With the recent rebound of the housing market, and interest rates at a 50 year low, one may ask, “What is the REAL benefit in homeownership?” Well, aside from the just the pride of ownership itself, financial security is also reinforced. As a renter, you are only bound to your residence by a lease, and when your contract ends, you can get up and move as you please. This is good for those with occupations that call for frequent relocation. For those with careers and families, especially those with children, it is in their best interests to become established within their community. Many don’t want the “burden” of a mortgage, but fail to realize the contingency of their financial situation when an individual other than themselves decides their monthly housing or rent payments.
Purchasing a home not only provides financial security, but can provide financial growth as well. When you rent a home, you are helping somebody else pay his or her mortgage. By purchasing your own home, you are essentially taking money each month from your right hand pocket, and putting it in your left hand pocket for later. For most taxpayers, the interest you pay on your mortgage qualifies as a deduction against you income, allowing you to keep more of the money you make. In addition, a traditional mortgage ensures that each portion of your mortgage payment goes to paying off the actual mortgage debt, thereby increasing the portion of the house that you actually own. If you eventually decide to move, you can get all your money back if you sell the house for what you bought it for, or you can even make money if the value of the house has risen, and you sell it for more than what you bought it for.
In the Northern Virginia area, the average increase in the value of homes historically (over a 50 year period of time) has been approximately a 6% growth. This value takes into factor year to year fluctuations and economical corrections- the area has seen growth in excess of 20%, in addition to occasional losses and drops in home values. However, taking the average of this 50 year span, home values in the area grow an average of 6% each year. This growth, even in during the time of economic instability, give a strong indication that as the economy continues to rebound, home values will continue to rise. At this time, the prices of homes are still lower than they have been in years, but are paired with mortgage interest rates that are lower than they have been in 50 years!
In all the ways that one can build financial wealth, it is through home ownership that many Americans attribute their success. One of the reasons we have been so successful in amassing our personal wealth is due in part to the home buying programs we have here in the US, that allow us to leverage what we have to increase our wealth. There are programs that allow little money down, and Virginia even has programs that allow for no money down! By leveraging a small amount of money (your down payment) you can have a large amount of money (your mortgage) working for you to help build your financial assets.
Knowing whether or not it is the right time for you to purchase can be an easy process – speaking with a lender will allow you to evaluate your options. Keep in mind that neither your lender or realtor will be making your monthly payments for you, so it is important to ensure that you maintain control, and not allow yourself to become contractually obligated to a home that exceeds your comfort zone for the monthly payment. Many first time homebuyers will prepare a budget with what they currently make balanced against monthly financial obligations. With a firm figure in mind for your monthly payment comfort zone, a good idea of the available money you have to put down can help you quickly determine the best program available to you.
Make sure you and your lender speak the same language, in that when you discuss your payment, it includes all the components: Principal & Interest, Taxes, Insurance, Mortgage insurance (if needed) and the HOA or condo fee if applicable. Acceptable sources of down payment may be from the borrower’s own checking/savings/ 401K accounts, employee benefits/Live near Your Work programs. Some programs will allow gift funds, but all programs do require that the source of funds used be satisfactorily explained.
Some of the most used programs available today include:
Make an appointment today, and we can go over your personal and financial situation to determine you options, and whether or not it is a good time to buy. Even if it isn’t, I can provide you with the information and resources you need to get on track for the path to home ownership! Call me at (703) 929-1701 or email me at firstname.lastname@example.org.