Dreaming of owning your first home? Tired of shoveling out rent for a home or apartment that doesn't feel like yours? Take heart, changing from renter to homeowner may be easier than you think. We're here to help.
Can owning a home improve my financial situation?
Yes - definitely! There are a number of benefits to owning your own home; security, peace of mind and other lifestyle and emotional benefits. But, the easiest to measure are the financial benefits. A tax advisor or financial planner can assist you in determining what the exact benefits would be given your financial situation. But here are some of the benefits many home owners enjoy:
Tax Benefits. Unlike your rent check that goes directly into your landlords pocket and provides you with no tax benefits, much of your mortgage payment is tax deductible. Generally, you may be able to deduct mortgage interest, property taxes and even some other costs from your income for taxation purposes.
Consider this example of tax savings:
If I am in the 28% tax bracket and I pay $1,500 for a mortgage payment, $1,400 of which is tax deductible - my annual tax savings is $4,704. ($1,400 per month x 12 months X 28%) Because I have to pay less of my income to the federal government, I can afford to pay more for my mortgage payment than I paid in rent - and take that extra money out of Unlce Sam's pocket instead of my own. In this example, if I pay $392.00 more per month on my mortgage than I paid in rent, it actually doesn't cost me a penny more.
By paying less money out of their paychecks each month for taxes, many first time buyers discover that they can afford to move into homeownership much more easily than they had expected.
Appreciation. No matter what any news headlines may say, over time, real estate always appreciates. There is only a finite amount of real estate in the world, nobody can make more of it. You've probably heard your parents talk about the first home they ever bought and paid something like $8,000 for it. Unbelievable to imagine in today's terms.
Where do you start?
First of all, learn the financing basics. Get pre-approved and become a smart shopper.
When you buy your first home, making monthly payments probably won't be a problem. After all, you're already paying rent to your landlord each month. Some first time buyer's fear that coming up with the lump sum needed for a down-payment may keep them from becoming homeowners. Fortunately, there are options to make buying your first home a happy reality.
Programs for first-time buyers. There are several local or federal government programs that help first time buyers get into the housing market. Ask us about these options. Many lenders now offer little down or no money down programs.
Your lender. Your bank or credit union may help as well. Are you debt free and own something free and clear, like a car? Your lender may lend you the down-payment by securing it against this asset.
Need financial solutions?
Credit or tax problems. Do you have problems with your credit rating or owe money in taxes? Buying your first home is still a possibility. Check with your lending institution about options, such as paying a higher down- payment.
If necessary, contact a financial advisor.