Over the past few years the homes in Southern California have gone up tremendously to the point that it makes the prices seem ridiculous. For many, buying a first time home can be very difficult especially when you have children. As stated in UCI annual survey, “Orange County residents are paying more for housing, with 29 percent of renters-up four points from 1999-and 49 percent of homeowners paying more than $1,000 per month for housing. While the proportion of homeowners paying more than $1,000 is unchanged from 1999, one in four homeowners now pay more than $1,500 per month, a six-point increase from 1999” (Johnson).
As housing costs increase, the American dream of home ownership continues to elude many Orange County ethnicities. Statistics show, only “35 percent of Latinos own their own homes, compared with 72 percent of non-Hispanic whites and 63 percent in the county as a whole. Latinos also are less likely than non-Hispanic whites to live in single-family homes (35 percent to 58 percent) “(Real Estate).
Buying a home can be one of the most significant investments in one life. Not only is person choosing his dwelling place, and the place in which he will bring up his family, but he are most likely investing a large portion of his assets into this venture. Homeowners need to prepare themselves before buying their home for the first time. As a result this can eliminate some of the more overwhelming and chaotic processes of purchasing a home. It is wise for a first time homeowner to go over a financial budget plan to see if they are able to find a home that would meet their qualifications and needs.
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As a family with two boys, we have selected a home that met everyone’s needs and wants. The home is located in Cypress and the market price was $485,000.00. The interior of the home is 2189 square feet; it’s very spacious for our size family. It has four beautiful bedrooms, one for each child, one master bedroom for us, and the parents. the fourth room is going to become a study for the children. Furthermore, the fifth bedroom is going to be converted into an office for myself and my husband. In addition, the home has its original oakwood floors that were installed in 1955. The wood flooring covers the three bedrooms, hallway, living room and dinning room. In addition, there was an added family room with cathedral ceiling and gas fireplace. Also, all of the bathrooms have been remodeled with custom paint and tile flooring, in which, makes it appear more modern. The home has two attached garages with automatic garage openers and access into the kitchen.
The home is surrounded by a beautiful green landscape. The lot of the home has been estimated to 7766 square feet and if you subtract 2189 square feet you have 5577 of landscape. In the rear of the home there is a beautiful Japanese garden and an area where the children can play in their swing set. In addition, a small Koy pond was installed in the backyard. Also, the front of the home is surrounded by beautiful palm trees and a variety of freshly planted flowers.
Almost, first-time home buyers, saving enough money for a down payment is the biggest hurdle to owning a little piece of paradise. As stated in, Buyers Guide, “Traditionally, lenders have required a down payment of at least 20% of the homes purchase price” (12). In contrast, let’s assume a 10% down payment on a
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$485,000.00 that will calculate to be 48,500.00. In a fixed mortgage rate of 15 years at a 5.125% interest rate through Downey Savings our payments would be $2,780.00 monthly. If you multiply that amount of $2,780.00 by 180 full-terms, it will come out to $500,400.00. As a result of the Interest we would have to pay out of our pockets $15,400.00 additional from the asking price. In addition, a fixed mortgage rate of 30 years at a 5.375% interest rate through Downey Savings our payments will become 3,480.00 monthly. By multiplying $3,480.00 buy the full term, which is 360 month’s our $1,252,800.00. The out pocket expenses end up coming out to $767,800.00 addition from the asking price.
First time homebuyers have to set a side a budget for closing costs. There are other costs beside your down payment associated with purchasing a home. Such additional fees are points, lender's fees, appraisal, credit report, document preparation report, underwriting, flood certification, flood monitoring, tax services, notary, settlement closing, recording and loan tie in. As a result, of purchasing a home our closing cost came out to being an additional charge of $1,378.00. Prior to applying for a home loan we figured we would be borrowing $436,500.00, but with the additional closing cost fees it became to be roughly around $437,878.00.
Home ownership often include monthly utilities cost. Such expenses are necessary to have to run a home with a family of four. Such utilities as, gas, electric, water, phone this are the major necessities. In contrast, such as the Internet service, gardening service, maid service are just wants in which many families can do without. Furthermore, the importance of utilities running in your home is for the basic needs.
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Such as, having a heated stove to cook on, being able to turn on the lights to see at night. Also, having a phone is important for especially in a case of an emergency. The most important utility is having water to drink, bath as well as, for the using the bathroom. As a family of four our utilities cost can change depending on everyone’s needs for that month and the seasons. Especially in the summer we tend to use more of our air conditioning unit and in the winter we use our heater. In addition, for our family our estimated monthly utilities cost came out to $455.00. Annually our utilities cost comes out to being $5,460.00. (table2a)
Other hidden cost can come from owning and running a home. It is very important to have a saving account for any repairs or replacements expenses. Such repairs and replacements might be need for example a water heater, roof, new air conditioner, and plumbing. Many homes might cost more depending on the year the house was built and the condition of it. In addition, it is very important to get a few estimations of any repairs or replacements from any contracting company. Furthermore, rather than getting the lowest bid it is vital that they are licensed and insured for doing the work that they are being hired for. As a result, by doing these simple tasks it can save the homeowner lots of money in the long run. Moreover, as an owner of a home my estimations on repairs and replacements annually came out to $1,205.00. As a result, my monthly savings I would have to set aside for the repairs and replacements would be $100.42 (Table 2b).
Property taxes and homeowners insurance are necessary expenses of homeownership. The collection and payment of real estate property taxes is handled
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by the homeowners mortgage company in the same manner as with the homeowners’ Insurance. The difference is unlike insurance, property taxes are paid in "amount overdue". This means they are paid after they have accrued, not in advance. For instance, when property taxes are paid, payment is being made for the previous 12 month period, not the upcoming year. In the closing of the real estate transaction, the homeowner will receive a credit from the seller for the months of the current tax year by owning the property. An amount sufficient to pay the taxes for the current tax year, once they become due, will be collected and returned to your Lender for deposit into your escrow account. The tax collector’s office will bill your mortgage company for payment of the taxes. (You will receive a courtesy notice in the mail from the tax collector’s office stating the amount due and notifying you that your mortgage company has been billed.)
Homeowners’ insurance covers your property against certain types of damage. Furthermore, homeowners’ insurance rates can vary significantly from company to company, as can the service provided by the agent and his company, so every homeowner really needs to "do his homework" and comparative shop when choosing his insurance provider. They need to select the one he or she feels best suited for their needs. Many, mortgage lenders will not mind if homeowners change insurance companies at any point they feel necessary. If homeowners do change their insurance companies, however, they will need to notify their mortgage service and their new agent
will need to provide them with certain information, in which they become aware of. As shown on the estimation homeowners’ Insurance table, the annual payments came out
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to $7,200.00 for a 2189 square footage home. In addition, by dividing the annual amount by twelve the monthly payments will come out to $600.00 (table 2d).
Buying a car is a very individual decision. What is important in a car for one person may not be important to another person. Furthermore, if cost was not a factor, buying a car would be easy. In addition, there are reports to help a person with their decisions making on purchasing a car. Such as, Consumer Reports magazine, they review cars every month in their magazines with full details. For example, the report will list the ratings of the engine, cooling, fuel, ignition, transmission, electrical, air conditioning, suspension, breaks, exhaust, power equipment, pain/trim/rust, body integrity, body hardware and the reliability of the vehicle. Furthermore, it will also indicate the mileage per gallon of the vehicle. They also advertise car-buying services. In the yearly Buying Guide, they point out reliable cars and provide tips on how to carefully purchase a used car.
The vehicles that we have chosen as a family are a Toyota Sienna and a Toyota Tacoma. My reasoning choosing the Toyota Sienna for myself was due to its excellent rating in the Consumer Report magazine, price and the safety it will provide our family while driving. The sale price of the Toyota Sienna is $16,995.00 with a down payment of $3,399.00. Furthermore, the financing would be through Toyota Financial Service. The finance term would be for 60 months at a percentage rate of 5.2%. Moreover, Toyota Financial Service was able to finance the $13,596.00 due to excellent credit. As a result, our monthly payments for the Toyota Sienna would be $272.00 in an annual total it comes out to $3,264.00.
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The other vehicle we had selected was the Toyota Tacoma. This vehicle would mainly be used for my husband to travel to work and back home. In contrast, the Toyota Sienna is going to be used for school, work and pleasure. Furthermore, we searched for a vehicle that would not be to costly especially since it was going to be a vehicle for construction work. The Toyota dealership was asking for $14,999.00 for the Tacoma truck with a down payment of $2,999.00. With a special college graduate discount we were able to finance both vehicles 60 months as well with a 5.2% annual percentage rate and qualified for $12,000.00. Our monthly payments for the Toyota Tacoma will come out to $228.00 in an annually total would be $2,736.00.
There can be additional costs that come with owning a vehicle. The additional expenses for owning a vehicle are maintenance, Insurance, and gas. First, it is very important to take in your vehicle for maintenance every three months or every 3,000 miles otherwise problems can occur. Maintenance on vehicles can differ depending on the type of vehicle as well as the condition of it. As a result, I came across a mechanic who we have known for several years; he is honest, reliable and fair on his prices. Furthermore, he works for a respectable gas station that has been around for many years. Our mechanic quoted us an annual fee of $577.00 for the Toyota Sienna and $487.00 for the Tacoma (Table 3H). When researching for a mechanic sometimes it is better to ask a reliable source, such as a friend or family member who has been using their mechanic for several years.
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Everyone who drives should have auto insurance. Saving on insurance is equally or more important since insurance costs go on for the entire ownership period. Prices for the same coverage can vary by hundreds of dollars from company to company, so it pays to shop around. The way to find out about auto insurances is to surf the net, ask friends or call the state insurance department for ideas about companies and agents to contact. People should get at least three different quotes to compare auto insurance prices. In addition, it is very important to ask question it can either save a persons’ money or even their lives. In contrast, Mercury Insurance quoted me for both vehicles under premium insurance, which is considered the best coverage. Furthermore, for the Toyota Sienna the annual premiums come out to $589.00 and the Toyota Tacoma’s premiums run $435.00. Also, the annual premium coverage for both vehicles comes out to $1,025.80 (Table3I).
A monthly miscellaneous expenditure budget is necessary to have in a single family living. In addition, a home and personal budgeting problems may seem innocent enough, but a poor budget or cash flow allocation can quickly lead to very serious financial collapse. most common reasons behind people falling into financial problems are stemmed from not accurately knowing where they budget and spent their money. Even for those people who without money problems, understanding the truth about their personal budget finances can help save even more money for college or retirement. In our family our miscellaneous expenditures included entertainment, household items, clothing, medical, private education for our children as well as a vacation budget. In addition our monthly expenses came out to $1,916.34 in an annual bases, the sum is
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$23,004.00 (table 4A-N). Miscellaneous expenditures can very with every household because everyone’s needs, wants, values and priorities are different.
Planning for retirement is very important for all of us. When people turn into their 30 or 40, or even 50, they think it’s something old people talk about. Yet, the years sneak up on all of us. There are a few who think retirement can be a 25 year vacation. There are others who did not get involve when they should have and think they should have invested at an early age.
Most experts say most of us are not ready, but it is not too late to make our financial status more comfortable. One form of retirement is social security which is a federal government plan. These program is not a savings plan into which you deposit money that people get back later with interest. The money that people pay in now is funding the benefits that are being paid out to people now retired. When people begin collecting benefits, those benefits will be paid for by the people who are working and paying social security. In addition, my social security deductions came out to $1,028.05 monthly and 12,336.67 annually. In my calculations if I have $20,000.00 social security in today’s dollars in about 30 years at a 2.427% Interest it adds up to $48,540.00 in future value of 401K (table 6c)
401k’s Investment plans allow employees to contribute pre-tax dollars to retirement savings programs, within limits set by the federal government. While the money remains in these accounts, it is not subject to income tax. 401K’s are only for those employees who work in a corporation. These plans have become the most popular form of qualified retirement plans for workers. The max a person can contribute
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into a 401K is $15,000.00 a year. If it two people in the household work as much as $30,000.00 can be invested. In my calculations I have invested the max for one person of $15,000.00, since my husbands line of work does not provide a retirement fund. In addition my employer matches .50 cents per dollar. As a result my employer contributes into my 401K plan $7,500.00 a year. The total sum of my 401K contributions come out to $22,500.00 a year. If you add $22,500.00 over 30 years at a 113.283% my plan is worth $2,548,867.50 (table 6b).
While money can't buy happiness, lack of money will almost always buy you misery. This is true enough in life, but particularly true when it comes to retirement.
Nevertheless, as one grows older, their opportunities to create wealth will inevitably decline. Poverty in youth can be remedied quite easily through action in middle age. However, as individuals or couples approach their 60s, poverty becomes far more difficult to alleviate. There simply is no longer time. As a result, the time to begin building wealth is as soon as possible. The stream of income that is required of me to live of my nest egg is $515,222.00 this is with a home loan of 15 years. In my other calculations of the home loan of 30 years my stream of income that is required of me to live of my nest egg is $429,205.00 (table 6d).
The brokerage firm in which I chose to create a portfolio with is JKR & Co. In today’s marketplace it is absolutely essential to shop around for stockbrokers. It is very important to ask questions about fees and services before committing to do business through any stock brokerage firm because they are dealing with our money. There
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are several different ways to invest in retirement. People can invest conservatively, high risk or even low risk. Depending on the age mostly younger people like the high risk investments and elderly like to invest in the low risk. In contrast, there are those who are very conservative. Furthermore, many people do not know how to invest so they pay a broker to handle their investments, which is okay to a certain instant. There are several books that help people understand the stock market and how it works. These books teach people about corporate stock holdings or just stocks, bonds, mutual funds, cd’s, and other financial investments.
In the personal financial statement that I invested $1,315.79 in cash and cash equivalents, equities as well as Mutual funds (Table 6e). In the cash and cash equivalents my investment are in a Money Market – Pershing Government account my holdings are 1% in my portfolio, market price $18.34. Furthermore, I have holdings in stocks, rights, and warrant’s for Microsoft Corp. at Equities 57% of portfolio market price $749.10. In addition, Mutual funds are also part of my portfolio of 42% investment in Washington Mutual investors fund Class A. The market price for the mutual funds comes out to $548.33 (Table e).
Savings for retirement begins early; not just a couple of years before the actual retirement party. The more people save and invest for their retirement, the greater the financial security in their retirement years. Many people don’t set aside monies from their take home check and if they only took about 10 percent of their gross income and learn to live on less they would have more for their retirement vacation as I see it. For
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example say that he goal is to save $1000 a year, in addition to my contributions to my benefits plan at work. To do so, I must put aside about $20 every week. For many working people $20 dollars a week is nothing when it spent on for example going out for lunch every day. Instead of going out for lunch it is probably best to pack a lunch. At a 8% earnings for 20 years $1,000.000 comes out to $49,422.00. This savings is well worth the lunches to fast food chains.
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Work Cited
American Realty. “How to Buy and Manager Rental Properties.” The Milin Method of
real estate management for the small investor. (1998) New York, New York,
(182-183)
Department of Motor Vehicles. “Annual Vehicle Inspections.” Department of Motor
Vehicles. (1995 -2001) March 19, 2004
Downey Savings Bank. “Downey Savings Home Loans.” Downey Savings Bank 16
March 2004. 18 March 2004
Fanne Mae Home Loans. “Mortgage Solutions.” Fanne Mae Home Loans 1995-2003.
17 March 2004.
Guest, James. “Buying Guide 2004.” Consumer Reports Consumer Union, Yonkers,
New York 2004.
Janice M. Johnson. “UCI’s Orange County Annual Survey.” UCI Research Center 22
February 2004. 16 March 2004
Mercury Insurance Group. “Mercury Insurance Quote.” Mercury Insurance Group 20
March 2004
Toyota California Dealership. “College Graduate Finance Programs.” Toyota
Dealership (1995-2004). 20 March 2004
United States Department of Energy Efficiency and Renewable Energy. “2004 Fuel
Economy Guide.” (335); 18 March 2004. 20 March 2004
