Why Buy a Home The Renting vs. Buying Decision by hbh68006


									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

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                                                           (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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