One question you hear a lot why rent when you can own. Often times Gustan Cho Associates
Homeownership can be less expensive than renting and come with tremendous benefits. In many cases the security deposit can more than the down payment required for a home purchase when landlords will ask you for two months security deposit plus your first months rent.
Besides the down payment, there are closing costs that come with any home purchase. Closing costs are one years insurance premium, escrows, title charges, attorneys fees, appraisal, home inspection, and other costs associated with a home purchase and getting a mortgage loan. How about closing costs? There are closing costs on a home purchase but keep in mind that the closing costs can be paid by getting a sellers concession and if the seller is not willing to give a sellers concession, then the mortgage lender can cover all or most of the closing costs by a lenders credit for a slightly higher rate. A sellers concession is where the home seller gives you a set dollar amount to assist with the home buyer’s closing costs. If the home buyer wants to net $200,000, the home seller and home buyer can agree to inflate the purchase price to $205,000 and give the buyer a $5,000 sellers concession towards the home buyer’s closing costs. The drawback is that the home has to appraise out but most cases, it all works out. In most cases, the home buyer does not have to worry about closing costs because if the sellers concession does not cover all of the home buyer’s closing costs, the mortgage lender can give the home buyer a lender’s credit towards closing costs to offset the shortage.
Advantages Of Homeownership
The many advantages of homeownership include the potential of the home appreciating in value and gaining equity in your home as well as the advantages of being able to deduct your mortgage interest from your income taxes.
You do not permission from your landlord to be able to get a dog, cat, bird, or other pet, get a garden, or decorating your home to suit your needs. If you are a homeowner, you do not have to worry about the insecurity of having to move out because your landlord will not renew your lease. The question is why doesn’t every renter become a homeowner? Just like with everything else in life, for every pro, there is a con and being a homeowner also comes with responsibilities of maintaining your home as well as needing reserves in the event if something goes wrong. Sometimes repairs can get quite costly. When you are a renter, you contact your landlord if your furnace breaks down and your landlord is responsible for the costs of all repairs. If you are a homeowner, you need to fix your own furnace and if the furnace is beyond repair, a new furnace can run upwards of more than $1,000. Whether it’s a simple house call from a plumber, repairs for a well and septic system, the air conditioning units running at full blast and breaking down during the summer months, the bottom line it costs money lots of money.
Maintaining A Home
Homeowners who own a single family home are responsible for general maintenance like landscaping, shoveling snow during the winter months, and other duties associated with maintaining owning a home. The will need to mow their own lawn and do their own landscaping unless they contract a landscaping service or their homeowners association that covers it. When doing your own landscaping, homeowners need to purchase a mower, weed wacker, and other landscape equipment can be costly not to mention these machines need servicing and often times may break down one or more times per season.
If you live in the northern region of the country where there are harsh winters, a breakdown on your furnace can cost you hundreds of dollars not to mention the cost of frozen pipes as well. Imagine if you have a long driveway the shoveling of snow involved or hiring snow plowing companies which will probably charge $100.00 or more per service. Moving from a small apartment to a home, you need to consider how much more in utilities you are going to pay. In most cases renters do not pay for water and sewer service. Water and sewer bills can be quite costly.
Disadvantages Of Homeownership
Mortgage loan underwriters do not calculate utilities when they are qualifying a mortgage loan applicant’s debt to income ratios. Sometimes during harsh winters, gas bills can exceed more than $300 dollars per month. Consider electric and gas bills which can easily double if you are renting an apartment and your new home purchase is a larger home. When considering purchasing a home, the home buyer need to not just calculate the additional costs of utilities but also consider having reserves in case if something breaks down. Older applicances break down all the time and can be quite costly replacing them.
If you are a homeowner, you cannot be able to just pack up your bags and furniture and move to anywhere you want. Homeownership comes with responsibilites and if you end up with a scumbag neighbor, you will be stuck with them until they either move out or you move out. It takes anywhere between 3 to 6 months to sell your home from the moment you decide that you want to move.
A home buyer needs to consider the cost of homeownership. Even though homeownership has many advantages it also requires responsible budget planning and setting aside reserves. Insurance companies nor mortgage lenders cover repairs. You must keep in mind property taxes and homeowners association dues increase and can really cause a financial hardship on the homeowner. The truth of the matter is home buyers should be conservative when purchasing their own home and realize the cost of homeownership.