Buying a home is the largest purchase most people will ever make. Homeownership has great benefits. Homeownership also comes with certain responsibilities.
Are you ready for homeownership? Look at your current financial situation.Once you fully understand your current situation, it's important to look at the pros and cons of homeownership to make the best decision for you and your family.
Unless you are a cash buyer the smartest thing you can do, to put you ahead of the game, is to go get pre-approved for a loan at your lending institution of choice, be that your bank or a mortgage company. Your loan officer will be able to look at your financial situation and guide toward the type of mortgage that best fits your situation. Don't be afraid to shop around for the best possible deal you can get. You are a consumer, the lender makes money from your transaction!
Benefits of Home Ownership
Homeownership has many advantages - both financial and personal. But buying a home is an important decision. Look at the benefits and the differences between homeownership and renting to better understand if owning a home is right for you.
Some of the benefits of home ownership could be:
You may earn significant tax savings because you can deduct mortgage interest and property taxes from your federal income tax and many states' income tax if you itemize your deductions.
A more stable monthly housing expense.
Your monthly housing loan or mortgage expense can remain the same for the life of your mortgage, depending on the type of loan you choose.
You may build equity in your home over the life of your loan, which allows you to plan for future goals like your child's education or your retirement.
How Much Can You Afford?
To get a quick idea of what you can afford to spend, multiply your annual gross income (before taxes) by 2.5. For example, if your annual household income is $50,000, you might be able to qualify for a $125,000 home. This is just a rough estimate - the actual number will vary based on factors such as your debt and credit history.
Mortgage lenders typically use the housing expense and debt-to-income ratios to more accurately determine how much you can afford to spend on your mortgage.
Some links to information and calculators useful to buyers: