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Mortgage Guide

How to get a home loan

The Road from Renter to Homeowner


Many of us have been renters for most of our independent lives. Admittedly, renting is a convenient set-up. You pay a set monthly rate. Renter’s insurance is less expensive than homeowner’s insurance. You aren’t responsible for maintenance and repairs. Finally, you can easily move to another apartment or neighborhood if you decide.

While renting may be less expensive and more convenient in the short term, it does not offer the type of stability and freedom most of us strive for as we settle into our careers and begin our families.

Freedom and privacy

Homeowners can make decisions that renters are not able to make. As a homeowner, you can change the flooring, paint the walls, and decorate your porch to your heart’s content. If you purchase a single-family home (rather than a condo or townhome with shared walls) you won’t need to worry about disturbing your neighbors as you take on those home improvement projects. As a homeowner, you can entertain as many people as often as you like without landlord restrictions. Want a pet? In your own home, you get to decide.

Equity

Another benefit of homeownership is that you build equity. Equity is the value of your home that exceeds the outstanding mortgage balance. Generally home prices/values increase over time. As you pay your mortgage loan down, and the value of your home increases, you have more and more equity in your home. When you rent, no matter how many rental payments you make you will never have any ownership in your apartment. You can use the equity in your home as collateral to borrow funds for home improvements, college tuition or to pay off other debts.

Credit Score Management

When you own a home, you have the opportunity to build a solid credit history. Debt repayment accounts for as much as 35% of your FICO score--the score lenders use to determine loan eligibility and interest rates. As you pay off your mortgage, your credit score increases. In short, a mortgage payment is an excellent way to demonstrate how financially reliable you are.

If you need another loan in the future for major expenses your favorable repayment history will make it more likely that you will be able to secure the credit you need.

Learn more about credit score.

Tax deductions

Owning a home allows you to take advantage of some tax benefits which are not available to renters. Payment of annual property taxes and mortgage interest can be counted as deductions on income taxes. You may also deduct closing costs and discount points paid in the year you purchased your home. Tax deductions help you save up to 40 cents per dollar on your federal income taxes.

Long-term Investment

Home prices are cyclical. They can go up and down. Over the long term, however, home values typically increase. If you plan to stay in your home for many years, it is likely that, the value will go up. According to the Price Shiller Index, homes have consistently increased in value by 3.4% annually. If this index is accurate, a $500,000 home purchased today could possibly be worth $1.4 million in 30 years. And selling a home at $1.4M might put you in pretty good shape to retire comfortably.

If you’re considering making the leap from renter to homeowner, we can help. We have simplified the mortgage application process into four easy steps: Qualify, Apply, Approve and Close. Contact us today and we’ll help you start moving down the road to homeownership.

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