If you're currently renting an apartment or house, it makes good financial sense to consider becoming a homeowner in the foreseeable future. There are pros and cons to owning your own home -- and it's not for everyone -- but for most people, the advantages far outweigh the disadvantages.
An exception would be if your job requires you to relocate frequently. In that scenario, the potential benefits of building up equity in a home would be greatly diminished.
On the other hand, if you plan on staying put for more than a few years, then the tax benefits and investment value of owning real estate could put you on a stronger financial track than if you continued shelling out your hard-earned money to a landlord. You've probably heard the argument before: "If you pay rent, you have nothing to show for it at the end of the year". However, when you buy a home, an increasing portion of your monthly payments is applied to your actual ownership of the property (as opposed to how much you owe the bank).
Tax Advantages of Home Ownership
In most cases, you can deduct all of your home mortgage interest from your federal tax returns, according to the IRS. More specifically: "The only costs you can deduct are real estate taxes actually paid to the taxing authority, interest that qualifies as home mortgage interest, and mortgage insurance premiums."
However, since everyone's financial situation is different and there is no "one size fits all" approach to financial management, it's always best to consult with an experienced CPA, enrolled agent, or knowledgeable tax preparer. There may be other tax benefits you could qualify for as a homeowner, too, including getting tax credits for installing a solar energy system. The government's Energy Star program says tax credits on new solar energy systems are available through the year 2021.
Getting the Process Underway
Two key steps to becoming a home owner are finding out your credit score and meeting with a mortgage lender to determine how much of a real estate loan you could qualify for. An experienced real estate agent can also provide you with a wealth of guidance and information on how to become a homeowner. They can fill you in on many of the exact steps, requirements, and advantages of buying your first home. A buyers' agent can also help you assess your readiness to take the plunge into home ownership.
In addition to finding out your credit score, which will impact your mortgage interest rate and the type of loan you may qualify for, other vital information can be gleaned from a detailed personal budget. Although the amount of rent you now pay will provide some insights into your potential house-buying budget, there are a lot of variables which will impact how much of a mortgage you could comfortably afford.
Smart tech is quickly taking over the home landscape. From thermostats to flooding detection technology is being designed to create a safer home and lower bills. But in a world where everything can be controlled from your cell phone, your home screen becomes cluttered with icons… and fast.
Wemo from Belkin has created a solution that allows you to control multiple devices from one app so your phone can be as efficient as your home. In addition to issuing commands from your cell phone, Wemo also works with Amazon Echo and Google Home. You’ll literally have your very own home assistant to take care of your every whim.
Monitor your electricity usage with Wemo Instant Smart Plug. You can run reports to drill down on how much energy each device in your home uses and even how much total energy a room uses. With the Smart Plug, you can also schedule lights to turn on and off to fit your schedule. Come home to a bright welcoming home and schedule everything to turn off while your family is out for the day.
The Smart Dimmer replaces your light switch to give you ultimate control of your home's lighting. Create schedules for your home that automatically dims lighting when it’s time to start unwinding at the end of the day or use night mode when you get up in the middle of the night but don’t want to be blinded by harsh lighting.
Wemo’s NetCam can give you peace of mind with its wide-angle view. Keep an eye on the kids in the other room, a parent with mobility impairment or the overall safety of your home from intruders. The push-to-talk capability allows you to give a disobedient pet a command whether you’re just a room or town away.
Indulge you're inner techy with IFTT commands. For the uninitiated, IFTT stands for If This, Then That. It’s an automation service that allows you to create commands, or “recipes”, that are triggered when a specified action occurs. Setup specific cues for when to turn lights and devices on or off. Whether you want to do so by email, text or simply set up a schedule. You can also set up a series of events so that when you turn one device on or off others in the room will do the same.
Wemo works with your Nest thermostat through a mutual partnership. This means that Nest can trigger your Wemo devices to turn on or off and you can use the Wemo app to control your Nest thermostat. Which means one less app on your phone and one more available space on your home screen for the latest addition to the Candy Crush Saga.
Are you a millennial under the presumption that because you carry student loan debt you aren’t eligible for home financing?
If you are, you aren’t alone. According to a 2017 survey from the National Association of Realtors 80% of millennials don’t own a home. And a whopping 83 percent of those who don’t own a home say that student loan debt is holding them back.
However, you might have a better chance at homeownership than you think.
Lenders look at your monthly debt commitments when forming a decision to offer to finance. Debt commitments are things like car loans, student loans, credit card balances and mortgages.
As you can see student loans are just one small piece of the puzzle that makes up your eligibility.
What this means for millennials carrying student loan debt who want own a home is that they simply need to get laser-focused on their financial priorities. Steep credit card debt and expensive car loans that fund a lifestyle chasing the newest, shiniest things will work against your home ownership goals.
With student loans, you don’t have to pass up homeownership but you do have to be willing to compromise on the other debts you carry. You also may not be able to aggressively pay down your student loans while also making a mortgage payment each month. This is a matter of knowing your budget, your values, and your financial goal timeline.
If you have other debts start by paying them down. Take care of your most expensive debts now before applying for a mortgage approval to increase your eligibility. Lower monthly payments by consolidating your student loans or opting for income-driven repayment options. Refinancing options can give you a lower interest rate and total a 6-figure difference in savings over time.
Doing these things increases your debt to income, or DTI, ratio. Your DTI is a strong factor in financing eligibility. Typically, lenders look for a 28/36 qualifying ratio. This means that 28% of your income is being spent on housing expenses and 36% of your income towards debt, including your future mortgage payment.
When carrying two long-term debts (a mortgage and student loans) you want to make sure you still leave room in your budget for saving. You also want to leave ample room for home maintenance costs and any potential large repairs.
You may also take a temporary lifestyle setback financially while saving up for your down payment. While there are programs that will help you by lowering the required percent down it is always recommended to put as much down as you can. This will lower your month to month payments significantly and make carrying two debts a lighter burden.
If you plan to pursue a house, you likely want to enjoy a seamless homebuying experience. Although you may take extra steps to err on the side of caution as you explore myriad homes, there may be times when it helps to be an aggressive homebuyer.
Ultimately, there are many reasons why you may want to be aggressive and try to accelerate the homebuying journey, such as:
1. You're facing a tight deadline.
If you have only a certain amount of time to buy a house, it may be a good idea to be aggressive. That way, you can accelerate the homebuying journey and acquire your ideal residence before time runs out.
For those who are facing a tight deadline, you may want to stay on top of new houses as soon as they become available. Fortunately, if you work with an expert real estate agent, you can do just that.
An expert real estate agent can keep you up to date about houses that fall within your price range and are located in your preferred cities and towns. As a result, this housing market professional can help you secure your dream house faster than ever before.
2. You discover your dream home and don't want to risk losing it to a rival homebuyer.
If you find a house that fulfills all of your homebuying criteria, there is no need to wait to submit an offer. In fact, if you hesitate, you risk losing your ideal residence to a rival homebuyer.
Of course, when submitting an offer on a house, it pays to be realistic. If you analyze the housing market closely, you can understand a house's current value and submit a competitive proposal right away. As such, you can boost the likelihood of receiving an instant "Yes" from a seller, as well as improve your chances of enjoying a successful homebuying experience.
3. You possess the homebuying confidence and expertise that you need to succeed.
An informed homebuyer should have no trouble assessing the housing market and finding a residence that matches or exceeds his or her expectations. Thus, this homebuyer may be more likely than others to quickly discover a terrific house at a budget-friendly price.
To build your homebuying confidence and expertise, it may be beneficial to collaborate with a real estate agent. This housing market professional can teach you everything that you need to know about purchasing a house. By doing so, a real estate agent will ensure that you can achieve the best-possible results throughout the homebuying journey.
Let's not forget about the housing market insights that a real estate agent can provide, either. A real estate agent can help you differentiate between a buyer's and seller's market, submit a competitive offer on a home and much more. Therefore, with this housing market professional at your side, you can go from homebuyer to homeowner in no time at all.
Ready to start your search for your dream house? Become an informed homebuyer, and you can speed up the homebuying journey.