Home buying

Please answer Questions 1-4 of the Home-Buying and Mortgage Decisions Financial Planning Case facing Zoe and Luis Martinez (Chapter 9: page 341-342). Your initial post should be a minimum of 250 words

ANSWER

Home Buying

The possible source of down payment for Zoe and Luis is the little they get from the wages and monthly employment salary. When they combine both of their monthly salaries, it might be enough to afford the down payment for a house. If it was only one person paying the down payment, he could have not afforded easily as when they are contributing both of them.

If Zoe and Luis obtained a mortgage with very low down payment, it could be an advantage during the start because they would not spend much on housing. But after they start paying the remaining balance, it would be very disadvantageous because they will pay very high amounts of instalments. It is better to pay a huge down payment to reduce the amounts of monthly or annual instalments on the remaining balance.

Luis and Zoe during their final walkthrough should have requested the owner of the house to make necessary repairs before they got in the house. This is because a person living in a certain house is responsible to cater for all the damages he or he have caused before leaving that house. The sales manager who was living in that house was responsible to repair the lights and the kitchen water system

Zoe and Luis might be asked whether they have ever purchased houses in the previous past to ensure that they understand all the regulations when buying a new house. This is because on should purchase a house that they can afford. One might have more than required when paying the down payment but fail to afford the remaining balance.

In conclusion, I have learnt that; before relocating to a new house, one should consider factors like; location, mortgage application, down payments and not forgetting the maintenance cost which is very essential.

References

Stein, J. C. (1995). Prices and trading volume in the housing market: A model with down-payment effects. The Quarterly Journal of Economics, 110(2), 379-406.