Advantages Of Owning

As the saying goes, "your home is your castle." Home ownership frees you from the whims and dictates of a landlord. You gain privacy and freedom of personal expressions. There’s a certain pride that goes with home ownership. Your own home provides you and your family with the feelings of stability, security, satisfaction and commitment.

Additionally, the financial rewards of home ownership can be tremendous. When you own a house, your monthly mortgage payments serve as a type of scheduled savings plan. As your home increases in value, you can borrow against your home equity, use the equity to buy another home, or convert the equity to cash by selling. And, there are significant tax advantages available to homeowners that are not available to renters.

How Much Home Can You Afford?

In most instances, you can afford a home that costs up to two and one-half times your annual gross income, (the amount you make before taxes are deducted.) For instance, if your income totals $40,000, you may qualify to purchase a home ranging in price up to $100,000. Lenders will also factor in how much cash you have available for a down payment and closing costs, plus your existing monthly debt payments, living expenses and credit history.

How Much Down Payment?

A down payment is the money you pay up front toward the house you’re buying. The more cash you pay as a down payment, the less you will borrow and the less you will pay each month on your mortgage. Typical convention lenders are sometimes willing to accept a lower down payment if private mortgage insurance (PMI) is secured to protect the lender in case of default in repayment of the loan.

If you qualify for a Veterans Administration (VA) or Federal Housing Administration (FHA) loan, you will benefit from very attractive down payments that can range between zero and about 5 percent. And if you are a first-time buyer and have no equity from the sale of a previous home, some lenders will permit a portion of your down payment to come from money that has been given to you as a "gift."

Closing Costs

Closing costs include expenses such as the loan origination fee, loan discounts points, advanced payment of interest, credit report fee, appraisal fee, title search and title insurance fees, document preparation fees, and recording and transferring fees. If you plan to assume an existing mortgage, there may be an "assumption" fee. Because closing costs vary considerably from one lender to the next, it is wise to shop around for the best available loan.

Understanding The Mortgage Loan

Qualifying for a mortgage loan is the first step in the loan approval process. Qualifying means learning just how much money you may finance in order to purchase your new home.

Real estate loans are generally available from 15 to 30 year periods. They fall into two basic categories: (1) Loans that have fixed interest rates and payments; and (2) loans with interest rates and payments that vary over the life of the loan. The interest rate, the principal amount of the mortgage, and the length of the loan will determine the amount of your monthly payments.

Decide What You Want

Once you know the price range for which you qualify, it’s time to establish a wish list for your new home. Start by determining the type, size and location. When you narrow the range of suitable homes, you’ll spend more time looking at homes that meet your basic needs and requirements.

Special features are another consideration. Do you want space for laundry facilities, a garage, workshop area, a second bath, a porch, air conditioning, a pool, a spa, or wheelchair accessibility? It helps to clarify just which features matter to you the most.

Location is probably your first concern. You may already know exactly what type of neighborhood you want to live in. Or you may be researching that area and comparing urban living to suburban and rural areas, Do you want a short commute to work, schools, daycare facilities, shopping, entertainment, transportation, etc? Once you’ve selected the area in which you want to live, visit the area at different times of the day and on various days of the week. See what the neighborhood is like on Saturday and Sunday as compared to the rest of the week.

Do you want a "new" or an "existing" home? This decision means weighing the benefits of established neighborhoods, more individual-looking homes, and sometimes superior building material, against the latest in amenities, appliances and style. Purchasing a new home usually means the added expenses of window coverings, upgrades in carpeting, and landscape installation, plus a great deal of time and patience. To many buyers, an existing home that has been well cared for is much more attractive than a new home demanding months of decision-making and cash outlay.

Next, compare a single family home to a condominium or cooperative. Which suits you best? A single family home gives you the most privacy and choice. Single-family homes are generally more spacious than a multi-family home, provide larger yard areas for children to play, and accommodate outdoor hobbies such as gardening. On the other hand, condominiums free you from the burden of general maintenance and upkeep, while usually providing common areas with pools and recreational facilities. They are often more affordable but usually have monthly association fees.

Size requirements are an important consideration, too. Review your present and future housing needs. How large is too large? How small is too small? What about lot size, recreational vehicle and off street parking? Consider looking for a home that will be adequate for the next five to ten years.

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