Buying A House

Is home ownership right for you?

Buying a home is the largest purchase most people will ever make. Homeownership has great benefits. Homeownership also comes with certain responsibilities.

Are you ready for homeownership? Look at your current situation and determine if:

  • You have a steady, reliable source of income and a steady employment history for at least two years.
  • You have a credit history.
  • Your total debt is manageable and you can afford to take on the costs associated with homeownership.
  • You have money saved for a down payment and closing costsor you have access to other sources of funds, such as an employment bonus, tax refund, or a gift from a relative.

Think about your future plans that might affect your ability to manage the costs of homeownership.

  • Consider whether you need to make lifestyle changes that might include not taking expensive vacations or purchasing luxury cars, and dining out less.
  • Consider the costs of a growing family when looking at your homeownership budget.
  • Consider whether your future plans might include a wedding or college education for yourself or your children.

And remember, the mortgage is not the only expense you need to consider. Homeownership comes with other potential budget items such as repairs, maintenance, taxes, landscaping, etc.

Once you fully understand your current situation, your future plans, and the big picture in terms of homeownership, it’s important to look at the pros and cons of homeownership to make the best decision for you and your family.

 

Why Own?

There are many great reasons to consider owning a home:

  1. You'll have a place that is yours!
    You'll own it, have a place to raise your children and become a part of your community. You can pass your home down to your children, and their children, creating security for generations to come.
  2. You may pay less to own a home than you would to rent – and it's yours at the end!
    Homeownership can reduce the federal income taxes you pay. You can deduct the interest on your home mortgage and property taxes you pay on your home on the tax returns you file each year. These tax savings partially reduce, or offset somewhat, the actual cost of owning your home.
  3. Your monthly payments won't ever go up if you choose a fixed-rate mortgage!
    If you choose a mortgage with a fixed-interest rate (one that stays the same for the life of the loan, say 30 years), you'll pay the same mortgage payment each month for the entire 30 years of the loan (if your taxes go up, your escrow will go up – increasing your monthly payment).
  4. You'll build a good nest egg!
    Owning a home and building equity is the single greatest source of financial security and independence for the majority of people who've taken this step.

What Are the Risks?

Overall, homeownership is a good investment for most people, but there are risks. If you understand the benefits and risks of homeownership, you can make the best decision about when to buy a home.

So what are the risks of homeownership?

  1. Monthly housing expenses can increase.
    Your monthly mortgage payment may be larger than your rent. These higher monthly payments may be offset by a tax benefit at the end of the year. Talk to a tax professional to understand your particular situation.
  2. You become your own landlord.
    If an appliance breaks, you will have to pay for its repair or replacement. You are also responsible for the maintenance and upkeep of your home and your property.
  3. You may need to sell your house due to life circumstances.
    Depending on the local real estate market, you might not be able to sell your home quickly. You may also face additional expenses, such as hiring a real estate professional.
  4. Property values can depreciate.
    You can lose value in your home for a number of reasons, such as a recession, the condition of your home not being kept up, or a drop in a neighborhood's home values. If your home loses value and you have to sell it for less than you owe, you will be required to repay the full mortgage.
  5. Downsizing quickly may be difficult.
    In times of financial difficulty it is easier to find a cheaper rental than sell a house. If you need to sell your home, it may take some time and you'll still be responsible for the mortgage until it is sold.

Myths About Homeownership

How lenders assess mortgage applications has changed a lot in the last 20 years. What closed the door to homeownership then may not be a factor today.

The following are some common homeownership myths:

Myth: You need great credit to become a homeowner.
Fact: You may still be able to buy a home and you have less-than-perfect credit. And remember, you can improve your creditover time. But if you are buying a home and you have less-than-perfect credit, talk to a housing counselor who can help you avoid a mortgage you can't afford. It is important to comparison shop. Be wary of a lender who tells you, "Your less-than-perfect credit means that no one but me will work with you to find you a loan."

Myth: You need to put 20% down to buy a home.
Fact: There are many types of mortgage products and programs that allow low and no down payments. But remember that your interest rate may be higher for a low or no down payment loan. Also, be sure to factor in other costs such as closing costs, property taxes, moving expenses, and repairs.

Myth: You can't buy a home in the U.S.if you're not a citizen.
Fact: If you're a permanent or non-permanent resident alien, you can purchase a home in the U.S.

Myth: If you don't have a bank account or credit cards, you can't qualify for a mortgage.
Fact: Having a bank account is always a good idea and helps you establish credit. However, lenders can approve you for a mortgage even if you don't have a bank account or credit cards. You'll likely need to keep records showing a history of payments you've made for items such as rent, utilities, and car payments.

Myth: Lenders share your personal financial information with other companies.
Fact: By law, banks and other financial institutions are restricted in their uses and disclosures of information about you. In some situations, you may choose to restrict the disclosure of your information if you don't want it to be shared. If you are unsure how your information will be used, don't be afraid to ask – it's your right to know.

Myth: If you're late on your monthly mortgage payments, you'll lose your house.
Fact: If you have a financial hardship, like the death of your spouse or a medical emergency, and fall behind, it's possible to keep your homeand get back on track if you contact your lender early. Even if it is not possible to keep your home, you can sell your home and possibly buy a less expensive one rather than face foreclosure.

Myth: You can't get a mortgage if you've changed jobs several times in the last few years.
Fact: Not true. You can change jobs several times and still get a loan to buy a home. Lenders understand that people change jobs. The important thing is to show that you've had a stable income.