Renters: Are you ready to buy a home?
Emma Madison, 30 lived in a rented home all her life. In her childhood, her parents moved from place to place, and when she secured a job of her own in Houston, Tx she started renting a home with two of her friends. After a couple of years, she decided to settle in Houston itself and was wondering whether to continue to rent or own a home. She crunched the numbers and discovered that paying a mortgage amount is almost equal to the rent she is already paying. That’s when she decided to take the big leap and decide to shift from being a tenant to a homeowner.
Similarly, we would like to help other renters who are turning homeowners. If you are thinking of becoming one, here are some helpful pointers:
What does crunching the number mean?
We all know that renting or buying a home of your own is a personal choice. But if you plan to become a real estate investor and wants to build a long-term equity, then buying a home would be a good choice. Look at the yearly expenses involved in owning a home as opposed to the rental amount you have to pay. Are you buying the house with someone? Will you be looking after the repairs and maintenance yourself?
Some people point out that renting is cheaper than buying, especially in certain areas. If you are a single person who has to travel a lot for work, then renting would be a good choice because you have a landlord to fall back on.
You have the following benefits as a homeowner:
- Roots in a community; you belong to a community wholly
- Enjoy tax benefits, especially mortgage interest deductions
- Potential to earn income from rental in the future
- You have the freedom to design the house as per your requirements
- Financial security for the future
Identifying mortgage that would fit the bill
The general rule is that you have to put down 20% mortgage down payment. If it is not possible, then a mortgage as low as 3% down is also possible. If the downpayment is less than the general role, then you will have to pay about .85% of your loan amount as mortgage insurance. And this is not tax deductible.
An example to understand this better
The Principal, Interest, Tax, Insurance (PITI), including mortgage insurance will be set at $1995, on a home value of $300,000 if you are paying the 3% down payment. If there are tax deductions and you are going for the 30-year fixed mortgage by 4%, then housing cost would dip to $1,614. If that’s the case then the down payment would be only $9,000.
There are tax benefits
A homeowner is entitled to tax deductions. You can make the claims for property tax deductions if you pay the taxes on a particular year and then take a deduction for tax for the same year. Borrowers are also entitled to point’s deduction over the years, especially if the points you pay are in line with the standards mandated by the authorities. You can actually get full points deductions if the mortgage is for a primary home.
And finally
If you are looking for low mortgage rates, then remember – a low credit score is the only way out. Establish a good payment history to avail this.