Considering Your Options

Use the information provided below to help as you buy your first home.

Owning vs. Renting

If you’re currently renting and have discussed the possibility of buying with
your friends or family members, no doubt you’ve received advice from each end of
the spectrum and everything in between. But it’s your money and your future, so
weigh your options carefully and get as much information as you can!

Some of the advantages of renting include:

  • Less expensive: Owning a home comes with a number of monthly and
    yearly expenses, such as insurance, property taxes, and repairs. As a renter,
    these expenses are not your responsibility.
  • Predictability: Because none of the unexpected expenses of
    homeownership are yours to worry about, you’ll have an easier time creating a
    reliable budget.
  • Freedom: With a renter’s lease, you’re free to move once the lease
    is done. Noisy neighbors? Move! More available money. With few house-related
    expenses, you’re free to do what you want with leftover monthly income.

Some of the advantages of owning include:

  • It’s all yours! As the house’s owner, you can paint, wallpaper,
    drywall and tile to your heart’s content. Get a swimming pool and a dog!
  • Equity: Does equity seem mysterious or meaningless to you right
    now? Building equity through homeownership opens endless financial doors.
  • Stability: When you own your home, it’s always there to come home
    to.
  • Tax breaks: The federal government has written tax laws that
    encourage homeownership. Reap the financial rewards of tax breaks!

Are You Ready to Buy?

Aside from emotionally preparing yourself for the possibility of
homeownership, you should also take a close look at the state of your finances.

Be certain you get a credit history report for yourself, which can be easily
obtained through a number of online resources inexpensively–and even for free.
Fix any inaccuracies immediately. Do you have enough cash on hand to deal with
the up-front costs of buying a home, as well as the down payment? These expenses
often cost thousands of dollars, depending on the home you purchase.

Finally, be certain you understand what you’re saying and hearing.

How Much House Can You Afford?

In attempting to determine how much house you can afford, take into
consideration the following expenses:

  • Up-front costs, processing fees, appraisals and inspections, insurance and
    additional miscellaneous expenses
  • Down payment
  • Closing costs
  • Interest rate and Annual Percentage Rate (APR)
  • Mortgage principal
  • Post-purchase expenses such as remodeling, property taxes, and home
    insurance policies

Most of the expenses listed above depend upon your income, monthly expenses
and any debt you now carry. Learn more about the math behind the Housing and
Debt Ratio.

In addition, the house you choose and the neighborhood where the house is
located will change the amount of house you can afford.

Recommended Reading

The following books are just a few examples of the wealth of information
available today for first time homebuyers.

  • “100 Questions Every First-Time Home Buyer Should Ask.” By Ilyce R. Glink
  • “Home Buying for Dummies.” By Eric Tyson and Ray Brown
  • “Mortgages for Dummies.” By Eric Tyson and Ray Brown
  • “The Everything Homebuying Book.” By Mark B. Weiss
  • “Buying Your First Home! 2E.” By Robert Irwin


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