As a renter buying a home is a process. It involves back and forth consultation between you, your agent and the seller. There are things you need to ask yourself to determine if you are ready to be a homeowner.
Do you understand the cost of your home? Compared to renting, when you own a house, there are additional expenses such as insurance, taxes, mortgage and other utility bills. When you become a homeowner especially through a mortgage, you will need to get insurance cover from a home owner’s insurance company. It will cover you against risks such as fire or destruction by natural disasters. You will also be required to pay a tax to the government.
Taxes vary from county to county and payable yearly. If you took a mortgage to buy your home, it is crucial to carefully consider the monthly repayment and compare it with your salary. It will not be favourable for all your salary to go towards repaying the mortgage. You will also have to pay for all your utility bills. If you live in a rented place and bills like water, electricity or garbage are inclusive in the rent, it takes time to adjust to paying these bills on your own. You will need to set aside some money to cater for the bills monthly.
Which mortgage will fit your timeline and budget? Down payments on a mortgage are usually at least 20 percent of the total amount. However, you can still make a less than 20 percent down payment which requires you to have mortgage insurance if you have a loan which in turn is deductible for tax. Getting a short term loan will, in turn, lower your monthly repayment cost though staying longer than the required time will also increase your repayment cost.
What is your credit score? Credit scores depend on your repayment history which is low when your card is new. It increases with time depending on your dedication to make full and timely repayments depending on the terms of the credit card provider. Good payment history will help you to get mortgages with low repayment rates.
What is your homeowner tax benefit? When you file your tax returns annually, taxes on property and interests on a mortgage are deductible as well leading to a decrease in taxable income. As a result of deductions, the cost of homeownership including monthly repayment on your mortgage will as well reduce significantly. It makes it easier for you to become a homeowner rather than renting.
What is the comparison between renting and buying? Before buying a home, you need to do calculations on the cost of home ownership and renting to determine which one works best for you. It is, however, advisable to do the calculations upon deductions on tax benefits to get appropriate figures as compared to using the actual payment costs.
Your utmost honesty when answering these questions will determine your readiness to own home. Anyone no matter how much money they make can be a homeowner.