If you’ve ever thought about purchasing a home, you’re not alone. Called the “American Dream” for good reason, nearly four out of five renters now say that homeownership is a priority for them in the future, according to the National Association of Realtors’ (NAR) 2013 National Housing Pulse Survey.
Homeownership is often associated with creating a sense of community, making memories and building financial security. But if you’re a renter, the possibility may sound daunting, particularly if you’ve heard that credit is getting harder to attain and mortgage rates and house prices are rising.
Owning your own home can provide you with financial stability and the opportunity to build equity over time — so don’t make a decision to take yourself out of the market before doing your homework and reaching out to an experienced housing professional for guidance.
While renters are subject to rising rents, often on an annual basis, a monthly mortgage payment that stays the same for the entire period of a loan provides significant stability, making long-term planning and budgeting easier. So when deciding if homeownership is within reach, consider the added benefits of a 30-year fixed mortgage rate. Not only will you have stable payments for 30 years, you’ll be building equity and can take advantage of certain tax breaks.
Recent numbers suggest that now is a great time to buy, according to many industry experts, as mortgage rates are still historically low. Although rates have been rising in the past few months, as of mid-September, the Freddie Mac update on mortgage rates showed the 30-year fixed-rate mortgage rate still below five percent. In the early 1980s, the rates exceeded 18 percent. And in an economy that’s bouncing back from a recession, potential homebuyers are feeling more confident — with less concern about jobs and foreclosures than in 2011, according to the NAR survey.
Homeownership may be within reach if you:
• Have reliable income, good credit and documentation to verify your savings.
• Can afford at least a five percent down payment plus related closing costs.
• Have adequate cash reserves to withstand a loss of job, long-term illness, large maintenance costs or other financial setback.
While homeownership can provide many benefits, it’s important to carefully evaluate your lifestyle and financial situation before diving in, particularly if you’re a first-time homebuyer. You’ll also want to become educated about the responsibilities associated with homeownership — financial and otherwise. It’s one of the biggest financial decisions you’ll ever make and the more you know the better.
“Educated borrowers are better prepared for successful long-term homeownership and overall financial stability,” says Christina Diaz-Malone, Vice President of Housing and Community Outreach at Freddie Mac.