Sixty-five percent of Americans prefer owning a home versus renting. Is this just some leftover remnant of "the American dream?" Is it a romantic notion, or can it make financial sense, as well? Is the time right for your family?
With all of the foreclosures, fragile economy and fear about where to put one's investment dollars, the question about whether it is good for your pocketbook is more important than ever.
You've heard "there may never be a better time to buy," what with home prices and mortgage rates at near historic lows. But the reason to buy should have more to do with you and your family's situation than with the market. Yes, prices are low - really low, but tighter lending requirements have made it harder to qualify for a home loan. Bottom line: You'll need a larger down payment and a higher FICO score.
Interestingly, declining home prices have made the differential between buying and renting - significant in years past - minimal in some regions. However, with a cash downpayment, buyers may be able to save an average of $100 per month paying a mortgage over rent for a comparable property.
Of course, homeowners qualify for tax breaks, most notably the mortgage interest and property tax deductions. A general tax benefit-analysis reveals that a buyer purchasing a median-priced home with 20% down and a 30-year conventional mortgage looks to save over $500 per year on taxes. Not a huge amount to be sure, but homeowners will take it, along with the knowledge that their payments can be building equity and not just going into the pocket of a landlord!
In Part 2, we'll look at the second consideration: Can you really afford this house?
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