Are you unsure about becoming a HOMEOWNER! 

Thinking that you can't afford to BUY a home? 

Are you worried about whether home buying is a good INVESTMENT?

Buying a home can be an intimidating process. But the first step is making those first decisions. Here are some facts that might help you make that first step towards becoming a homeowner.

 You Can't Afford NOT to Buy a Home!

Over the last ten years, the cost of rental housing in the U-.S, has increased an average of 3 percent per year. That means that an apartment or home renting for $750 per month will cost more than $978 a month in ten years. If you rent the same home for ten years, the total amount you would pay for rent will equal $103,000!

Tax Advantages of Owning a Home Result in Savings

None of that $103,175 is returned to you, either through savings or as an investment. Homeownership, on the other hand, has tax advantages over renting a home, and those advantages can help you save money. Unlike your monthly rent, part of your monthly mortgage payment "comes back to you" in tax savings. Here's an example:

You purchase a home that costs $110,000. Your downpayment is $10,000 (plus closing costs -expenses incurred to actually process the transaction). You finance the balance with a 30-year fixed rate mortgage at 6.5 percent interest. Your monthly payments (not including utilities, maintenance, insurance, etc.) are:

 Monthly Mortgage & Tax Payments

You actually save $195 a month by owning your own home. On a yearly basis, the savings is even more dramatic: 

Total Annual Costs

Homeownership is a Good Investment

For the majority of Americans, their home is their largest financial asset and a major player in their investment portfolio. It's a good thing, too, since the stock market value meltdown in 2008. Some people saw  80% of their portfolio disappear over a matter of months. During that same time frame, overall home prices nationally dropped about 21 percent from their peak in 2006, while in the SE Minnesota - Rochester area the decline has been a more modest 8.7 percent over the last three years. In the higher end markets, the price decline has been much more drastic. Discounting the last 36 months, the NATIONAL ASSOCIATION OF REALTORS estimates that home value rise, on average, by 4.5 percent a year. That's a steady return on investment; one's own home is a much less volatile asset than stocks, bonds or mutual funds. 

As an example, let's look again at that $110,000 home. Unlike your rental unit, your home should appreciate over time. Assuming a 4.5 percent appreciation rate, your home will be worth $114,950 in the second year of ownership, $120,123 n the third year of your owning it, etc. After ten years, your 110,000 home will be worth $163,470. Not only do you earn a rate of return on your original purchase price, but you also get a return on any subsequent appreciation. 

The Federal Reserve Board estimates that homeowners have a let worth almost 36 times more than that of renters. In 2001, the median net worth for homeowners was $171,700 compared to just $4,800 for renters. How do you build up your net worth? One way is through those "appreciating returns" on your home. 

We've already seen how your $110,000 home is worth $163,470 in ten years. In addition, you are paying down the principal on your mortgage. Remember that $100,000 you borrowed at 6.5 percent over 30 years -that debt amount is decreasing every month and every year. After the first year, you now only owe $98,786 on a home that is worth $114,950. You have "netted" a $4,950 increase in the value of your home, plus $1,116 a year that previously you owed as part of your mortgage debt. As your debt decreases and the home value increases, you accumulate wealth from the value of your home. In addition, over this ten-year period, you will have a significantly lower after-tax payment for housing. Each year as your home appreciates and you continue to pay down your mortgage debt, you increase your own net worth. 

Homeownership - It's Not just About the Money

The "numbers tell the story" should ease your mind about the financial aspects of becoming a homeowner. But there are other, less monetary, benefits to homeownership. Several research studies indicate homeownership adds to the value of communities, has positive effects on children, and even contributes to increased voter participation rates. More than two thirds of American households own their own home. They know the benefits of homeownership, from the accumulation of home equity, tax incentives, and the pride of owning a place of their own. They took that  first step of deciding "I'm ready to be a homeowner."   

Give us a call, we will guide you through the process and help you achieve that dream.