Every Dollar Matters

Buying a Home

Your ability to get a good interest rate depends upon your credit rating. If you are not sure if you have good credit you can get a free report from the three main credit reporting services. https://www.annualcreditreport.com/cra/index.jsp These reports are free so you are under no obligation to purchase any additional services. 

Rent or Buy?

When you factor in the tax savings you can typically buy a home for the same (or pretty close) monthly outlay that you pay for rent. Even if you have to pay 10-25% more it is worth redoing your budget to make this happen. Remember your income is likely to rise over the years, and so will rents. A fixed mortgage (principle and interest) will not increase!!! Of course keep in mind that in buying you will have to pay all the utilities, upkeep, as well as home insurance and property taxes. 

For example, you can rent a 2 bedroom, 1 bath apartment in Fort Wayne Indiana for around $500 as month (2007 prices). You can buy a decent 2 bedroom, 1 bath starter home in Fort Wayne for around $75,000 (2007 prices). This is a mortgage of principle and interest at 6% at about $420 a month on a 30 year note.. With utilities, insurance, and property taxes you are not going to be paying much more than you would renting.

Free and clear mortgage when I retire

It should be one of your primary goals to have your mortgage paid off before you retire. Unless you are putting kids or yourself through college it is a safe bet that your house or rent payment is your largest monthly bill.

But I am too old?

You are never too old. If you are 50 you still have 15 years until you retire. That is enough time to pay off a fifteen year mortgage.

But I have not saved for retirement, shouldn't I do this instead of buying a home?

You do have retirement. Its called social security. And, if you read my blurb above on rent or buy you can use the money you are paying for rent to cover the majority of the cost of a modest starter home. Certainly you will need to tighten the budget belt up quite snug. But, you should also have some money left over to put into an IRA or a 401k. 

If you own your home free and clear you also have the option of moving to a lower cost housing market. 

I am too young and there is lots of time?

You are never too young to buy a home. Get a starter home within your means. You can always move into a larger home as your family grows and your needs change. Keep in mind that as you get older your income should rise. 

It just costs to much to buy?

Says who? Maybe if you live in San Francisco or Manhattan. But then again renting in those places is not exactly cheap either. It is all relative.

I don't have the down payment?

If you are a veteran you can go 0 down. Also there are many programs that allow first time buyers to get into a home with little money down. 

I hate mowing the lawn and doing yard work?

Ever hear of a condo?

Principle and Interest as part of my mortgage?

Yes. Why not consolidate it? This way you have two less bills a month to pay.

Links

http://www.hud.gov/buying/