Buying A Home

The Benefits of Ownership

Buying a home doesn’t mean all of your problems will go away.  There are plenty of responsibilities that come with home ownership, but the benefits far outweigh those responsibilities.

Owning a home involves a down payment, property taxes, potential home owner’s association fees, and other various expenses that can seem at first to be a burden, but when put into perspective, are all positive aspects of home ownership.

• Down Payment – the downpayment becomes part of your home’s equity, or the amount of money your home is worth above and beyond what you’ll owe on it.  Equity is what you would walk away with if you sold the home.  Traditionally, since homes increase in value on average by 3% – 4% annually, your downpayment is now part of that investment.
• Property Taxes – Did you go to school?  Are you children in school?  Will they be?  Education is just part of what your property taxes pay for, and as I mentioned, contrary to popular belief, purchasing a home is not the most important investment you’ll ever make.
• HOA Fees – The homeowner’s association is responsible for keeping your neighborhood looking good for the purpose of retaining property values.  Nobody likes a run down neighborhood.  There are other benefits that you’ll learn about in their documentation (Covenants, Conditions, and Restrictions.)  Remember, not every neighborhood has one.

The fact that purchasing a home involves large dollar amounts is what typically drives the would-be buyer away.  But let’s face it.  Most of us don’t have $100,000 sitting around in our bank account, and so we remain stuck in a pattern of believing we cannot afford to buy a home.

So what makes buying a home such a financial benefit?

• Tax Deductions – When you finance a home, part of the payment you pay to the bank is interest and part of the payment is equity.  During the first 20 years of a 30 year fixed mortgage, the interest portion is actually disproportionately larger than the principle payment.  Under current tax regulations, you are permitted to deduct the interest payments from your income to lower your tax liability.  Renting does not allow this.
• Appreciation – Real estate, over time, will increase in value by an average of 3-4% annually.  In some cases more, in some cases less.  As your home’s value increases, your equity grows, which equates to you and your family walking down a road towards financial independence and complete freedom from the rat race.
• Equity – Part of your monthly payment goes towards chipping away at the balance of your loan and becomes equity in your home.  Equity is something you can recover when you sell the house, provided the value has increased.  When you rent, you don’t build any equity.
• Buying Power – As the equity in your home grows, so does your ability to borrow that equity to improve your home or invest in additional properties down the line.  While the reason we’re in this economic crisis is because of cash mongering greed, home equity loans are a potential solution to emergencies should they arise.
• Economic Stability – A 30-year fixed loan is just that, fixed.  The payment never changes.  Rent continually shifts from lease term to lease term and over time can increase.  Buying a home ensures your payments will always be the same.
• Freedom to Choose – Owning a home gives you the right to do just about whatever you want to it, from the landscaping to interior decorating, you’ll no longer be bound by the landlord’s rental agreement and you’ll have the freedom to express yourself exactly how you want.  Not only that, but you’ll also have the freedom to rent your home out to someone else.  Renting out your home is a great way to continue to reap all of the benefits above without having to pay for it.  In fact, your renter pays for it and helps move you toward financial freedom.

When you own, you have a voice, and you gain a sense of greater community, as though you matter more to the world.  I have owned my own home since I was 30.  I wish I had purchased sooner because I would be way ahead of the game.  Get on it today!  It’s time for you to buy a home.

More First-Time Home Buyers Than Before

According to the National Association of Realtors, in 2007, 39% of all home sales were by first-time home buyers.  So far in 2008, we’ve seen that number increase to 41%.  First-time home buyers have some very attractive incentives to enter the market, and it’s much easier than many would think for a first-time buyer to purchase a home because they aren’t tied to another property.

When you don’t have something to sell, you don’t have to worry about waiting.  You have complete freedom to shop the market and quickly purchase a great property. You don’t want to be renting forever.

Renting is money lost.  Purchasing a home puts some of that monthly payment back into the home which can be recovered when you sell (Equity.)  Not only will you recover it, but it will grow at an average of 4% – 7% annually over time as proven by history.

Even thought recent growth rates have receded due to economic conditions brought about by the mortgage crisis, if you choose the right area to buy your home, such as an affluent area of your city, or a city such as Scottsdale, Arizona which has seen year over year increases in value, you’ll be positioned well in the market and your home will increase in value.  They aren’t building anymore land in Scottsdale.

We’ve never seen a better time to buy than now especially IF you are a first-time home buyer with a LONG TERM VIEW.

Getting into the market to make money on your home quickly is not the attitude that you need to have.  Lenders are less forgiving when approving loans for investors or people who already own their first home and are looking for a second home or a rental property.  Since you are a first-time home buyer, you want to make sure that your perspective is one with a long term view of ownership.  Sellers in this market are either desperate to move because of adverse conditions, or they’re wasting their time hoping for an offer at a price that the market will not bear.  Lenders won’t lend when the home’s appraisal fails to meet the accepted price.

Understand that the average first-time home buyer stays in their first home for five to seven years on average in a normal market.  In this market, where inventory is high and demand is low, the only common denominator is price, and the purchaser must meet the seller in order for there to be a sale.  In a buyer’s market, this means the seller will have to move more than the buyer, which puts you in the driver seat. (Article Reference: Supply and Demand, X Marks the Spot)

Buying your first home can be a stressful venture, which is why you need to enlist the services of a professional.  By working with a Realtor you will protect yourself from the pitfalls associated with the home buying process.