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Should You Buy a Home?
According to the National Association of Realtors, first-time
homebuyers say the Number One reason for buying a home is that
they're "tired of paying rent." Second on the list are the tax
advantages that come with homeownership. And as the third reason,
renters say they want a larger home to live in.
What enters people's minds most frequently is, when they're paying
rent they're not making any kind of investment in their future. A
lot of people also consider the fact that they can take a tax
deduction on their mortgage interest as well as their real estate
property taxes. Indeed, from a financial point of view, owning a
home appears to be a huge advantage. Why would anybody want to put
money into the pockets of their landlord instead of into the equity
of their own home?
Yet sometimes it
seems that we don't have a choice, that owning a home is the single
most important thing in the world. Our parents, our neighbors, and
our teachers everybody has filled our heads with the idea since we
were young: "Someday, you'll own a home of your own." But sometimes
we have to ask ourselves: "Is owning a home the American Dream or
American Duty?"
Like anything else in life, making an informed decision calls for
some sound and sensible planning. Buying a home can be an
emotionally taxing experience. So before you go off ordering new
carpeting or inspecting wallpaper samples, take a few minutes to
consider some important facts about homeownership.
Why do people decide to buy a home?
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Typically, it's the frustration of watching the monthly rent check
go up in smoke that pushes renters into the home buying market. You
can't get ahead paying rent, they reason. And, beyond the agreement
of a rental lease, there's no way to hold down rising rents. By
contrast, mortgage payments generally remain stable from year to
year.
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Whether married or single, homeowners gain tax incentives that
renters do not. A sizable portion of your mortgage interest and
property tax can be deducted if you own a home. And the longer you
own a home, the more equity you establish in your property.
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Essentially, owning a home becomes an investment, a valuable asset
for future opportunities.
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Another major motive among first-time buyers as well as repeat
buyers is the need for more space, both inside and outside. Growing
families need larger yards, a recreation room, more bedrooms or
another bathroom, and generally, rental units are smaller and more
confining.
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Usually there are more homes for sale that there are for rent,
giving homebuyers more options to choose from when searching for a
place to live. With a greater selection of homes come a greater
variety of home styles, sizes and features. By comparison, renters
often feel they must make sacrifices and "take what they can get"
when shopping for a place to live.
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Homeownership is a universal symbol of financial integrity that can
improve a person's credit rating.
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Buying a home also brings a sense of security. With a 30-year
fixed-interest mortgage, for instance, people don't have to worry
about a landlord selling the property or doubling the rent.
Homeownership gives people more control. No more noisy neighbors in
the apartment above. No more sharing garage space. As a homeowner,
you can paint your living room hot pink, replace your kitchen sink
with a lighted water fountain, install a hot tub in your master
bedroom whatever you want, without asking permission from your
landlord. Your home is your own.
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There's a certain satisfaction that ownership brings, a pride that
renters don't enjoy. Homeowners can take pleasure in the way they
landscape their yard or decorate their family room. They can add an
outside deck or remove that tacky orange shag rug without having to
answer to anyone.
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Along with pride of ownership comes a sense of prestige. Like owning
a new car, owning a home gives you a feeling of accomplishment, of
success, of having "made it." Fulfilling your dream boosts your
self-worth and makes it a little easier to get up for work every
morning.
What are the drawbacks of owning a home?
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Condos, townhouses and similar "turn-key ownerships" are relatively
easy to maintain. But the unhandy owners of a detached single-family
home might find themselves with their hands full soon after moving
day. Maintaining a home inevitably involves repairs, some simple and
some complicated. A certain measure of skill is needed for even the
most routine projects, such as changing a furnace filter, replacing
worn washers in a faucet, or unclogging a garbage disposal. And if
you own a home with a yard, you can expect outside chores to last
all year round, depending on the climate from cutting the lawn
and cleaning the gutters, to raking leaves and shoveling snow.
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While the tax advantages of homeownership may be obvious to
first-time buyers, the costs of maintaining a home are not as
evident. In most cases, expenses for repairs and upkeep of a
purchased home are much higher than that of a rental. And in some
cases, the unexpected expenses can be overwhelming. Painting and
wallpapering, adding new light fixtures, replacing old carpet,
upgrading appliances, and on and on all can be hidden costs to an
unsuspecting first-timer. Added to these are the basic costs of
ownership from the fee for trash pick-up or the purchase of a
garden hose, to the installation of a fence or an investment in a
lawn mower.
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Even with a lease, renters can change residences fairly easily. But
uprooting yourself and your family when you're locked into a
mortgage is not as simple. It's not like giving advance notice to
your landlord. You can't walk away from a mortgage. It's a long-term
commitment.
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Any personal or family crisis (a divorce, a medical emergency) or
change in lifestyle (a marriage, a job transfer) could force you to
sell your home long before you had anticipated. And if and when you
do, the market can dictate the purchase price and length of time to
sell. Depending on location and region, you could be forced to
accept an offer that's considerably lower than you had bargained
for. Or, in a worst-case scenario, you could be unable to sell your
home altogether. For some people, the mobility of renting can be an
advantage over owning a home.
Is owning a home the right choice for everybody?
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If after you purchase a home you decide you've made a mistake, it's
a BIG mistake. So before you make the leap, think hard about where
you'll land.
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The time may not be right for everyone. The length of time that a
person expects to live in a place might weigh in on a person's
decision, for example. Also, there are some
people who aren't ready to buy because their budget isn't in order,
but buying a home is a goal that most people would like to achieve.
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For the vast majority of Americans, the drawbacks of owning a home
are easy to overlook when compared with the realities of renting.
Remember that renters sacrifice a good share of their privacy and
freedom.
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Think of all the restrictions that the typical renter faces: no
pets, no garden, no parking, and no storage.
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One way to think of it is: Do you want to pay your own mortgage or
someone else's? That's essentially what you're doing when you're
renting. Buying a home is an emotional decision, filled with
excitement and hope, but also fraught with worry and doubt. Keep
your needs in mind. Arm yourself with enough information to make an
educated choice. And ask advice from real estate brokers, lending
officers, family and friends.
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As illustrated by our fictional characters, Betty, Sam, John and
Jane, buying a home can be a life-changing experience. As soon-to-be
parents John and Jane decided they were ready to build a future for
their expanding family. Sam realized it was time to stop throwing
his money away in the rental market. And Betty, after recouping from
a divorce, is sure that she and her children will be happier in a
home of their own.
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Along with all the tangible changes, owning a home can turn you into
a different person, a more complete individual. Homeownership
establishes roots in a community. It gives you a greater stake in
your neighborhood. When you own a piece of property, it makes you
more attentive and appreciative of what's going on around you.
Checklist: Weighing the fundamentals of buying a home.
There's no magic formula for deciding how to buy a home. People
generally want to live in the nicest house, in the nicest area, and
for the best price. But, figuring into that simple equation is a
number of key factors. To avoid making a blunder as you take that
first step as a homebuyer, ask yourself a few fundamental questions:
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Do I want to live in a city, suburban, or rural home? -
What size home do I need? -
Do I want to commute, and if so, how far? -
How long will I live there? Does my career track fit the permanence
of owning? -
Do I like the neighborhood? -
What is the quality of the schools? -
What are the local amenities shopping, restaurants, parks,
churches, medical facilities, health clubs, freeway access,
proximity to airport or train station? -
Are there other expenses that can be anticipated: increase in
property taxes, city easements for street or sewer improvements, new
roof, new appliances, central air conditioning? -
Does owning a home fit my lifestyle? -
When you can realistically answer each of these questions, then
you're ready to begin house hunting.
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