After years of rising rent prices and an inability to make your home truly yours, you’ve had enough and are ready to officially break up with your landlord. You’re ready to become a homeowner.
Before you begin, let’s dispel some of the pervasive myths that may be holding you back from making the transition from renter to homeowner. Understanding the benefits of owning your own home will help you make that transition even easier.
Myth #1: Renting is less expensive than buying
As a renter, you make a one-time payment that makes it seem as if you’re not paying for maintenance or other issues. However, past the 5-year point (the average amount of time it takes to break even on a mortgage), homeowning has a clear advantage over renting. Namely, that of fixed monthly payments.
If you live in an area where there’s a lot of demand for housing, it’s common to see dramatic increases in rent as the years go by. When you buy a home with a fixed-rate mortgage, you can say goodbye to rent that slowly eats into your budget. With a fixed-rate mortgage, you’ll get one monthly payment that stays the same until you pay your final statement.
Myth #2: Buying a home will just put me in more debt
Mortgage debt is different than other kinds of debt. As you pay your mortgage, you create an asset you can use at any time. If you sell your home, you discharge the mortgage debt. You can’t say the same about other kinds of debt (credit cards, student loans).
As you continue to pay your mortgage, you gain equity in the home. Equity is how much of the home you own, expressed in a percentage or dollar amount. If you have paid $150,000 of a $300,000 mortgage, you have $150,000 of equity or 50% equity in the home. This equity amount can be used for numerous purposes such as:
- Paying off other debt
- Funding a child’s college tuition
- Purchasing a second home
Myth #3: You need at least a 20% down payment for a home
This stops many potential homebuyers in their tracks. However, there are several loan options and many people have purchased their home without a large down payment.
There are various programs such as the FHA loan that can help you buy a home with only 3.5% down. Or the VA loan which doesn’t require any down payment for eligible borrowers. Depending on the city and state you live in or are wishing to buy in, you may even be eligible for down payment assistance to help bridge the gap between your finances and your down payment requirement. There are a lot of ways you can afford your dream home – so don’t be afraid to explore them more in-depth with a Homebridge Mortgage Loan Originator.
If you’re ready to learn more, read about What is a Mortgage? Why Do I Need One?, to help you understand why a mortgage is important and how it affects your lifestyle.