Pursuing Home Ownership

Pursuing Home Ownership

One should think very carefully before making the decision to buy a home, since it has numerous obligations and responsibilities to it. But advantages of owning a home are unarguable. Purchasing real estate remains the most profitable thing to invest into for many years; above that, home ownership is an achievement that makes a person proud, grants financial stability and possible tax advantages.

Surely, landlords will prove benefits of renting, and for obvious reasons. Just look at the numbers: If you are paying $1,000 per month for an apartment, and you know your rent will increase 5% every year, then over the next five years you will pay your landlord $66,309. If you are currently renting a house, you may be paying much more than that each month. The worst thing about this is that you don’t gain any home equity when renting, so you loose many future perspectives and benefits in case the property value will go up.

If you do own your property, you are constantly building your home equity. In our case, you would be well on your way doing that after that 5-year period. Another good thing is that by applying for a fixed rate mortgage you can get monthly payments that will never go up. Above that, in some point in future you can refinance for a better interest rate and even decrease your monthly payments.

There are also tax advantages available in addition to building up home equity. Owning a home is often less expensive than renting after taxes since mortgage payments on a loan under $1 million are tax deductible in most cases. Your mortgage consultant should help you evaluate the tax advantages of various loan scenarios, and share this information with your tax consultant to glean feedback on your behalf.

You should consider many factors, such as your monthly household income, current assets and savings, as well as any monthly obligations you may have for credit card payments, car payments, child support, etc., when choosing a mortgage program. There are some other things that determine how much house you can afford and what interest rate you are going to get; the most significant of them is your credit score. You should also share your future plans with your mortgage consultant, since according to them he will narrow down the list of loan plans that are reasonable for your long-term needs.

There are many mortgage programs available on the market; “little” or “no” down payment programs are among them. They require 3% or less from a home’s value to be provided as a down payment. There is a law, which requires mortgage payment including principal, interest, tax and insurance (PITI) to be lower than 31% of your gross income. Above that, PITI plus other long-term debt payments (e.g. car payment) should not exceed 43% of your gross income.

Even though owning a house can significantly influence your monthly budget, it is surely worth it. If you feel that “home” is something more than a place to spend a night in, and besides, you want to make a profitable investment of your capital, you should consider buying your own property.

© 2010, Jericho Mortgage — Pursuing Home Ownership