The Pros of Home Ownership
Invest in your future
Your monthly mortgage payments are not going into the pockets of a landlord. Instead, with each payment, you build equity in your home and contribute to your own long-term, personal investment.
Lighten your tax load
You'll find homeownership opens up a world of potential tax savings. Typically, the interest paid on your mortgage is tax deductible which can provide significant financial relief. To discover all the possible tax advantages available to you upon purchasing a home, it's best to consult with a trusted tax advisor.
Develop your credit further
Homeownerships is one of the best investments you can make. Additionally, making monthly mortgage payments on time will further improve your credit history and will help you with future and additional investments.
With homeownership, your monthly payments are no longer subject to increases by the renewal of a lease and the discretion of a landlord. This will help you make a long term budget plan and remove variable factors in your future financial decisions.
With the only potential parameters being homeowner association guidelines or city codes, you are able to remodel, renovate, and redecorate according to your own personal tastes. You are free to make your home your own -- however you see fit.
The Realities of Home Ownership
Know the numbers
Certain renting situations provide coverage for the expenses of some or all the utilities. This is not the case with homeownership. Not only will the utilities be the responsibility of the homeowner, but property taxes and homeowner's insurance also will be additional expenses.
Expect repairs There's no more calling the landlord to fix what might be broken. Any repairs and maintenance that are required on the home and/or appliances will be your responsibility. And, you can expect that these will always come with a bill or invoice to pay.
Stay put Renting provides flexibility. You regularly are given an opportunity to resign a lease (or not) and suffer only minimal penalties if you decide to break the lease prior to the time of renewal. On the other side, owning a home is a long term investment and will be more financially beneficial the longer you stay in the home. Project ahead; can you see yourself happy in that home and in that neighborhood 5 to 10 years down the road? Deciding to move out of a home does not remove your financial responsibility as the home owner; plus, the process of selling a home can be a time consuming and costly endeavor. It may not happen as quickly as you would like or hope.
Be ready to gamble The housing market is perpetually unpredictable. While the hope is that the home will appreciate in value over the time of ownership, this is not always the case in every market. If and when the time comes to sell your home, be prepared for whatever condition the market might be at the time. Housing prices could be down, the market may be slow, and the home may have depreciated in value. Owning a home is typically a sound investment, but it provides no guarantees.
Home Inspection Costs
These may fall between $200 to $900. The costs depend on the running rates in your area.
The down payment for homes usually ranges from 3% to 30% of the purchase price. You will acquire more equity in your home with a larger down payment. This also will set you up with lower monthly payments. If your down payment is less than 20%, you will be required to have mortgage insurance.
These are expenses that fall above the price of the property which are incurred by buyers and sellers in the process of transferring ownership of a property. Closing costs usually include an origination fee, discount points, appraisal fee, title search and insurance, survey, taxes, deed recording fee, credit report charge and other costs assessed at settlement. The cost of closing typically is about 3 percent to 6 percent of the mortgage amount. Closing costs will vary according to the area of the country; your PrimeLending Loan Officer is able to provide estimates of closing costs for you.
ON GOING EXPENSES
In addition to your monthly mortgage payment, homeownership also brings with it the following potential expenses:
Homeowners Insurance (required)
Mortgage Insurance (if applicable)
Flood Insurance (if applicable)
Things to Consider When Buying
While there are a good number of housing styles out there, each one provides unique features. The type of house you choose will depend greatly on your lifestyle and personal goals.
With the purchase of a single-family home, homebuyers acquire ownership of the home as well as the surrounding lot. All maintenance expenses and property taxes would be the homeowner's responsibility. Of all housing choices, this one typically provides the most privacy and flexibility.
In purchasing a condo, the buyer owns the areas within the walls of the living space but not the surrounding lot of land or building. Typically, a condo is governed by guidelines from a homeowner's association. These associations require monthly dues or annual fees (which are not tax deductible). In turn, the condo owner does not hold sole responsibility for repairs and maintenance to the unit and has access to property management services. Condo units are evaluated individually to determine property taxes (which are the condo owner's responsibility and are tax deductible*).
In a cooperative housing project (co-op), the buyer owns shares of a corporation which owns the building where the apartment is located. In essence, the person rents the living space from the corporation that owns the building but doesn't own it.
As with a condo, there typically is a governing association for co-ops. Through the required monthly or annual dues (not tax deductible), the resident of the co-op is free from the responsible of repair/maintenance and upkeep of the external areas; property management services are provided.
Unlike a condo, the co-op unit is not individually taxed. The corporation that owns the building is taxed as an organization instead. Then, according to the shares of ownership in the corporation, the amount of taxes is divided among shareholders.
Planned Unit Development
Also called a PUD, a Planned Unit Development is structured so that the buyer not only owns the house and the surrounding lot, but the person also purchases and owns a portion of common space that is shared with others that live in the development. These common areas are maintained through the homeowner's association. As with condos and co-ops, these fees are not tax deductible*
Choosing Your Neighborhood
The neighborhood you live in is as important as the house itself.
Do you need a quick commute to work? Keep in mind short commutes limit your neighborhood options.
Do you prefer country, suburban or urban living?
Is a certain school district important to you? Do you need to live near other family members?
Do you want to live close to your church or temple? What entertainment venues are nearby?
Future Zoning and Development
Is the park behind your house going to be developed in the future? Does this community have plans to build a large attraction of some sort?
What will the neighborhood look like in 10 years? Are you satisfied with an older neighborhood? Are you content with potential changes your neighborhood could make?
Time of Day
Does the neighborhood feel the same at night as it does during the day? Is weekend traffic heavier than during the weekday?
Can you afford the county or city taxes or any homeowners association fees?
What are the homeowners association rules? Are they good for protecting home values?
Have the homes in this neighborhood held or increased in value?
Talk to the people who live in the neighborhoods in which you are interested. These individuals will know the most about the area and are your potential neighbors. More than anything, you'll want a neighborhood where you feel at home.