Renters Pursuing Home Ownership?

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Renters Have Much To Gain By Pursuing Home Ownership

Buying a home versus renting is a big decision that takes careful consideration, as most mortgage consultants will agree. But the rewards of home ownership are great. For many years, purchasing real estate has been considered an extremely profitable investment. It is an achievement that offers a sense of pride, financial stability and potential tax advantages.

Yes, there are certain responsibilities associated with owning a home. Landlords will often argue the benefits of renting, and for obvious reasons. If you are their tenant, you’re helping them make their monthly mortgage payment.

But look at it this way: If you are paying $1,000 per month for an apartment, and you know your rent will increase 5% every year, 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 every month. Either way, you gain no equity by shelling out this monthly housing expense and you certainly won’t benefit when the property value goes up.

However, if you purchase your own home or condo, you’d be well on your way toward building valuable equity within that same five-year period. By choosing a fixed-rate loan program, you’d also have the comfort of knowing that your monthly mortgage charges would never go up. In fact, you’d have the option of refinancing to a lower interest rate should future interest rates drop.

Right now is an especially good time to consider home ownership, because a federal tax credit of up to $8,000 is available for qualified first-time homebuyers who purchase a principal residence before December 1, 2009.

In addition to building equity, tax advantages are also an important part of home ownership. Depending on your tax bracket, owning a home is often less expensive than renting after taxes, because interest payments on a mortgage below $1 million are tax deductible. 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.

To find the loan program that is right for you, your mortgage consultant will need to evaluate 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, and other expenses. These prequalification factors, along with your credit score, will determine how much house you can afford and what interest rate you will pay for financing. It is also important to let your mortgage consultant know about your future goals, because this will help narrow down which loan option is the best fit for your long-term needs.

There are many different types of loan programs available. FHA lenders rule that the mortgage payment, including principal, interest, taxes and insurance (PITI) should not exceed 31 percent of your gross income, and the PITI plus other long-term debt (such as a car payment) should not exceed 43 percent of your gross income.

There’s certainly a lot to learn about buying a home. The best place to start is with a little education, such as the “Home Sweet Home” homebuyer seminars sponsored every month by a local event company called Event Set Go. My team and I love participating in these workshops, because there’s absolutely no selling involved. From real estate attorneys and credit experts to home inspectors, accountants, and mortgage consultants, of course, the professionals in attendance are there for just one reason — to answer your questions about every aspect of the home buying process.

Housing is an expense that takes a big bite out of the monthly budget. If you are a renter and feel that “home” is more than just someplace to hang your hat, think about the advantages of purchasing real estate. It may be time to take the step into building your personal net worth as a homeowner.