First Steps to Buying a Home

Before you head out with a real estate agent, or head to your bank or credit union to get pre-approved for your new home, you should do a little research on your own before jumping in and buying that first home. Today’s blog will focus on the benfits and disadvantages of buying a home.

So, you are tired of renting and want your money to go towards something. Great. But as with most things there are ups and downsides to home ownership.

Advantages of owning a home

Some advantages to owning a home are:

1) A good investment. As you make payments on your home, your balance decreases and you gain equity in your home. Equity is the difference between what is owed on the home (including all liens (normally mortgages) that are against the home and what the home is worth. As time passes your home may appreciate in value adding to your equity. Remember that homes are not guaranteed to appreciate in value and may actually lose value.

2) Tax purposes. In most cases you are able to write off a portion of both your interest paid to your lender and annual property taxes to help with your tax bill. You will want to check with your tax preparer to determine to what extent you may benefit.

3) Ability to Step Up in the future. The more equity you build in your current home will be able to help you buy a bigger or nicer home in the future.

4) Satisfaction and Security. Owning a home is ,after all, part of the American Dream. It also allow you to decorate as you see fit and build a closer bond with your community.

Disadvantages

1) It typically will be more expense to own your home versus renting. You have your mortgage payment, your utilities (which you may not be paying if you rent), maintenance of the property (such as mowing grass, painting, roof, windows, etc, etc, etc)

2) There are No Guarantees. Your home is not always going to appreciate and may actually lose value depending on your market. You may lose money if you have to sell the home in the first few years of ownership, this is especially true if you put 5% or less as a down payment at purchase.

3) If it breaks, you fix it. There is no landlord anymore. Have an issue with the plumbing? It is coming out of your pocket now. There are many, many things that can break in a home. Think about it for a moment. All those things are now your responsibility.

4) You lose some mobility. By buying a home, it makes it harder for you to pack up and leave. It may effect you ability to accepted a new job elsewhere.

Want to compare renting and buying? Click here for a calculator that may aid you in your decision.

My next blog we will be discussing importance of saving and down payment.

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