Are you Buying Your First Home?
Steps to Buying Your First Home
Many of us are living the American Dream. And a key part of this is being a home owner. There’s a sense of belonging somewhere, in addition to pride of ownership. In fact, these have been primary reasons to motivate over 60% of all households to be home owners. Additionally, financial rewards can usually be gleaned from home ownership. However, this doesn’t always happen.
What should I spend?
That’s a great question. After all, owning a home is expensive. It’s expensive to buy, and it’s expensive to keep. First, you’ll need the down payment and closing costs. Then, after you own the home, you’ll need to make mortgage payments, utilities, cable etc. And maybe, you’ll want some furniture in the home. And you’ll need food on the new kitchen table. And all of this will cost money.
So – how do you decide what to spend on a home? Try this general rule of thumb. The cost of the mortgage, real estate taxes, home owners insurance, and – if applicable – HOA fees shouldn’t exceed 28% of your household income. Hint – search online for a calculator.
Next, let’s talk about the financial benefits of owning a home.
Tax laws change constantly, but, as of now, there are financial benefits to home ownership. You can deduct your mortgage interest from your income at tax time. In addition, you can deduct your real estate taxes. If your interest and taxes are, for example, $15,000, this means that $15,000 of your income doesn’t get taxed.
And, since real estate historically appreciates in value, when you sell the home it can quite often be a non-taxable transaction.
Potential Financial Gains
As I said, the values of homes historically rises. So the odds are good that someday, your home will be worth significantly more than it is now.
For most of us, achieving the American Dream begins with owning your first home. This is how many of us build true wealth. The alternative is to rent. And when you rent, you contribute to the landlords true wealth.
When you’re ready to either buy or sell a home, give us a call.