Renters Have Much to Gain by Pursuing Home Ownership

Buying a home versus renting is a big decision that takes careful consideration, but the rewards of home ownership are great. For many years, purchasing real estate has been considered an extremely profitable investment. It is an achievement that offers a sense of pride, financial stability and potential tax advantages.

Landlords often argue the benefits of renting, and for obvious reason. If you are renting, you’re helping them make their mortgage payment.

The numbers are staggering. For example, if you are paying $1,000 per month for an apartment, and you know your rent will increase five percent every year, then during the next five years you will pay your landlord $66,309. If you are currently renting a house, you may be paying the same or slightly more than that each month, but you gain no equity and you certainly won’t benefit when the property value increases.

However, if you were to purchase your own home or condominium, you would be well on your way towards building equity within that same five-year period. By choosing a fixed-rate loan program, you can have the comfort of knowing that your monthly mortgage payment will never go up. In fact, at some point, you would have the option of refinancing to a lower interest rate should interest rates drop, and this would cause your monthly mortgage commitment to decrease.

In addition to building equity, there are tax advantages with home ownership. Depending on your tax bracket, owning a home is often less expensive than renting after taxes. For instance, interest payments on a mortgage below $1 million are tax-deductible. Your mortgage consultant can help you evaluate the tax advantages of various loan scenarios, and you should share this information with your tax consultant to glean feedback.

To find the loan program that is right for you, your mortgage consultant will need to evaluate your monthly household income, current assets and savings, as well as any monthly obligations you may have for credit card payments, car payments, child support, etc. These prequalification factors, along with the report of your credit score, will determine how much you can afford and what interest rate you will pay for financing. It is also important to discuss your future goals to help determine which loan option is the best fit for your long-term needs.

There are many different types of loan programs available, including “low” and “no” down payment mortgage programs. These types of programs require the borrower to provide less than 3.5 percent of the loan amount as down payment. FHA lenders rule that the mortgage payment, including principal, interest, taxes and insurance (PITI) should not exceed 31 percent of your gross income, and the PITI plus other long-term debt (car payments, etc.) should not exceed 43 percent of your gross income.

Housing is an expense that takes a big bite out of the monthly budget. If you are a renter and feel that “home” is more than just someplace to hang your hat, think about the advantages of purchasing real estate. It may be time to take the next step into building your personal net worth as a homeowner.

With more than 23 years of mortgage and real estate experience, Billy Woolridge manages Embrace Home Loans’ Lynchburg, Va. branch, located at 103A Paulette Circle.

Founded in 1983, Embrace Home Loans is a direct lender for Fannie Mae and Freddie Mac, approved by FHA and VA, and an issuer for Ginnie Mae. Embrace Home Loans has remained a prominent leader in the industry, having helped hundreds of thousands of individuals and their families purchase new homes, lower their monthly payments and consolidate high-interest debt since its inception.

A member of the Mortgage Bankers Association of America (MBA), Embrace Home Loans is an Equal Housing Lender and an accredited business of the Better Business Bureau. Additionally, Embrace Home Loans has been recognized for its excellence in the workplace and devotion to community service through numerous local and national awards, reflecting the lender’s commitment to continued self-improvement. For more information, please visit http://www.embracehomeloans.com/.