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949.769.1599. OC Housing News provides tools home buyers need to find their dream home. Home shopping tools described with step-by-step instructions.

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Published 04 September 2014
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OC Housing News

































The Comprehensive
Guide to Finding Your
Next Home

HOUSING MARKET NEWS UltimateGuidetoOCHousingNews
RentVersusOwnDecisionGuide......................................................................................................................................5
RentingVersusOwning.........5
Reasonstobuyahouse.............7
Reasonsnottobuyandrentinstead...................................................9
Mistakesandfallaciesaboutrentingorowning..........................................................12
WhatisOwnership?.............................................................................................................14
AConceptualHistoryofRealEstateOwnership................................14
MoneyRentership(LoanOwnership)..............................................16
WhatisRentalParity?.........................................................................................................................................17
RentsCapturePremiums.......18
MovingBeyondRentalParity..............................................................18
UniquenessandQuality..........................................................................................................19
ReservoirofValue.....................................................19
HowMuchaHouseReallyCosts20
MortgagePayment....................................................................................................................20
PropertyTaxes...........................................................21
HomeownersInsurance.........................................22
PrivateMortgageInsurance.................................................................22
SpecialTaxesandLevies........................................23
HomeownerAssociationDuesandFees.........................................23
MaintenanceandReplacementReserves.......................................................................24
TaxSavings...................................................................24
HiddenSavings...........................................................................................24
LostDownPaymentInterest................................25
OwnershipCostMath..............................................................................................................26
CostofOwnershipDetailedAnalysis............27
FourMajorVariablesthatDetermineMarketPrice...................................................27
BorrowerIncomeandWageInflation..............................................................................28
AllowableDebt-to-IncomeRatios......................29
InterestRates..............................................................................................................................................................31
Downpaymentrequirements35
PITI..................................................................................................................................................................................37
PropertyTaxes...........................37
MelloRoosTaxes.......................38
HomeownersInsurance.........................................................................................................................................40
HomeownerAssociationDuesandFees.........40
HomeFinancingGuide.......................................................42
MortgageBasics.....................................................................................................................................................42
What'samortgage?..................42
What'sincludedinmymonthlypayment?.....................................................................................................42
Whatisanescrowaccount?..................................43
MortgageProcess..................................................43
Step1:Determineyourbudget...........................................................................................43
Step2:FindaLender...............................................................................43
Step3:GetPre-Approved......................................44
Step4:GoFindYourNextHome........................................................................................45
Renter’sguidetopreparingforhomeownership...................................................45
Adjustingyourfinances..........................................................................................................45
PITI..................................................45
Maximumloanbalance...........................................46
RentandSavings........................................................................................................................47
Interestratesandtherent-saveratio...............48
Thebottomline..........................................................48
ConservativeHouseFinancing........................................................................................................................49
info@ochousingnews.com 949.769.1599 UltimateGuidetoOCHousingNews
MortgageInterestRates.........................................................................................................................................50
TypesofBorrowers..................52
TypesofLoans............................................................................................................................................................52
StatedIncomeLoans................59
Downpayments.........................61
EquityComponents..................................................................................................................................................62
MortgageEquityWithdrawal...............................68
TheFallacyofFinancialInnovation..................71
Summary.......................................................................................................................................................................74
FHALoanRequirements....74
FHAMortgageInsurance.......74
FHALoanLimits.........................................................................................................................................................76
LoanChecklist.............................76
ClosingCosts................................77
FHADebtRatios.........................................................................................................................................................78
FHACreditIssues......................79
FHAFinancingandLoanAssumption..........................................................................................................81
Utilizefixed-rateassumablefinancing.............81
Maximizeyourdownpayment(withinreason)..........................................................................................81
Expectnohome-priceappreciation..................................................82
AssumptionofMortgage........................................................................................................................................82
Wrap-aroundmortgages........87
Factsaboutloanassumptions..............................88
BeWarytheHighCostofFHAInsurance........................................................................................................89
AcceleratedMortgagePayoff............................................................................................89
Paymorewhenyoucan..........89
Refinancingforacceleratedamortization......................................................................................................90
TimetoPayoff.............................................................................................90
HowNottoManageYourDebt........................................................................................91
WhatisaPonziScheme?........................................91
PonziSchemesofdebt.............................................92
GoingPonzi..................................................................................................93
ThePonzilimit............................................................................................95
TheFateofPonzis.....................................................................................96
HousingMarketInterpretationGuide..........................97
OCHousingNewsMonthlyMarketReport................................................................................................97
UsingtheOCHNMonthlyReport....................................................................................97
InterpretinganOCHNMonthlyMarketReport........................98
NewsOverview..........................................................................................................................98
MedianHomePriceandRentalParityTrailingTwelveMonths...........................................................98
Resale$/SFandYear-Over-YearPercentageChangeTrailingTwelveMonths100
RentalRateandYear-Over-YearPercentageChangeTrailingTwelveMonths..........................101
HistoricMarketDataCharts..............................................................................................................................102
PercentageChangeCharts..................................104
HistoricValuation..................................................................................................................................................106
OCHNRatingSystemChart107
InvestorAnalysis....................108
MarketPerformanceandTrendsTable........................................................................................................109
MarketTimingRatingandValuationsTable..............................111
Theimportanceofrentalparity...................................................112
RentalParityasbasisofvalue..........................................................................................................................112
Howrentalparityiscalculated........................114
Year-over-yearpercentagechange.................115
OCHNRating.........................................................................................................................................................................................116
info@ochousingnews.com 949.769.1599 UltimateGuidetoOCHousingNews
SystemCriteria........................................................................................................................................................116
OCHNGuidetoHomeSearch.........122
MethodsofPropertySearch..........................122
BrowsingorSearching.....................................................................................................................................................................122
FilteringUnsuitableProperties........................123
FullPageSearchVersusQuickSearch...........................................123
MapSearchVersusOtherSearchMethods.................................................................124
CommunityResearch............................................124
RegisteredUserAccountManagement.....................................125
Profile..........................................................................................................125
FavoriteListings.....................................................................................125
Savedsearches.........................................................................................126
MLSPropertySearchFilters..........................126
SearchBox.................................................................................................126
AskingPrice..............................................................................................126
BedsandBaths........................127
Rating...........................................................................................................................................................................127
Valuation....127
Income,DownPayment,andFinancing.......128
CostofOwnership..................................................................................................................................................129
MoreFilters...............................129
PropertyTypes........................129
SquareFeet................................................................................................................................130
LotSize........................................130
ParkingandGarage...............................................................................................................131
YearBuilt....................................131
Keyword(s)...............................................................................................................................131
ListingFacts..............................131
InvestorFilters........................................................131
NetIncome................................................................................................................................132
CapRate......................................132
CashFlow...132
CashReturn...............................................................................................................................132
FlipMargin................................................................132
Multi-cityselection................................................................................................................................................133
ZipCodeorMLSNumber....133
RadiusSearch...........................134
PolygonSearch........................................................................................................................................................134
AkasonRealtyConsultingHomeGuides...................136
WhyUseaHomeGuide?..................................136
HomeGuidesfeelanoblesenseofpurpose............................................................................................................................136
HousingMarketAnalysts................................138
HomeGuideAgents...........................................................................................................................................140
HomeGuideTestimonials...............................141

info@ochousingnews.com 949.769.1599 UltimateGuidetoOCHousingNews
RentVersusOwnDecisionGuide
RENTINGVERSUSOWNING
Rentingversusowningisbothanintellectual,financialdecisionandanemotionalone.Thefinancialdecisionisfirst
andforemostananalysisofthecomparativecostofrentingversusowning.Thecostofarentalcanbedetermined
fairlyeasilyasthereareusuallyanumberofcomparablepropertiesonthemarkettoestablisharealisticrental
rateforanygivenproperty.Ofcourse,itiseasytojustifyinone'smindacomparativerentthatishigherthanthe
marketwillbear.Ahousesomeoneisinlovewithwillalmostcertainlyrentabovemarketintheirminds.Also
whenlookingatsimilarproductstherentalratesmaynotberealisticinthemarketplace.Itisprobablyagoodidea
totake5%offcomparablerentalratesonpropertiesofferedonthemarket.Onceyouhaveestablishedwhatyou
believetobeacomparativerentalrate,andyouhavegonethrougharealisticevaluationofthetruecostsof
ownership(asoutlinedbelow),asimplecomparisonofthetwofigureswilltellyouifapropertyisovervalued,
undervaluedorjustright.
Thispoint-in-timeanalysisoftherelativeworthofahousedoesleaveoutacoupleofimportantfinancialfactors:
inflationandtransactioncosts.Inflationistheerosionofpurchasepowerofmoneyovertime,orlookedatanother
way,itistheincreaseinthepriceofsomesetofgoodsandservicesinagiveneconomyoveraperiodoftime.Itis
measuredasthepercentagerateofchangeofapriceindex.Theeffectofinflationonhousingcostsisthatittends
toincreasethecostofrentingovertime,andtheoretically,itwillincreasethevalueofahouseovertimeaswell.If
thecostofrentisincreasing,butyourcostofownershipisfixed(assumingafixed-ratemortgage,)thenowninga
homebecomeslessexpensiveovertimeandservesasahedgeagainsttheimpactofinflation.Ifyouarea
homeowner,inflationisyourfriend.Ifyouareahomeownerwithalotofdebt,inflationisparticularlywelcome.
Thereisonebigcostofhomeownershipthatworksagainstthepositiveimpactofinflation:transactioncosts.
Whenpeoplebuyahouse,theypaysomeclosingcosts,butmanyofthesegetrolledintoyourloanandforgotten.
Whenpeoplesellahouse,theygenerallygotoarealtortohelpthemmarketthepropertyandcompletethe
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