1. Preparation is a Must
Living in a home of your own sounds exciting, but you'll need to consider certain factors before you even start your home search. Determine whether or not you can afford the extra expenses and responsibilities, and decide how large of a house you require. Look at your financial situation and ensure you have a steady income and employment history. These requirements are known as your debt-to-income ratio. Most home mortgage lenders require you to have at least two years' worth of employment and income. Calculate your monthly pay, and compare it to the amount of bills you have each month to see if you can manage the expenses associated with a home. As with most major purchases, having a good credit history can help you qualify for most mortgages.
2. Lifestyle Adjustments May Be Necessary
In addition to saving a lump sum for a down payment and having enough to pay the mortgage every month, there are also others to factor in. These include inspection, closing costs, maintenance, insurance and property taxes. If you're serious about buying and maintaining a home, you may have to cut back on entertainment expenses. Opt to eat at home instead of dining out, postpone buying that new car or taking an expensive vacation and avoid impulse purchases at the mall.
3. Get to Love Home Ownership Perks
When you embark on home ownership, you have the opportunity to live in a nice neighborhood and to involve yourself in the community. Having plenty of space is also important if you have a family or you plan to start one. You also have almost complete freedom to change any aspect of your home that you desire. You can decorate or paint any rooms in your home the way you want without the need to get permission from a landlord. Plus, it's possible you'll pay less on your mortgage than you did for rent, and if you have a fixed mortgage, the payment never changes.
4. Don't Overlook Home Ownership Risks
It's sometimes risky to take on an adjustable rate mortgage, which means monthly payments can fluctuate depending on market conditions. In addition, the cost of household expenses, including those unexpected expenses such as a broken water heater, can often exceed your mortgage payment. Setbacks such as a job loss can cause you to fall behind in mortgage payments, which may force you to sell the home to pay it off. Therefore, it's essential you budget accordingly for such emergencies.
5. Provides Financial Security
Money that you pay in rent is gone forever. On the flip side, you can deduct mortgage interest and property tax payments on your federal income tax returns every year. Owning a home means building equity. This is the difference between the value of the home and how much you owe, which could bring you long-term wealth.
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