How do you know when you are ready to be a homeowner? There is a lot more to this question that you might thing. For instance, the true cost of home ownership will be much more than your mortgage payments. If you want to shop for your own house, please take the time to figure out how much it willreally cost you in the long run. Then you can make an informed decision.
You will probably need a large down payment. Most of those 0 money down schemes are gone. These days, a twenty percent down payment is back in fashion. Do you have this money? And after you put down this large amount, will you have any savings left? I think we have all learned that it does not do to be house poor in this day and age.
Think about the length of time you plan to live in the house you want to buy. Home owners, who stay put for years and decades, tend to be more satisfied with their purchases. If there is some chance you will have a job change or transfer in the next few years, you should weight that in your decision. It is so much easier to get out of a lease than a home purchase! It should be obvoius that you will not be able to get any guarantees that your home will sell for a good price when you need it to.
Many home shoppers only think about their mortgage payments. They have not considered property taxes which can cost thousands of dollars a year. Many homeowners were fine paying their mortgage bill every month. But when the end of the year rolled around they were unprepared for tax bills. If you do not have your taxes paid in an escrow account, can you set aside enough cash to cover your tax bills every year.
Beyond mortgage and taxes, you will have other expenses. When your roof leaks or your dishwasher fails you will not have a landlord to call. Instead you must call a repair company. Do you have cash set aside for emergency repairs?
Also consider homeowners association fees. In some neighborhoods, these are moderate, but in some neighborhoods they can cost hundreds or thousands of dollars every year. And things can get reallly ugly when these are not paid.
If you purchase a home, you will also need to purchase a homeowners insurance policy. Premiums will depend upon many things, but expect to set aside more than a thousand dollars a year for this. Almost all lenders will require coverage. Even if you are one of the lucky ones who can own a home without a mortgage, you will still probably want to cover this large asset.
One selling point for buying a home are potential federal and state income tax deductions. This will not benefit all home owners though. Sometimes the amount is less than the standard income tax deduction that the IRS allows everybody to use. And the interest paid amount also gets lower over time. Even if this helps you now, it may not help you in 5 or 10 years.
I am not writing this to talk everybody out of buying a house. I understand how attractive home ownership is for many people. You may enjoy the stability and security of owning your own house. But I do want people to really take a long hard look at the true costs before they make a decision. I think if more people would have done this in the last few years, we would have had a lot less problems with foreclosures. I am not totally blaming consumers either. I believe many lenders were at fault. But it was the actual buyers who really got hurt.
Tags: Home Mortage