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Choosing Your Home Choosing your
home is one of the most important decisions you will
make. If you do not have all the facts and
information, you could make a decision that could
ruin you financially.
Owning and caring for a house is not part of the
“American Dream” for everyone – at least, possibly
not right now. Based on lifestyle needs, renting can
make more sense. When you choose the home that best
suits your situation, consider how the following
factors fit your lifestyle and your future.
For more information, go to homequiz.net to take an
18-question quiz and find out if you are ready for
home ownership!
Finances: What can I afford?
Historically low interest rates and extremely
low-down payment mortgages have welcomed record
numbers of first-time homebuyers into the market.
Unlike previous generations who had to scrimp and
save for a 10% down payment, today a house can be
purchased with as little as 3% down. Some programs
are available at zero down, so that more people can
afford to buy houses.
In addition to a reduced down payment, many
programs have lowered the acceptable credit
scores and raised the debt/income ratios from
the standard banking guideline of 25% of monthly
income that is comfortable for most people. Ads
for these programs appeal specifically to those
who may not qualify for a traditional mortgage.
Before signing any papers, make sure you understand
the long-term conditions. Some mortgages offer
enticing initial interest rates or “buy-downs” that
charge a low rate in the first year. Problems occur
when the rate climbs in the second year and again in
the third year when the rate finally is locked in
for the duration. For example, the mortgage payment
would increase $200 a month by the third year of a
$162,000 mortgage that started at 4.125 percent and
rose to 6.125 percent. Few first-time homebuyers
understand the impact of the buy-down program. If
the special deals and programs have made it possible
for everyone to afford a house, why is Indiana’s
mortgage foreclosure rate double the national
average?* The appreciation rate on houses slowed
each quarter from 2002 to 2003. That means you will
have to own a house longer just to pay a realtor and
to break even when the house is sold. Renting keeps
your short and long-term financial planning more
flexible. Instead of investing your cash into the
costs to buy and maintain a house, you could rent
and diversify your investments with options such as
an IRA, stocks or bonds.
Mobility: How long do I plan to live in this area?
We are a mobile society with more than half of
us moving within any five-year period. In the
first five years of homeownership, nearly 90
percent of your monthly mortgage payment goes
directly to interest so your equity is limited.
The costs you encounter selling a house might
eat up any profit you would have gained in
appreciation.
Living in an apartment offers the ability to
move easily and with smaller financial penalties
than selling a home. As a renter, you enjoy the
freedom to move, to accept that better job in
another state or just across town. If you might
move within a few years, renting may be the best
option for you. Maintenance: How much time and money am I willing to
spend on caring for my home?
Homeowners must commit money and free time to
home improvements or repairs, and to other
chores such as mowing, raking leaves, or
shoveling snow. At least one percent of the
house purchase price should be set aside for
maintenance and repairs each year.
As a renter, you do not have the
responsibility of maintaining your home and the
facilities surrounding it. You are free to spend
time with friends and family, or pursuing your
favorite activities. Flexibility: What if my family/relationship/employment
situation changes?
A house purchase cements the size of your
living space and the location. Adjustment to any
change in personal needs would take time and
considerable money.
With apartment living you enjoy the ability
to increase or decrease your living space to fit
your needs as they change. Many apartments are
ready to move into with short notice.
The national 5.5 percent unemployment rate means
8.2 million people are jobless. The average
length of unemployment is 19.8 weeks, almost
five months. By renting you have
More flexibility to move to find the perfect
job.Recreation:
Have I considered the benefits and amenities?
As a homeowner, you would be responsible for the
cost and maintenance of a swimming pool, tanning
bed, fitness equipment, playground, garage, or even
business center equipment. Many apartments
offer amenities that improve your quality of life
and save unnecessary membership or usage fees
elsewhere. Take Your Pick: Will I find
a home that I like?
Apartment homes come in a variety of sizes and
configurations. The look and feel varies as much as
residents do. Some apartments look like
single-family homes. Others are in high-rise
buildings. You have the choice of vaulted ceilings,
attached garages, private alarm systems, or
fireplaces. You can find apartments almost anywhere.
You can live close to a specific school, grocery
store, or your job. It’s your choice. The
Apartment Advantages
- short-term commitment—usually 12 months or
less
- increased flexibility—easily adjust your
living space and location
- no maintenance—just call to report any
problems
- controlled expenses—costs are clear in the
lease and no surprise repairs
Based on the cost comparison table by the end of your first year of ownership, you will have paid an estimated $27,048 more to own than to rent!
Are you ready to own a home? Take the homeQUIZ and find out. |
