Getting Started
Why Buy a Home?
Purchasing a home will probably be your largest and most important investment. In general homeownership offers several advantages over renting:
1. It can be a sound investment: As you make payments over time, you accumulate equity- the term used to refer to your net financial interest in the property. It is the difference between the amount still owed on the mortgage loan and the fair market value of the property. In contrast, rent payments never earn equity. Over 10 years, a $10,000 investment inthe stock market at a normal 10% market rate of return would yield $23,600. The same investment as a down payment on a $200,000 home at a normal appreciation rate would retun nearly five times the stock market return, at $110,300.
2. Increasing value: In general, property increases in value over time. This is known as appreciation. Any increased worth is equity you may be ale to borrow against or take as profit upon the sale of the property. The average homeowner's net worth is $171,000. That's nearly 36 times that of a renter who has an average net worth of $4,800.
3. Tax Advantages: As a homeowner, you can deduct mortgage interest and property taxes from your federal income taxes. Consult a tax professional for details.
4. Offers generally fixed housing expenses
5. Gives you control over your environment. Homowners create positive environments for families. Children of homeowners are 59% more likely to become homeowners. Their children are also 25% more likely to graduate from high school and 116% more likely to graduate from college.
How is Your Financial Situation?
Before you begin the home buying process, ask yourself "How much can I pay for a house and still have a life?" In most cases you will obtain a mortgage loan- an advance of funds froma lender to a borrower for the purchase of real estate. Visit the Commonly Used Mortgage Terms page for clarification.
Review Your Credit History
Your current debt is not hte only factor used in the lending process. Your credit history will also impact the interest rate and terms of your loan. A credit report gives potential creditiors a "snap shot" of your credit worthiness. You can access all three of your reports at www.annualcreditreport.com or contact the three major credit reporting agencies:
Equifax: www.equifax.com
Experian: www.experian.com
TransUnion: www.transunion.com
You can establish good credit by:
*Having a steady source of income for 3 years
*Having a good record of paying your bills on time
Scores can range between 300 to over 800 with the typical credit score fallling between 600 to 700.
*Keeping outstanding long-term debts low
*Putting money in a savings account
Source: NAR housing market facts and NJ Dept of Banking and Insurance
