Although the commitment to owning a home might seem scary at first, making the transition from renter to homeowner isn’t as difficult as it seems. With a little research and a few key steps, you can be well on your way to owning your own house sooner than you ever thought possible.
Understand the Costs of Home Ownership
Because rents are soaring while home prices are remaining steady, many people believe owning a home is more affordable than renting. It’s about more than the mortgage payment, though. While the cost of a home payment in many markets can be much less than paying rent, there are other home ownership costs to consider before you take the plunge. These include:
• Maintenance. When you own your home, there isn’t a landlord handy to fix any problems. You will be responsible for any repairs and routine maintenance that your home needs.
• Property taxes. You can expect to pay between 1 and 2 percent of your total home value in property taxes each year to the county you live in.
• Homeowner’s insurance. When you have a mortgage, you are required to take out a homeowner’s insurance policy to cover any necessary repairs or even rebuilding costs after a disaster. For a single family home, you can expect to pay between $500 and $1,500 per year on your policy.
• Homeowner’s association fees. For some single-family homes and for condos and townhomes, you may be required to pay a monthly homeowner’s association fee that covers shared community amenities. This fee varies between a few hundred and a few thousand dollars annually depending on your association.
Keep these costs in mind as you decide how much you can afford to spend on a home.
Get Educated About the Tax Benefits of Home Ownership
Purchasing a home makes drastic changes to your tax liability. Did you know that the interest on your mortgage and your property taxes are tax deductible? Writing off these costs reduces your taxable income, which in turn reduces your tax liability every year for the life of your loan.
Research Your Mortgage Options
Not all mortgages are created equal. There are many different kinds of mortgages that can help you finance your home that all have their own benefits, drawbacks and stipulations. Before you sign on the dotted line, research different mortgages like the ones listed below:
• Traditional Fixed-Rate Mortgages: These mortgages offer a fixed interest rate for a set amount of time. This kind of mortgage offers security and the ability to refinance if rates drop.
• Adjustable Rate Mortgages: These mortgages have an interest rate that fluctuates within a set margin. While your initial mortgage payment may fit your budget, you need to be sure you can handle the payment if your interest rate rises.
• Federal Housing Administration Loans: These loans are offered by the government and can include down payment assistance. These loans are great for those who are struggling to get over the down payment hump!
• VA Home Loans: These loans, which are offered to military veterans only, require no money down and no mortgage insurance.
Get Your Credit Score Ready Now
If you are hoping to buy a home in the near future, it is never too late to pull your credit report and start making positive changes to increase your credit score. Your credit score is a key factor in securing approval for a mortgage, and a higher credit score will get you the best mortgage rates available. To learn how to boost your credit score in advance of a home purchase, check out our previous blog!
Think Long Term
Buying a home is a huge commitment, and not just financially. Renting a home is a short-term solution to housing that gives you the freedom to move around. Becoming a home owner allows you less flexibility, so it is important to think long and hard about whether or not you are ready to commit to home ownership. Ask yourself the following questions:
• Do I plan to stay in the same place for a long time?
• Does buying a home match up with my career and lifestyle goals?
• Am I prepared for the extra costs of home ownership, like maintenance and insurance?
• Is my credit score high enough to afford me a favorable interest rate?
If you answered yes to these questions, then you may be ready to become a homeowner! With the affordable NC Home Advantage Mortgage™ with down payment assistance, the NC Housing Finance Agency can help make home ownership more affordable for you.