Renters Have Much to Gain by Pursing Home Ownership

A Qualified Mortgage Consultant Can Outline Your Options
Renters Have Much to Gain by Pursuing Home Ownership

CITY, ST – Buying a home vs. renting is a big decision that takes careful consideration, as most mortgage consultants will agree. But the rewards of home ownership are great. For many years, purchasing real estate has been considered an extremely profitable investment. It is an achievement that offers a sense of pride, financial stability and potential tax advantages.

Yes, there are certain responsibilities associated with owning a home. Landlords will often argue the benefits of renting, and for obvious reason. If you are renting, you’re helping them make their mortgage payment.

The numbers are staggering if you look at it this way. If you are paying $1,000 per month for an apartment, and you know your rent will increase 5% every year, then over the next five years you will pay your landlord $66,309. If you are currently renting a house, you may be paying much more than that each month. Either way, you gain no equity by shelling out this monthly housing expense and you certainly won’t benefit when the property value goes up!

However, if you were to purchase your own home or condominium, you would be well on your way toward building equity within that same five-year period. By choosing a fixed-rate loan program, you can have the comfort of knowing that your monthly mortgage payment will never go up. In fact, you would have the option of refinancing to a lower interest rate at some point in the future should interest rates drop, and this would cause your monthly mortgage commitment to go down.

In addition to building equity, there are tax advantages that come into play with home ownership. Depending on your tax bracket, owning a home is often less expensive than renting after taxes. Interest payments on a mortgage below $1 million are tax-deductible, and your mortgage consultant should help you evaluate the tax advantages of various loan scenarios, and share this information with your tax consultant to glean feedback on your behalf.

To find the loan program that is right for you, your mortgage consultant will need to evaluate your monthly household income, current assets and savings, as well as any monthly obligations you may have for credit card payments, car payments, child support, etc. These prequalification factors, along with the report of your credit score, will determine how much house you can afford and what interest rate you will pay for financing. It is also important to let your mortgage consultant know what your future goals are, because this will help narrow down which loan option is the best fit for your long-term needs.

There are many different types of loan programs available, including “low” and “no” down payment mortgage programs. These types of programs require the borrower to provide less than 3 percent of the loan amount as down payment. FHA lenders rule that the mortgage payment, including principal, interest, taxes and insurance (PITI) should not exceed 31 percent of your gross income, and the PITI plus other long-term debt (car payments, etc.) should not exceed 43 percent of your gross income.

Housing is an expense that takes a big bite out of the monthly budget. If you are a renter and feel that “home” is more than just someplace to hang your hat, think about the advantages of purchasing real estate. It may be time to take the step into building your personal net worth as a home owner.

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Real Estate Trends in Colorado

Anyone planning to relocate to another state wants to know what the average property values are in the new location. Currently the annual rate of appreciation from 3rd quarter of 2004 to 3rd quarter of 2005 nationally is 12.95%. The states that rank the highest are Arizona at 34.90% and Florida at 26.83%. The appreciation rate during that same timeframe for Colorado is 5.99% on the average for the state and is ranked number 44th out of 51 states. This is a bit of a shock for homeowners in Colorado who purchased there current residence approxiamately 5-6 years ago when Colorado was in the top 5 for appreciation.

There are many theories as to why this happening, but it always boils down to supply and demand from Economics 101. We have a higher supply of homes on the market currently then we have had in the past decade. That is why people refer to this as a Buyer's market. It is my personal opinion that this is one of the best Buyers markets I have seen. There are alot of homes to choose from, prices are more competitve then ever, the interest rates are still low, and the many alternative financing options makes home ownership easier then ever for the First-time Home Buyer.

How long will this market last? I have no idea. Real estate is impacted by economic trends and with so many changes happening world-wide; it is hard to let history predict the future in real estate. I believe Colorado is one of the best places to live and as more and more natural disasters are happening along the coastal states people will want to move more inland. That certainly does not explain why Florida is #2 nationally for appreciation or why California is #6 with an annual appreciation rate of 21.07%.

If your thinking about purchasing a home in the future and you ask me if this is a good time to buy-my answer is yes. I can not tell you about future predictions, there are many experts that are better at predicting the future then I am.