The Benefits of Owning a Home

Financial Gain

Owning a home is a valued investment which can offer financial advantages. Because homes generally increase in value, each payment you make is an investment in your future. Even if your home doesn’t appreciate much, which is rare, you will benefit from the monthly forced savings that result from paying down the remaining balance due on your mortgage.

With each monthly payment, home equity is built – the difference between what your home is worth now and what you paid for it. When you sell, your equity is your profit. This gain can help you purchase your next home perhaps moving up to a larger or nicer one. Or, [insert comma] you can tap into the equity for college tuition loans or retirement needs at a rate that is generally lower than available on personal loans. Additionally, making payments toward, and ultimately paying off a mortgage is an excellent way to establish a good credit rating.

Freedom and Stability

Perhaps the most tangible yet greatest treasure of homeownership is the personal satisfaction of living in a home that you own. You are free to keep pets, plant a garden and remodel or redecorate to reflect your personal style. A home gives you and your family a feeling of stability and commitment.

A special sense of security and satisfaction comes as you begin to put down roots in a neighborhood.

What can I afford to spend on a home?

The answer to this question is based on two facts (1) How much you feel comfortable spending on a monthly basis after surveying your budget and spending habits and (2) How much your lender calculates you can afford based on your income and debt obligations.

It is important to understand how a home is financed. These are crucial elements: (1) a down payment (2) closing costs and (3) the mortgage. When you know the amount of down payment, closing costs and monthly mortgage payments, you can better determine how much house you can afford.

Down Payment

A down payment is the money you pay up front toward the house. The higher the down payment, the lower the monthly payment and interest fees.

Fortunately, home buyers today no longer have to climb a financial mountain – saving for the traditional 20% down payment – before purchasing a home. There are a number of alternate programs available.

Closing Cost

Closing is when ownership of your new home is officially and legally transferred from the seller to you and documented locally. Sometimes sellers will pay closing costs. Some fees may be negotiable between the Seller and Buyer.

These costs can be generalized into three categories.

• The cost of borrowing money: this includes “discount points” a one-time charge to adjust the yield on the loan to what market conditions demand. Each point equals one percentage of mortgage amount; for example, two-and-one-half points on $100,000 mortgage would cost $2,500.
• The cost of establishing a loan: These include the loan origination fee, appraisal fee and cost of credit reports. Premiums for hazard and mortgage insurance are usually paid at closing. Also, prepaid interest will be collected for the period between closing and the end of the purchase month.
• The cost of document preparation: Title insurance costs pay for the search of public records to determine if the property is free from any other ownership or liens. Recording and transfer fees cover the legal recording of the deed with governmental agencies as well as the transfer of taxes.

Overall closing costs vary from state to state. Check with your agent for a list of credible lenders that you can speak with for an estimate of your closing costs.