Stanley, Thomas; Willam Danko. The Millionaire Next Door: The Surprising Secrets of America's Wealthy. Taylor Trade Publishing, 2010.

Chapter 17: Lowry, Erin. Broke Millennial: Stop Scraping By And Get Your Financial Life Together. Penguin Publishing Group, 2017.

Five From the Field

Frank Coto is the president and owner of Lincoln Lending Group, a company specializing in Florida mortgage loans. Based in Tampa, FL, you can learn more about Frank and his company here: https://www.lincolnlend.com/Home

In this video interview, Frank answers the following questions:

What are the primary considerations in the "rent versus buy" decision?
A general rule is to not purchase a home unless you expect to live there 3 years. What's your opinion on that rule?
What is the first step in the home selection process?
What are the advantages of hiring an agent versus acting independently?
What are common pitfalls to avoid?

Mark Mathiason is the Florida Region Sales Manager for Mortgages for Hancock Whitney Bank. He has originated over 3,700 residential home loans since starting in the business in 1989. While Mark is based in Tampa, FL, Hancock Whitney services the Gulf South region. Learn about their services here: https://www.hancockwhitney.com/

In this video interview, Mark will answer the following five questions:

How do you advise someone about the “right time” to buy a home?
Besides the mortgage, what are two other important costs to remember about owning a home?
What are attributes to consider when hiring an agent?
What is an important element to consider, but many people overlook, when searching for a home?
What advice would you give to a first-time home buyer?

additional resources

You are welcome to download and use our budget file. Zero-Based_Budgeting.xlsx

You are welcome to download and use our mortgage amortization file. Mortgage_Amortization.xlsx

https://www.bankrate.com/real-estate/how-to-buy-a-house

https://www.daveramsey.com/get-started/home-buying

https://www.igrad.com/start/start-here-buying-a-home

https://www.myfloridacfo.com/YMM/Calculators/House.aspx

https://www.youtube.com/watch?v=0fiM8x5vxcY

https://www.annuity.org/financial-literacy/

other books

Malkiel, Burton. A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing. W. W. Norton & Company, 2020.

Wood, William. Getting a Grip on Your Money: A Plain & Simple Christian Guide to Managing Personal Finances, Eliminating Debt, Spending, Saving & Giving, Investing for the Future. Intervarsity Press, 2002.

Bach, David. Smart Women Finish Rich, Expanded and Updated. Currency, 2018.

Bogle, John. The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns. Wiley, 2017.

Clason, George. The Richest man in Babylon. Dauphin Publications Inc., 2018.

Hill, Napoleon; Arthur R. Pell. Think and Grow Rich: The Landmark Bestseller Now Revised and Updated for the 21st Century. TarcherPerigee, 2005.

Lynch, Peter; John Rothchild. Beating the street. Simon & Schuster, 1994.

Kobliner, Beth. Get a Financial Life: Personal Finance in Your Twenties and Thirties. Simon & Schuster, 2017.

Orman, Suze. The 9 Steps to Financial Freedom: Practical and Spiritual Steps So You Can Stop Worrying. Currency, 2006.

Bach, David; John David Mann. The Latte Factor: Why You Don't Have to Be Rich to Live Rich. Atria Books, 2019.

Hogan, Chris. Everyday Millionaires: How Ordinary People Built Extraordinary Wealth―and How You Can Too. Ramsey Press, 2019.

important government sites

Housing:

Federal Housing Finance Board ensures the regulated entities fulfill their mission by operating in a safe and sound manner (Links to an external site.)

Ginnie Mae-the principal financing arm for government mortgage loans (Links to an external site.)

Freddie Mac makes homeownership and rental housing more accessible and affordable (Links to an external site.)

FHA is the largest insurer of residential mortgages in the world (Links to an external site.)

VA helps Servicemembers, Veterans, and eligible surviving spouses become homeowners (Links to an external site.)

Economy:

Bureau of Economic Analysis reports GDP, Income, International Trade, and many others (Links to an external site.)

Bureau of Labor Statistics reports Unemployment, Prices, Productivity, and many others (Links to an external site.)

The U.S. Department of the Treasury's mission is to maintain a strong economy and create economic and job opportunities (Links to an external site.)

The U.S. Small Business Administration (SBA) continues to help small business owners and entrepreneurs pursue the American dream (Links to an external site.)

Banking:

The Federal Reserve System performs five functions to promote the effective operation of the U.S. economy (Links to an external site.)

The Federal Deposit Insurance Corporation (FDIC) is an independent agency created by Congress to maintain stability and public confidence in the nation's financial system (Links to an external site.)

The National Credit Union Administration is an independent federal agency that insures deposits at federally insured credit unions (Links to an external site.)

Federal Regulation:

The Internal Revenue Service is the nation's tax collection agency and administers the Internal Revenue Code enacted by Congress (Links to an external site.)

The Federal Trade Commission protects consumers and competition by preventing anticompetitive, deceptive, and unfair business practices (Links to an external site.)

The mission of the SEC is to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation (Links to an external site.)

The CFPB is committed to providing consumers with up-to-date information and resources to protect and manage their finances (Links to an external site.)

(Links to an external site.)Other:

Social Security Administration (Links to an external site.)

Department of Education (Links to an external site.)

State of Florida

ECO 3041

ECO 3041 Personal Finance is a 3 credit hour course offered in-person and online each fall and spring semester. The purpose of the course is to provide you with the specific content knowledge of personal finance and to give you opportunities to start using that knowledge to create good habits, make better financial choices, and live a more fulfilling life. It covers material for all 33 topics listed here. See Professor Calhoun's most recent syllabus here. ECO_3041_SP21.pdf

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To schedule a presentation or an appointment with a certified peer mentor to discuss your situation email coss-financialpeermentor@fsu.edu or visit the Stavros Center financial wellness page.