Most of us would prefer to own our own home for a variety of reasons. There is no landlord to answer to, the accumulating equity belongs to us, and we are free to decorate as we wish. As wonderful as that all sounds there are other factors to consider that may be less attractive. Owning also means we are solely responsible for everything from a leaky faucet, to a new roof, to annual property taxes. Maintenance and repair bills are all going to come out of our own pocket and not the landlord’s.
You also must consider that in order to purchase a home, you will need to have a down payment, ideally about 20% of the purchase price. There will be homeowner’s insurance, closing costs to complete the purchase transaction, and possibly some remodeling expenses. These considerations and more are part and parcel of determining whether or not you can afford to purchase a home of your own.
In addition, there is the cost of moving from your current home to your new home. So where does one begin to arrive at this all-important decision? First, find out the property values of homes that have captured your interest. What are the values and sales prices of homes in the neighborhoods you prefer? Your real estate professional will be able to assist you with this information. Consider whether you have any amount of money saved up toward the down payment of your home. The more you have saved, the better off you will be when you purchase a home.
Consult a reputable lender. Here again, your real estate professional will be able to offer guidance. Your lender will consider your assets, your income, your liabilities, and finally the purchase price of the potential home. This is the best way to gauge how much you can afford to spend on a monthly payment. It is important to remember that a monthly mortgage payment includes more than just principal and interest. It will also include your homeowner’s insurance premium and your annual tax bill divided into monthly installments, as well as any special assessments on the property you select.
Do consult your tax professional. More often than not, you can afford a higher mortgage payment than your current monthly rent, thanks to home mortgage interest having a tax advantage that rent usually does not. Determining whether you can afford to purchase a home requires careful thought, and consultations with real estate professionals that are there to advise you. There are many benefits to home ownership, not the least of which is having a place you can call your own.