Is it time for me to buy a home? This is often a question many students about to graduate ask themselves. But, even if you’re not getting a diploma in May, there are still many factors to consider while preparing to buy or rent a home.
- Interest Rates Are Low. In the past interest rates for mortgages have been close to 17%. But currently they are staying around 4-6%, which is an advantage for buyers.
- Your credit can affect both your ability to get a mortgage and get approved for a lease. Just know that you can help yourself by building credit early on. A person with a higher credit score is more likely to receive a lower rate for their mortgage. For example:
Sales Price: $80,000
Down Payment (5%) $4,000
Loan Amount: $76,000
4% Interest Rate Monthly Payments = $362.84
6% Interest Rate Monthly Payments = $455.66
That is a difference of $33.415.20 for a 30 year mortgage!
- First Time Homebuyer’s Programs. There are various programs specifically designed for people who have never owned a home. Some of the benefits of these programs include: income-based grants (for qualified candidates), lower down payments, and help with loan approval. For more information on different programs visit http://www.kshousingcorp.org/homebuyer-assistance.aspx or schedule an appointment with Powercat Financial Counseling! (k-state.edu/pfc) Most of the time candidates are only eligible around college age, due to income restrictions.
- Tax Deductions. If you itemize your taxes, mortgage interest and real estate taxes are deductible. So you’ll only get this benefit if you own a home.
- When renting a home, you are often asked to sign a one year lease. Compared to buying, where you’ll typically have to be in the home for around 5 years to make your money back. In addition, you could be required to stay in a purchased home for up to 10 years if you opt for a specific first time homebuyer program!
- If something in a rental home needs repaired, often times it is the landlord’s responsibility. They hold most of the liability. If you were to own a home and, for example, the furnace went out, that would be your responsibility to fix! This can lead to many unhidden costs- that you will not have to pay for if you rent. However, it is important to read the fine print of rental contracts to make sure your landlord does hold the liability. In addition, it could be to your advantage to get Renter’s Insurance to cover some issues your landlord won’t.
- The housing market is ever changing. When you are paying rent you roughly know what your check to your landlord will be every month. Housing costs can quickly raise or fall. That is not to say your rent price will stay set in stone forever. But many times your monthly rent payment is locked in for a year when you sign a contract. Again, read the fine print to make sure this is the case.
Finally, there are many things to keep into consideration when deciding whether or not to buy a home. If you are uncertain of what to do, please schedule an appointment with Powercat Financial Counseling. We are always here to help. Listed are just a few of the “home buying” topics we can assist with:
- Building credit – which you need to get approved for a loan. Better credit will help get you a lower interest rate and save money in the long run.
- Budgeting – if you are renting or buying, you’ll need to set a budget that includes both your monthly house payment and other expenses. Some other expenses that it is important to keep in mind are: utilities, other debt payments (car, student loans, etc.), and necessities (food & clothing).
- Personalization – come in to PFC to get more personalized home buying/renting help (or another financial topic!)
Visit www.ksu.edu/pfc to schedule your appointment today! It is never too early to start preparing for your first home purchase!
Resources:
Larry Curran, The Mortgage Company, http://www.tmckansas.com/home.html
Morgan Powell, SalinaHomes.com, http://www.salinahomes.com/
Hillary Williams
Peer Counselor I
