Thinking about purchasing a home?

Every homeowner has been a first-time buyer once in his or her life, so you are not alone. Since purchasing a home is likely the largest purchase you will ever make, you must first consider if you re ready to take this important step. You should weight the advantages of owning versus renting. New York Times has a great article/calculator on rent vs buy (click below button)

If you decide to purchase, you will have to decide whether you want to live in a co-op, a condominium, or a single-family home, which neighborhood you want to live in, and how much you can afford to spend for your home. As you can see, there are many choices and decisions that will have to be made.

This blog series will guide you through the process of purchasing a new home. The first step in this process is to ask yourself the following important questions.

1. What are your personal reasons for buying a home?

2. Do you need room for a growing family, or do you want to move closer to work or to schools?

3. How long do you plan to own this home? In some cases, you may be better off renting if your job requires frequent relocation or if you want to have the flexibility to move on a whim.

4. Do you have enough cash for a downpayment and closing costs?

5. Can you afford to make a monthly mortgage payment and still pay your other bills? Generally, your mortgage payment should be no more than one-third of your net income. 

6. Do you need the income tax break? Mortgage interest and property taxes are tax-deductible items. Although you may be making a larger monthly payment than if are renting, remember to take into consideration the money you will save because of the tax deductibility of a portion of your monthly carrying expenses.

The Advantage of Home Ownership

Almost two-thirds of all Americans own their own home. Some of the advantages to home ownership are:

1. More Housing Options: Generally, there are fewer options in the type and location of rental housing. If you are looking for a particular type of apartment or house or are interested in living in a certain neighborhood, you may have to buy.

2. Tax Advantages: A significant portion of the money you spend on mortgage interest and real estate taxes is deductible from your taxable income. 
3. Value Appreciation: The value of your home may increase over time, providing you with a valuable asset and a smart investment.
4. Autonomy: As a homeowner, you will have more freedom to make a change to your home than you will have as a renter. And, unlike a renter, you have the security of knowing that as long as you meet your financial obligation related to the property, you cannot be evicted or be forced to move when your lease expires.

You can shop for a home by reading the classified ads or by using the internet (more common on now days). However, an experienced real estate agent will be invaluable in helping you focus your search and analyze the market as well as represent you in negotiations with the seller and by providing reliable references for the other qualified experts that you will need along the way, including a bank loan officer or mortgage broker, a home inspector, and a real estate attorney.

Once you have made the decision to purchase a home, you need to determine how much you will be able to spend. How much you can afford will depend on your income and how much money you have available for the down payment and the closing costs. Your income also will determine how much you will be able to pay for monthly housing expenses and how large a loan you will be able to obtain. As a rule of thumb, you should add the amount of cash you have available for the downpayment plus the closing costs plus the projected loan amount in order to calculate your affordable price range for a buying a home.

Source: Keith A. Schuman, Esq