Home Buying
The decision to buy or rent a home can be daunting, so here are a few things to think about when making that choice.
Should I Buy?
Buying and owning a house definitely has its advantages. It's also one of the most important financial decisions you'll ever make, so it's important to make sure you're well prepared for the responsibilities that come along with owning a house.
Start by asking yourself the following:
- How long will I stay in the area? If you know you'll be moving to a new area soon it probably isn't the right time to buy a home. A home is a long term investment and you want to be sure you'll be there for awhile.
- Will the house need work done to it? Make sure you add the inspection costs and any remodeling you plan to do into your budget to determine if you can afford to buy a home.
- Can I afford all of the costs? Buying and owning a home is expensive, so make sure you know how much money you have, and how much you need, before you make any major decisions. You'll need enough money saved for the down payment and closing costs since you'll likely have to provide proof to the lender that you have that money. It's also a good idea to have at least $5,000 extra in an emergency fund to take care of unexpected home repairs. Remember, once you own a home, it is your responsibility if the air conditioning goes out or the water heater dies.
In addition to these costs, you need to make sure you are able to afford the monthly mortgage payment and additional housing expenses each and every month. Its one thing to buy a home, but it's another to be able to keep that home.
Other housing expenses you can expect include: property taxes and special assessments, home/hazard insurance, utilities, and maintenance.
Advantages & Benefits of Owning a Home
Although the costs and responsibilities of owning a home may seem overwhelming, remember there are some really great benefits homeowners receive that you don't get as a renter.
- Tax benefits: There are many tax benefits for homeowners — such as the ability to deduct your mortgage interest and real estate taxes.
- Sound Investment: Hopefully, real estate property increases in value every year, which will represent savings for you.
- Build Equity: Each time you make a monthly mortgage payment, you build equity in your home, which can be converted to cash by refinancing or selling your property.
- Fixed-Rate Mortgage: If you have a fixed-rate mortgage, your monthly payments are set — an advantage for long term financial planning.
- First-time Home-buyers: Buying your first home brings the financial advantages of first-time home-buyer programs.
Are you ready for the responsibility of owning your own home?
When you decide you are ready to buy, visit us to see how much of a mortgage you qualify for, and how much home you can afford. When you begin shopping, don't be afraid to name your price — negotiate! Don't fall in love with the first house you see, do your research, and see a lot of different options.
If you're not sure if you can afford the responsibility and finances of owning a home just yet, check out the advantages of renting — it may be a wiser choice financially and save you money in the long run.
Should I Rent?
Buying isn't the only option, especially if you're not ready! Here are some of the benefits to renting:
- Lower Monthly Payments: Typically, you will pay less per month for rent than you would for a mortgage payment. The base mortgage is just the beginning of housing costs — on average you should add another 40-45 percent to get a more realistic total monthly cost.
- Save for Other Purchases: Since you more than likely would be paying less per month for rent, use the extra money you are saving to pay for other purchases or invest it and actually build more financial assets.
- Low Maintenance Costs: A rental company takes part of your monthly rent payment to cover certain housing expenses. When deciding to purchase a home, you accept responsibility for paying for these expenses. Aside from saving money on maintenance costs, you also save time because most maintenance problems are taken care of by the rental company.
- Flexibility: If you're unsure where you want to live, or if you need the freedom to move easily from place to place, renting is probably the better option. Some leases allow you to rent month to month, and some last up to one year. After the lease is up, you can move anywhere you like.
- Avoid Taxes and Risks of Homeownership: As a renter, you don't have to pay property taxes and special assessments. You also avoid the risks that homeowners face — losing the money they invested in their home if housing prices decline. Homeowners also risk foreclosure, (the lien holder taking back the house) if they miss mortgage payments.
Renters Insurance
Renter's Insurance is generally cheaper than Homeowners Insurance, but is still a cost that should be considered in your budget. Some renters believe they don't need renters insurance because the landlord already has insurance on the building. However, a landlord's insurance will not cover your personal property if a fire destroyed all your belongings or if someone broke into your place and stole or destroyed items. Renters Insurance covers personal property loss or damage and Liability Protection, which will cover injury to another person on your property.
Renting is the obvious choice if you know you are not ready to take on the responsibilities of buying a home or you know you don't plan on staying in the area. Owning a home is something you need to be completely prepared for, and until you are, renting is a great option. You can always save now and buy a home when you're ready. Buying a home before you are ready can be a lot more damaging to your financial goals.
Learn more about Insurance options.
Financing
A home will likely be the largest investment and purchase of your financial life. Trust it to Heartland FCU. Our mortgage professionals and trusted partnership with Capital Mortgage Funding will ensure your mortgage loan process is smooth and stress-free.Learn more about the mortgage options available to you as a member.
