Now is the best time to become a homeowner with the buyer’s market being strong, low property prices, and reduced interest rates. If you have been sitting on the fence for leaping from renting to becoming a homeowner, this is the best time to do so. Before you decide to make the jump, here are a few things to consider:
It Is a Long Commitment
Owning a home is a long-term commitment and is quite unlike renting. When you are on rent, you are free to move to another home once the lease ends, but being a homeowner you have to be prepared to stay in the same house for at least four years. Plus there are many costs associated with homeownership, including closing costs, taxes and real estate fees; however, this is a necessary evil in a world where buying a home will allow you to build so much wealth.
Being a homeowner, you have to pay property tax, which can be calculated by multiplying the evaluated amount of your property with the prevailing tax rate. When you are renting, you are paying property tax as well, but you don’t really see it because it’s built into the price of your rent. You can choose to pay your property tax either through an escrow account with your mortgage company or pay it yourself directly to the city.
The tax will be billed to you twice a year and the amount will vary depending on which region you are residing in. The benefit of being a homeowner is that the property tax is heavily subsidized by the federal government, which makes your property tax deductible. Renters, on the other hand, do not get such tax benefits.
Freedom to Personalize
Being a homeowner gives you the freedom to make any changes you want. However, for any structural changes you will need a building permit and the changes you make will need to be inspected by the city. Nonetheless, you do have the option of making changes, even if it requires a permit. When renting, you won’t feel the need to make changes considering you don’t have ownership.
Maintenance Is Your Responsibility
When renting, the maintenance cost is built into the price of the rent. However, when you are a homeowner you are responsible for all maintenance costs. You can’t simply call the landlord or the super to fix things, because now you are the landlord and the super. For that reason it’s important that you put away money for unexpected repair costs.
Fixed Monthly Mortgage Payment
You will be paying a fixed monthly amount when you have a fixed rate mortgage, although common charges and taxes can fluctuate. This is quite unlike renting, because the rent goes up a little every year.
Homeownership Is Investment
Buying property is probably the safest investment you will ever make. Houses steadily appreciate every year, unless the economy is experiencing a financial crisis, much like it happened in 2008 in the Great Recession. One must be careful to be involved and updated on the state of the real estate market before buying. Stay up to date with us, and you will know when you can get the most for your investment. Learn more at www.thepowerisnow.com/magazine and www.thepowerisnow.com/radio.
Finances Needs To Be Well Managed
When buying a house, you have to be strict with your finances. After the last financial crisis, mortgage lending has become quite restricted so if you are planning to finance your house, plan to have at least three months’ mortgage in your bank account. You will also need additional money to cover down payment and closing costs. Also, mortgages are not easily approved.
You will have to prove your income through bank statements, pay-stubs, tax returns and verification of your employment status. Lenders want to see that you are capable enough of affording a property and will keep up with your payments. They will also see if circumstances, such as job loss, injury or illness, don’t interfere with your monthly payments.
If you are planning a mortgage, you need to get pre-approval. The pre-approval will help you in two ways. First it will let you know how much mortgage you can get. Don’t confuse the amount approved with how expensive a home you can afford. From your pre-approval amount, you will also need to take into consideration up-front costs, such as down payment, closing costs, etc.
Assess your financial situation to decide how much you can afford. The second thing the pre-approval helps you with is it tells the home seller you are a serious buyer. Sellers don’t like to waste and they want to sell their property as soon as possible for the best price, which is why they prefer people with pre-approved mortgages.
Mortgages can be frightening. It is a significant amount of money for a long term investment that will take you decades to pay off, but it is worth every bit of stress. When you grow older, what inheritance will you be leaving for your children or your grandchildren? Owning a home will leave your family in a security that is unmatched by any other investment. Get online and find your dream home now, because the power is now!
Eric Lawrence Frazier, MBA
President and CEO