A New Mortgage Loan, Is It Time To Buy a Home

If you’ve wavering between buying and renting, there is more than the pride of ownership to consider.  Buying a home comes with additional costs, but it also has many more perks than renting.  Even with the possible financial advantages of homeownership over renting, if you’re beginning to itch to buy your own home be sure you’re truly ready.

A home should be first viewed as a place to live, it can also be considered an asset for future plans, an investment in a community and possibly and financial asset as well.  This unquestionably does not mean the house buying is one big bonanza.

Renting allows an individual or family the ability to be generally free of most maintenance responsibilities that would come with a home.  By renting you do lose the chance to build equity, by property appreciation and mortgage balance reduction, take advantage of tax benefits, and protect yourself against the inconvenience of rent increases.

For first time home buyers, purchasing a new home can be overwhelming and comes with the uncomfortable process of obtaining financing or getting a home loan.  Unfortunately, the home loan process is simply overly complicated because of the confusing expressions and rules in the mortgage lending industry.  A few steps taken in advance to prepare for the home purchase can go a long way to facilitating the purchase and mortgage loan transaction.

Given the asset value, stability of payments, freedom, stability, and security of owning a home, potential new buyers have to consider whether they are prepared to make the leap into a new home and new home loan. 

You Have the Down Payment

The first step to decide if you can buy a home is not the monthly costs.  It is the initial costs of a home.  If you can afford a true down payment on a home including closing costs and possible points, it most likely makes sense for you to buy.  Home owners get serious tax breaks, but that tax break will be lost if you’re paying a penalty for not having an adequate down payment or are struggling with a subprime mortgage that is too much for your income to bear.

Save at least five percent of the home’s value before purchasing and push for up to 20 percent.  In addition to having immediate home equity, you’ll also find that your mortgage loan options are much more attractive without trying to find loans which require low down payments that will also require higher credit scores and mortgage insurance.  The exception would be loans for qualified veterans and FHA loans which are subsidized by the government.

Can You Afford It Long Term

A home is an excellent investment, but the bulk of homes are an investment that should be considered over the long-term.  Despite television shows to the contrary, flipping a home or selling it after a few well chosen modifications, is often not a lucrative option in the majority of housing markets.  Invest your money first is proper securities and market options.

With this sort of investment you are able to access your money quickly in case of emergency.  By tying up all of your money in your home and a home loan, you will have to take out a new mortagge loan or sell your home, which can take months, to access funds should a financial crisis arise.  And as recent markets have shown, home values can go down as well as up.

You must also consider your income in the long-term.  If you’re stretching to meet your monthly mortgage payments, but know that you’ll need a new car in a year or less, buying a home may not be a wise use of your money.  Either invest in a smaller, more affordable home, with a smaller mortgage loan or continue renting until your income rises to the level you need to afford the sort of home you’d prefer.

There is a tremendous array of mortgages available today, but all of the varieties fall into two main categories, fixed rate mortgage loans and adjustable rate mortgages - all carry quite long repayment terms.

You Have Done Your Homework

Arranging financing on a home is likely one of your first steps in buying.  Begin working with a bank to arrange a prequalification or preapproval which is an estimated amount of financing before making any offers on a home.  This will facilitate the sale and make the sale itself much cleaner and faster.  To arrange mortgage loan financing, anticipate 6-8 weeks for the complete home loan underwriting process and closing.  Home loan preapproval takes far less time, however.

Knowledge is the key to successful homeownership with regards to the dwelling as well the home loan used to secure the purchase.  To become a first time homebuyer, it’s important to know where and how to begin the home buying process.

Evaluate whether you have a steady source of income to handle the monthly mortgage payment.  Investigate your credit report to see that you have a good credit record and credit score.  Look at your outstanding debts as wells, looking especially close at outstanding long-term debts, like car payments.  Review your monthly budget to be prepared for the mortgage payment, mortgage loan costs, moving and ongoing expenses such as home maintenance and repair.

Consider Whether You Have Time

Another major consideration for homeownership is that you have the time to deal with the upkeep of that house itself.  When will you mow the yard and repair any little problems that arise?  Renting makes these little tasks other people’s problems.  You can hire a cleaning or lawn service, but you still must be around enough to facilitate any workers in or around your home.

Examine Potential Homes Thoroughly

When it’s time to begin actively searching for a new home, look at all manners of homes within your price range.  Travel the area where you’ll be moving and consider various locations and neighborhoods.  As you view each house, try to minimize the emotional response, although that is important, and instead work through your checklist.  In addition to the features you’ve listed, you should also be comparing each home on the basis of cost, convenience, condition, and capacity.  When you compare homes on a logical basis, it will soon be evident which home is the best investment for you and your family.

You’re Staying Put

If you move constantly or have a career that takes you far from home on a regular basis, you may be better off renting a while longer.  Owning a home means putting down roots in a particular community.  You’ll be paying for the upkeep of the neighborhood as well as school taxes.  You will be paying a monthly mortgage payment that requires timely payments.  Your children will be friends with other kids nearby and you may enjoy getting to know your neighbors at backyard grills or such.

If you’re constantly moving around the country or even the globe, owning a home may be a commitment you’re not willing to endure.  You’ll be responsible for the home’s upkeep even while traveling and selling a home after a short-term will likely cost you far more than you’ve made in equity.

Follow the boy scouts motto and be prepared before you decide the time is right to buy a new home and obtain a new mortgage.