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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?

  • 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.

  • 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.

  • Essentially, owning a home becomes an investment, a valuable asset for future opportunities.

  • 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.

  • 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.

  • Homeownership is a universal symbol of financial integrity that can improve a person's credit rating.

  • 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.

  • 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.

  • 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?

  • 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.

  • 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.

  • 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.

  • 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?

  • 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.

  • 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.

  • 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.

  • Think of all the restrictions that the typical renter faces: no pets, no garden, no parking, and no storage.

  • 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.

  • 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.

  • 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:

  • 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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