HOW DO I FIND OUT HOW MUCH I CAN AFFORD?
We have found that affordability is the single biggest concern of today’s first-time home buyers. Given the wide range of media coverage regularly devoted to the issue, it’s not surprising that many young families wonder how long it will take them to afford their first home.
Our advice: Talk to your real estate agent. A good agent is committed to honestly and responsibly working with you to determine your affordable price range. There are many financing options available today, and some include low down payments. Your agent will help find an option that fits your current financial situation. You may be surprised at just how much home you can afford.
How does buying compare to renting?
Renting offers a lifestyle that’s nearly maintenance-free. That may appeal to you, but consider that renting offers you equity, nor tax benefit, and most likely no protection against regular rent increases.
If your rent has averaged $700 a month for the last 10 years, you have spent $84,000 with nothing to show for it. Isn’t it time you invested in yourself instead of your landlord?
Several financing options hold special advantages for first-time buyers or families with limited cash reserves. FHA-insured and VA-guaranteed mortgages can minimize or even eliminate your down payment. You may also consider a rent-to-own option, or borrow cash for a down payment from your life insurance, profit-sharing, or retirement account.
In addition to tax deductions you will receive that can partially offset the cost of real estate taxes, insurance and home maintenance, your home my appreciate in value. Say you purchase a home that costs $100, 000. If property increases in value a meager 3% each year, your potential appreciation in just two years is nearly $6,900. Thanks to recent changes to the tax code, subject to certain restrictions up to 250k is single or 500k if married, the profit you make when you sell the house is tax free as long as you live on the property for at least two of the five years prior to the sale.