So you want to own a home

by Tom Furio

It’s the American Dream!

Own your own home. Play with your kids in the yard. Build a fort in the tree out back. Mark off the kids’ heights on a door frame. What a great dream, and it’s not as far away as you might think.

Year after year people continue to rent their homes. The average rent in Orlando, Florida is around $1100 per month, which is $13,200 for the first year. With a conservative 5% rent increase per year, in five years you would have spent $72,939 in rent! Added to that, the costs of any upgrades that you might do, paint, wallpaper, decorating etc. is lost money. Money lost to your landlord. Money that could have gone to you.

So why doesn’t everyone buy a house? We have been programmed to think that there are huge obstacles to home ownership. They are:

• A large down payment
• Great credit
• Great income
• A REALLY big mortgage payment.

While all of those things are considerations, they are not all true.

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Myth #1: You need a large down payment.

While a 20% down payment may get you more attractive financing, it is not required to purchase a home. If you have reasonable credit, you can get a home with 100% financing. That means if the purchase price of the home is $200,000, you new loan amount is $200,000. The only money you need to have is the closing costs.

While the closing costs could total several thousand dollars, in today’s real estate market, sellers are more than willing to pay part or all of those costs for you. Currently, there are more homes for sale than there are buyers. These sellers are motivated to help you buy their property. In many cases, you can move into your new home with absolutely no money out of your pocket! An amazing opportunity exists right now to become a homeowner.

Myth #2: You need great credit to buy a home.

Yes, great credit will get you the best loan programs available. But reasonable credit will still get you a good mortgage with good terms. And more importantly, it will get you into your own home! Even a mortgage with less than perfect terms will allow you to receive significant tax benefits and allow you to profit from the appreciation of the value of your new home.

Myth #3: You need great income.

Great income is far less important than steady income. If you have been in the job for 2 years you are ready to go. If you have been on the job less than 2 years but have been in the same line of works for several years, that is just as good. As long as you make enough money to meet the loan debt to income calculation requirements, you are ready to go!

To find out what you debt to income ratio is, go to our online Debt to Income Calculator.

To find out how much home you can qualify for, you can use our How Much Can I Afford Calculator.

Myth #4: A mortgage payment is MUCH more than my rent payment.

In many cases, a mortgage payment can be very close to your current rent payment. Here is an example:

Renting:

As we saw in the example above, renting for $1100 per month will cost you $72,939 for five years. At the end of five years you have $0 accumulated equity or wealth.

Buying:

Let’s say you wanted to buy a home for $175,000. You made an offer and negotiated with the seller to pay your closing costs. With the proper mortgage strategy, you can buy that home with absolutely now money down and have a mortgage payment of $1569.

“Now wait a minute”, you say. “That mortgage payment is $469 more than I am paying now.” Is it really? Let’s consider the tax advantages. That payment includes the cost of property taxes and insurance. Insurance is not tax deductible, but the taxes are. The interest on the mortgage is also tax deductible. In that same five year period you will have paid $19,980 in taxes and $67,900 in interest. These two items total $87,880. Assuming you are in the 25% tax bracket, you will realize $21,790 in tax savings or $366 per month. So let’s look at it:

But wait! That’s not the end of the story. Your home that was purchased for $175,000 has appreciated in value during this time. We will assume a conservative 5% appreciations rate. Some years will be better or worse but 5% is a realistic number.

At the end of the fifth year, your home is now worth $223,349! You have accumulated $48,349 in wealth!

My advice to you is simple, stop throwing away tens of thousands of your hard earned dollars every year and start accumulating wealth. Call us today and let’s work together to get you in your new home!