First-time homebuyers Q&A
Why should I buy,
instead of rent?
You'll love
the feeling of having something that's all yours - a home where
your own personal style will tell the world who you are. A thriving
vegetable garden in the backyard, a tiled entryway, a yellow
kitchen...when you own, you can do it all your way! But there's
more to owning a home than personal satisfaction. You can deduct
the cost of your mortgage loan interest from your federal income
taxes, and usually from your state taxes, too. And interest will
compose nearly all of your monthly payment , for over half the
number of years you'll be paying your mortgage. This adds up
to hefty savings at the end of each year. And you're also allowed
to deduct the property taxes you pay as a homeowner. If you rent,
you write your monthly check and it's gone forever. Another financial
plus in owning a home is the possibility its value will go up
through the years.
I've heard of HUD homes.
What are HUD homes, and are they a good deal?
HUD homes can be a very good deal.
When someone with a HUD insured mortgage can't meet the payments,
the lender forecloses on the home; HUD pays the lender what is
owed; and HUD takes ownership of the home. Then we sell it at
market value as quickly as possible. Read all about buying a
HUD home - one might be right for you! And check our listings
of HUD homes - as well as homes being sold by other federal agencies.
I've had bad credit, and
I don't have much for a down-payment. Can I become a homebuyer?
You may be a good candidate for one
of the federal mortgage programs that are available. A good place
for you to start is by contacting one of the HUD-funded housing
counseling agencies. They can help you sort through your options.
In addition, contact your local government to see if there are
any local homeownership programs that might work for you. Look
in the blue pages of your phone directory for your local office
of housing and community development or, if you can't find it,
contact your mayor's office or your county executive's office.
I'm a single mother. How
would I go about buying a home?
Although you won't have the benefit
of two incomes on which to qualify for a loan, there's no reason
that you can't become a homeowner. Become familiar with the process,
pick a good real estate broker, and think about getting pre-qualified
for a loan. You might want to contact one of the HUD-funded housing
counseling agencies in your area to talk through your options.
And you also might want to think about buying a HUD home - they
can be very good deals. Also, contact your local government to
see if there are any local homebuying programs that could help
you. Look in the blue pages of your phone directory for your
local office of housing and community development or, if you
can't find it, contact your mayor's office or your county executive's
office.
HOUSING 101
1. HOW DO I KNOW IF I'M READY TO BUY A HOME?
You can find out by asking yourself some questions:
- Do I have a steady source of income (usually a job)? Have I been employed on a regular basis for the last 2-3 years? Is my current income reliable?
- Do I have a good record of paying my bills?
- Do I have few outstanding long-term debts, like car payments?
- Do I have money saved for a down payment?
- Do I have the ability to pay a mortgage every month, plus additional costs?
If you can answer "yes" to these questions, you are probably ready to buy your own home.
2. HOW DO I BEGIN THE PROCESS OF BUYING A HOME?
Start by thinking about your situation. Are you ready to buy a home? How much can you afford in a monthly mortgage payment (see Question 4 for help)? How much space do you need? What areas of town do you like? After you answer these questions, make a "To Do" list and start doing casual research. Talk to friends and family, drive through neighborhoods, and look in the "Homes" section of the newspaper.
3. HOW DOES PURCHASING A HOME COMPARE WITH RENTING?
The two don't really compare at all. The one advantage of renting is being generally free of most maintenance responsibilities. But by renting, you lose the chance to build equity, take advantage of tax benefits, and protect yourself against rent increases. Also, you may not be free to decorate without permission and may be at the mercy of the landlord for housing.
Owning a home has many benefits. When you make a mortgage payment, you are building equity. And that's an investment. Owning a home also qualifies you for tax breaks that assist you in dealing with your new financial responsibilities- like insurance, real estate taxes, and upkeep- which can be substantial. But given the freedom, stability, and security of owning your own home, they are worth it.