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Home Buyer's Guide

The Benefits of Owning a Home

Homeownership remains one of the highest goals for many people because of it's many benefits. Along with owning a home comes an investment in your future, stability for you and your family, tax savings, personal satisfaction and a sense of community. And, thanks to a wide spectrum of financing options and low down payment mortgages available today, more families are realizing their real estate dreams.

Financial Gain
Purchasing a home is a valued investment which can have many financial advantages. Because homes generally increase in value, each monthly payment you make is an investment in your future. And even if your home doesn't appreciate much, which is rare, you will benefit from the monthly forced savings that result from paying down the remaining balance due on your mortgage.

With each monthly payment, you also build home equity - the difference between what your home is worth now and what you paid for it. When you sell, you collect the equity as your profit. This profit can help you purchase your next home, perhaps move up to a larger one. Or you can tap into the equity for college tuition loans or retirement funds at a rate which is generally lower than available on personal loans. Also, making payments toward, and ultimately paying off a mortgage is an excellent way to establish a good credit rating and prove financial stability.

Owning a home is a powerful tax benefit. You can deduct both the interest on your home mortgage payments as well as the cost of property taxes.

Freedom and Stability
Perhaps the most intangible, yet greatest treasure of home ownership is the personal satisfaction in living in a home that you own. You are free to keep pets, plant a garden and remodel or redecorate to reflect your personal style. A home gives you and your family a sense of stability and commitment. A special sense of security and satisfaction comes as you begin to put down roots in a neighborhood. Your family will enjoy the benefits of this decision for many years.

What Can I Afford To Spend On A Home?

The answer to this question is based is based on two factors: (1) How much you feel comfortable spending on a monthly basis after surveying your budget and spending habits and (2) How much your lender calculates you can afford based on your income and debt obligations.

Generally speaking, to qualify for conventional loans, your total housing costs should not exceed 28 percent of your gross monthly income. For example, if your gross monthly income is $2,500, you would probably qualify for a conventional loan with a monthly payment of $700 ($2,500 x 28% = $700).

Before you determine how much you can afford, it's important to first understand how a house is financed. There are three crucial elements: (1) a down payment, (2) closing costs, (3) the mortgage. When you know the amount of the down payment, closing costs and monthly mortgage payments you can afford, you can better determine how much home you can buy.

Down Payment
A down payment is money you pay up front toward the house. The higher the down payment, the lower the monthly payment and interest fees. Fortunately, home buyers today no longer have to climb a financial mountain - saving for the traditional 20% down payment - before purchasing a home. There are a number of alternate programs available.

Commercial Programs
Private Mortgage Insurance: Typically, lenders are willing to accept a down payment of as little as three to five percent of the purchase price if private mortgage insurance (PMI) is secured. Although PMI benefits the lender by protecting them against default, it also benefits you by allowing you to buy a home earlier. PMI premiums depend on the size of mortgage and down payment. Generally, though, expect to pay 0.5% of the loan amount for the first year, followed by lower payments thereafter.
Piggy Back Loans: You put 10% down, get one loan for 80% of the purchase price and another loan for 10% at a higher interest rate.

Government Programs
FHA and VA Loans: Loans through the Federal Housing Administration (FHA) or Veterans Administration (VA) carry attractive down payment requirements of five percent or less. There is usually a maximum on the amount you can borrow, and VA loans are only available to veterans.

Other Options
Family Gifts: Any gifts or loans from your family need to be documented if you are using them for a down payment.

Where and What to Buy

After you have determined how much house you can afford and which mortgage option is best for you, you'll want to prioritize your needs and wants for your new home. The two main factors are location and and style of your home.

It's true. Location is the most important factor in buying a home. It will partially determine the price of the home and will be a powerful influence on your lifestyle. Check out the nearby amenities of the neighborhoods you are considering, and talk to the people who live in those areas. Ask coworkers and acquaintances for their recommendations. And ask an experienced real estate professional for current information on the communities economic health, schools, crime rates and stability.

Next, you'll need to decide what you want in a home. The first basic choice is between a newly constructed home or an existing one. If you are looking to own a home that nobody else has laid claim to and brings with it the latest in style and efficiency, a new home is what you're after. The downside is that new homes are usually more expensive than used homes. To many, an existing home that has been well-cared for and is located in an established neighborhood is much more desirable than a new home requiring months of decision making and cash outlay.

You'll also need to choose between a single family home or a condominium/co-op. A single family home gives you the most privacy and is generally more spacious. Plus it comes with a yard. Condos and co-ops free you from the burden of general upkeep and provide common areas with pools and other recreational facilities. They are usually more affordable.

Working With An Expert

Finding your new home can be a rewarding experience, especially when you have an expert in real estate at your side, working and negotiating on your behalf. Some people choose to find a home on their own, but a real estate associate will have many up to the minute listings available that may not appear in the newspaper or the Internet, and can save you lots of time by screening for properties that best suit your requirements.

Selecting the right real estate office is an important decision. As the worlds largest real estate sales organization with approximately 6,600 independently owned and operated franchised broker offices in more than 28 countries and territories worldwide, the Century 21 System, a subsidiary of Cendant Corporation, has continuous access to all the latest properties available through its expanding network, advanced technology and participation in the Multiple Listings Service. Plus, Century 21 associates have the expertise to supply you information on home values, taxes, utility costs, neighborhoods and financing.

We know you are looking for more than just a roof over your head. You're looking for a place to express your lifestyle and values, a place to retreat to at the end of the day. That's why we learn what is important to you and search until you are completely satisfied.