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Why Buy a Home? The Renting vs. Buying Decision Don't make the #1 mistake of still renting simply because it seems cheaper than buying! You're more likely to win by owning your own home. Here's how: One good way to help evaluate the decision of buying vs. continuing to rent is to ask yourself: Do You can't get ahead paying rent. That monthly I want to pay my own mortgage or someone rent check simply goes up in smoke each month. else's? That's essentially what you're doing when In contrast, mortgage payments go towards you're renting. Buying a home is an emotional Request a copy of your credit report. This is building equity in your home - the longer you decision, both exciting and scary. Keep your how you are going to look on a home loan own your home, the more equity you establish in needs in mind. Arm yourself with enough application. Read it carefully and mark any your property! information to make an educated choice. And ask inaccuracies and errors. Contact your Certified advice from real estate brokers, lending officers, Credit Counselor to find out how these can be Homeowners gain tax incentives that renters do credit counselors, family and friends. corrected. not. A sizable portion of your mortgage interest and property tax can be deducted - saving you There are some sound reasons why it might be in Unless you are presented with a really money! your best interest to continue renting. For outstanding career opportunity, try to stay instance, if you have just moved to a new city, you with one job. Hopping from employer to Owning a home becomes an investment - a might want to rent for a year to get to know the employer looks bad to some lenders. valuable asset for future opportunities. area, the schools, and the people before you make a purchase decision. Also, if you are only planning Insure yourself, your family, and your assets. Homeownership is the universal symbol of to live somewhere for a short time, it may be Paying a little more for insurance on a regular financial integrity, "The American Dream", and financially advantageous to rent. basis is far better than not being able to make can actually improve your credit rating. Like your future house payments because of a owning a new car, owning a home gives you a Like anything else in life, making an informed sudden, catastrophic cost. feeling of accomplishment, of success, of having decision calls for some sound and sensible "made it". What a self-worth builder! planning. Once you have decided that you Start managing your money more wisely. Put want to buy a home, here are some important aside some extra savings in a separate account Buying a home brings a sense of security, pride, steps towards getting financially ready for the that might go to repairs, maintenance, and the and more control. No landlord to double the purchase: other hidden costs of owning a home. Smart rent; no more noisy neighbors in the apartment home buyers make sure they have an amount above. You can paint your living room neon Make a budget of your monthly expenses and in savings at least equal to two mortgage orange, replace your kitchen sink with a water include EVERYTHING! Trim the fat and you'll payments after the closing, Re-evaluate your fountain, install a hot tub in your living room - see how much you can actually scrimp to pay a budget with your Certified Credit Counselor to whatever you want! Your home is your own and mortgage payment, and what you're not find hidden monies to start this fund. you don't need to answer to anyone. willing to give up. Your Certified Credit Counselor can assist you with this evaluation. Get your finances in order. Don't assume you If you own pets, renting may be costly due to won't qualify for a mortgage because of hefty security deposits that are often non- Save as much as you reasonably can for the outstanding student loans or tax liens, or for refundable. You can open your own home to as down payment and closing costs. The more that matter, a low debt-to-income ratio. A many pets as you like, with no rules, regulations, you can put down, the better you look to Certified Credit Counselor can assist you with or fees to abide by! lenders. Start saving even before you start remedies for all of these situations to help you looking. If gathering the funds for a down become a qualified buyer. When you buy a home, you place a stake in your payment is difficult, look into a Down Payment neighborhood that establishes roots for you and Assistance Program, whereby monies are Make a "Pro/Con List". With a big decision like your family. When you own a piece of property, gifted to the homebuyer so there are virtually purchasing a home, this list will help you it makes you more appreciative of what you no out of pocket expenses. Ask your Certified determine if it is really best for you. Here's the have and more committed to your community. Credit Counselor for information on A New start, you can add more in the blank spaces to Horizon's DPA program. suit your particular situation: Effective: 02/05:Rev:00 QE-7-MKT Financial Solutions Tower • 2950 West Cypress Creek Road • Ft. Lauderdale, FL 33309 Executive Office Suite 300 • Customer Service Office Suite 301 • Creditor Relations Office Suite 302 • Accounting Office Suite 304 Broker Account Management Office Suite 202 • Information Technology Office Suite 206 Ph: 954.545.6160 • Toll Free: 800 556.1548 • Fax: 954.545.6161 • www.anewhorizon.org (continued from front) PROS and CONS of Home Buying So, instead of going to the edge of affordability, consider limiting your housing costs - mortgage In the example box below, two individuals PROS CONS payments, property taxes and homeowners purchase a $100,000 home. Purchaser A puts insurance - to 25% of your gross income. That 10% down and has $10,000 invested in the Obtain an Increased liability extra 3% (compared to the 28%) can help to home, while purchaser B puts 30% down and equitable asset cover those additional costs you will face and has $30,000 invested. Both of them sell their Responsible for all allow you that vacation or two! homes one year later for $110,000 and both Tax advantages make a gross profit of $10,000. Since purchaser home repairs And, remember - shop around for the best A invested $10,000 to make $10,000, his/her Home Owner mortgage deal! Even people with a few "dings" return on investment is 100%. Since purchaser Freedom to renovate Association fees on their credit can qualify for better loans than B invested $30,000 to make the same $10,000 they're typically being offered. Be smart and profit, his/her return on investment is only 33%. shop for a mortgage like you would a new This is what financial leverage can do for you. camera. You can avoid paying literally thousands of dollars more than you need to. So, when is it right to say good-bye to your landlord and hello to your new home? The really big benefit of home ownership: Although no single answer fits all, if you are Homes create wealth! tired of paying rent, want the tax advantages that come with homeownership, and desire a How will your new home create wealth for larger space to live in, there's no time better you? Two ways: than now to make your move! First, mortgages create a form of "forced savings". For more information please call to speak Let's get real now! So how much can you Even if your home never appreciates a single with a Certified Credit Counselor at : afford to spend on a house? dime, you gradually build up more equity over 1.800.556.1548 time with your payments. The traditional way to calculate what you can afford is to add up all of your income and make Of course, houses typically do appreciate, sure that your housing expenses, including averaging 6% a year over the past 30 years, mortgage payment, homeowners insurance, and according to the National Association of Realtors. property taxes, don't exceed 28% of your gross And thanks to your mortgage, you get to take monthly income. Most lenders don't want more advantage of that appreciation using leverage. than 36% of your total income to go toward That means using a little of your own money mortgage and other debt payments, so if your plus a lot of someone else money (in this case, total debt would push you over that figure, you the mortgage lender's) to make even more will have to reduce the size of the mortgage for money. Here's a great example of how this which you are applying. leverage factor can work for you: Example: if your gross monthly income is $3,300.00, your total housing expenses should not be greater than $924 per month. The Leverage Factor A: Home Purchased w/ B: Home Purchased w/ 10% down 30% down Many people take out the biggest loan they Purchase Price of Home $100,000 $100,000 possibly can, figuring their incomes will Down Payment (Amount Invested) $10,000 $30,000 eventually increase enough to make the Amount Financed $90,000 $70,000 payments comfortably. But few first-time homebuyers have a clear idea of how expensive homeownership can be. Even though your new Home Appreciation per Year 10% 10% mortgage payment may not be much higher Sale Price of Home After 1 Year $110,000 $110,000 than your previous rent check, you'll need to Proceeds From Sale Assuming no cover property taxes and homeowners insurance, Commissions $20,000 $40,000 as well as higher bills for utilities, maintenance, Gross Amount of Profit $10,000 $10,000 and repairs than you faced as a renter. Lenders Return on Investment 100% 33% are perfectly willing to let you overextend, knowing that you'll probably have to forgo vacations, retirement savings, and new clothing rather than default on your mortgage.
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