Thursday, September 22, 2005

Renters Have Much to Gain by Pursuing Home Ownership by Mical Johnson

Buying a home vs. renting is a big decision that takes careful consideration, as most mortgage consultants will agree. But the rewards of home ownership are great. For many years, purchasing real estate has been considered an extremely profitable investment. It is an achievement that offers a sense of pride, financial stability and potential tax advantages.

Yes, there are certain responsibilities associated with owning a home. Landlords will often argue the benefits of renting, and for obvious reason. If you are renting, you're helping them make their mortgage payment.

The numbers are staggering if you look at it this way. If you are paying $1,000 per month for an apartment, and you know your rent will increase 5% every year, then over the next five years you will pay your landlord $66,309. If you are currently renting a house, you may be paying much more than that each month. Either way, you gain no equity by shelling out this monthly housing expense and you certainly won't benefit when the property value goes up!

However, if you were to purchase your own home or condominium, you would be well on your way toward building equity within that same five-year period. By choosing a fixed-rate loan program, you can have the comfort of knowing that your monthly mortgage payment will never go up. In fact, you would have the option of refinancing to a lower interest rate at some point in the future should interest rates drop, and this would cause your monthly mortgage commitment to go down.

In addition to building equity, there are tax advantages that come into play with home ownership. Depending on your tax bracket, owning a home is often less expensive than renting after taxes. Interest payments on a mortgage below $1 million are tax-deductible, and your mortgage consultant should help you evaluate the tax advantages of various loan scenarios, and share this information with your tax consultant to glean feedback on your behalf.

To find the loan program that is right for you, your mortgage consultant will need to evaluate your monthly household income, current assets and savings, as well as any monthly obligations you may have for credit card payments, car payments, child support, etc. These prequalification factors, along with the report of your credit score, will determine how much house you can afford and what interest rate you will pay for financing. It is also important to let your mortgage consultant know what your future goals are, because this will help narrow down which loan option is the best fit for your long-term needs. There are many different types of loan programs available, including "low" and "no" down payment mortgage programs. These types of programs require the borrower to provide less than 3 percent of the loan amount as down payment. FHA lenders rule that the mortgage payment, including principal, interest, taxes and insurance (PITI) should not exceed 31 percent of your gross income, and the PITI plus other long-term debt (car payments, etc.) should not exceed 43 percent of your gross income.

Housing is an expense that takes a big bite out of the monthly budget. If you are a renter and feel that "home" is more than just someplace to hang your hat, think about the advantages of purchasing real estate. It may be time to take the step into building your personal net worth as a home owner.


About the Author
Mical Johnson is affiliated with Rock Financial, Inc., a Licensed Correspondent Mortgage Lender, Florida Department of Finance. Mr. Johnson hosts Home Buyer's Seminars which are open to the public each month in the TampaBay area in Florida. To obtain a free copy of Mr. Johnson's Home Buyer Handbook contact him at www.TampaMortgageGuy.com He is also a contributing author at www.Debt-Free-Personal-Finance.com

8 comments:

Marco said...

Just cruising the blogosphere and came across this great blog - excellent articles - If you have a moment please take a look at my site: Discount las loan mortgage refinance vegas las loan mortgage refinance vegas

startonline said...

Hey, good stuff!
I have a credit history reportsite. It pretty much covers credit history report related stuff.
Check it out later :-)

Johnny said...

Hello, just visited your blog, it's geat. I also have a payday cash loan related blog with some useful articles about the topic. Hope that it is helpful to you.

De Post Man said...

Nice posts. Check out my site http://mortgage.27days27gurus.com/ if you get a chance. interest mortgage

job opportunitya said...

Captivate blog. I surf the web for blogs this
nature.The site are wonderful and will be returned to
again!
It may look like it was hard work, but my first time buyer mortgage blog was simple.

Mortgage Center said...

Hi thanks for your blog, I liked it! I also have a blog/site about first horizon mortgage
that covers first horizon mortgage
related stuff. Please feel free to visit.

Debt Consolidation Refinance said...

Your blog is creative, Keep up the great work. You may be interested in living better mortgage after bankruptcy http://thehomemortgageguide.com Start planning for the future mortgage after bankruptcy

Mi Michigan House Cleaning said...

I look for blogs as great as your work. Fine
blog. I found your site suitable for another visit!
I know that you love my work so, look up my tx texas house cleaning blog.