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Home Ownership

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Tom is a single father of two children who are 13 and 15 years old. Tom has a steady job and makes $55,000 per year. He is currently renting a house and has been saving for a down payment so that he can purchase a house. He has $12,000 saved and is under no specific pressure to purchase a home immediately. Owning a home is one of the biggest dreams of many people (McNaney-Juster 2007). Economists state that buying a home is generally the biggest investment that an individual can make in his/her life. Therefore, for Tom, buying a home would be an achievement of one of his dreams, as well as making a sizeable investment. However, there are certain factors that Tom should consider before making a decision to purchase a home, given his current situation.

One of the factors that Tom should consider before buying a home is the location of the potential house (McNaney-Juster 2007). Tom’s children are school going children: most likely, they are in high school. He, therefore, requires considering the location of the house in proximity to the location of the school(s), which his children attend (in case they attend different schools). The house should be near the school(s), or at least, should be located in a place where the children can access the school easily. In addition, he should consider the location of the house in proximity to health facilities and auxiliary facilities such as shopping centers, parks, and worship places, among other. Being a family person, he will require staying in a place where he can access these facilities with ease.

Furthermore, Tom should consider the security of the location (McNaney-Juster 2007). He should consider the current and the past crime rate in the area and its neighborhood, as well as the appearance of the streets whether they look comfortable or inviting. The location of a house is usually important than the condition of the house (McNaney-Juster 2007). This is because one can always change or update the condition of a house through renovation but can never change the condition of the location unless one sells the house or moves out of the location. For this reason, Tom should be keen on finding the perfect location for a house where he would live peacefully with his two children. Houses located in unsecure areas, underdeveloped areas or areas with no development potential in the near future; or areas, not well served with transportation, health, education, and shopping facilities are usually cheaper than houses located in secure, well developed/potential areas for extension, and well served with auxiliary facilities. Therefore, Tom should not be in a hurry to buy just any house, given that his current saving would only be enough to pay a down payment for a cheap house, but rather should accumulate enough money to buy a house located in secure and well-serviced location.   

Before purchasing a home, Tom should consider the amount of retail and commercial development currently going on in the location as well as the potential future developments (Information for Home Owners 2012). If a home is surrounded by many empty fields designated for sale to commercial developers, then it is likely that the owner will regret because of lack of privacy and interference by the hustles and bustles of commercial activities. Tom should consider this factor given that he has school-going children, and they would require a serene environment to relax after school, do their homework, and interact with other children. Tom requires this as well.  

Moreover, Tom should consider his current financial position before purchasing a house (Information for Home Owners 2012). Even though he has a steady job, Tom should consider the financial implications of purchasing a home now. To purchase a good home, Tom may require 20 times his current savings: $240,000, or even more. If he takes a mortgage, he will be required to repay the mortgage on a monthly basis plus interest. Given that his monthly salary is approximately $4,600, this may not be enough to repay the mortgage, pay school fees, take care of his family needs, and pay insurance premiums, among other needs. Therefore, Tom may have to postpone his decision to purchase a home now until his financial status improves either though accumulating more savings or getting a pay increase.

Assuming that Tom resides in New York, there are many houses, which are currently on sale. One such house is 345 Lenox Avenue Unit 3 located in New York City. The house is going for $499,000. It has two bedrooms and two bathrooms. The size of the house is 1,080 Sq. Ft. The 1910 house is spacious and has exotic features such as mahogany doors and floor. The good thing with this house is that it is spacious. The bedrooms are large enough to fit two beds each (Properties for Sale 2012). In addition, the house is located within the city, therefore, easily accessible and well served with auxiliary facilities. However, the location of the house lacks serenity. New York City is a busy city and one can barely have a quiet day or night. This would not be conducive for Tom and his children. Besides, the house is old. It was built in 1910 and has undergone many renovations and repairs since them.

Another available house is located in Bronx in New York. The house is worth $599,000. Its features include two bedrooms, two bathrooms, and a parking lot. The size of the house is 1,800 Sq. Ft. The advantage with this house is that it is located in a purely residential area. The location is serene, and this offers Tom and his children a good place to spend their evening, weekends, and holidays. In addition, the house is not old since it was built in 1990. No major renovations and repairs have taken place in house, therefore, giving the potential owner value for his/her money (Properties for Sale 2012). However, the location of the house is far from the city (assuming that Tom works in the city). Tom might have problems commuting to and from his place of work from this location.

Another house, which Tom might consider purchasing is the 635 West 42nd Unit: 45f. The house is located in New York City but in a residential area. The house has three bedrooms, two bathrooms, ample parking lot and backyard, and magnificent view of the city. The cost of the house is $1,200,000. The house is good because it is big and its location is safe and serene (Properties for Sale 2012). However, it is too expensive, thus making it unaffordable to Tom.

There are various sources housing finance that Tom can explore. One of these sources is the Federal Housing Administration (FHA), provided by the US Department of Housing and Urban Development (Meggit 2012). FHA insures mortgages to qualified borrowers can raise 3.5 percent financing. Another source of house financing is savings and loan associations. These institutions specialize in mortgage loans to their members according to the value of their savings. For instance, a member can take a mortgage worthy 20 times the value of his/her savings. Commercial banks are also good sources of house financing (Meggit 2012). They offer mortgages to their clients at competitive rates. Personal savings are also a good source of house financing (Meggit 2012). An individual can save money until it is enough to buy a house. However, the best source of house financing that Tom can explore is mortgage from saving and loans association. This is because these institutions offer mortgages to their members at low rates compared to commercial banks (Meggit 2012). Furthermore, the savings of an individual member determine the mortgage amount. Tom should join such an association, accumulate enough savings, and then use them to acquire a mortgage from the association. This way, Tom will be able to acquire a home for his family without incurring many costs. 

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