A new home in the new year
With low rates and a variety of down payment assistance programs, you can make this year the year you make the move—the year you make one of the best investments of your life. Owning a home opens new doors for your future, allowing you to build up equity and potentially qualify for valuable tax deductions.1
Whatever it is that’s been holding you back—student loan debt, not enough saved for a down payment, etc.—we may be able to help you work around these roadblocks and budget for your new home. Here we’ll bust some of the buying myths and discuss some of the biggest benefits of homeownership.
Benefit: Your money stays yours
Why put your hard-earned paycheck into a landlord’s pocket via monthly rent payments? By owning a home, your monthly payment increases your home equity—essentially serving as a re-investment in your long-term financial security. Homeownership is a gigantic step toward your future success.
Roadblock: You’re carrying debt
It’s a myth that you have to be completely debt free in order to qualify for a mortgage. Lenders will look at your debt-to-income ratio (DTI), which reflects how much of your monthly income goes toward paying off debt. The percentage required varies from lender to lender and from loan to loan, but your DTI ratio can give you an idea of where you stand.
Lenders are typically more concerned with what you’re revolving debt looks like—what you’re paying month to month—and not as much with what the grand total is. That being said, if your monthly payments are too low and you’re not paying off your accruing interest, you’re going deeper into debt and taking on further debt may not be recommended. It could be a good idea to talk to a financial planner or credit professional to determine whether you’d want to get those loans paid down further before taking on a mortgage payment.
It doesn’t hurt to speak with a mortgage professional to take a look at what your options might look like, and how you can start budgeting to make a mortgage payment a possibility. In the long run, building up equity can actually help you take control of debt, as you may eventually be able to tap into it to pay for home improvements at a rate typically lower than high interest credit cards, or consolidate student loans or credit card debt.
Benefit: Your payment is consistent
With homeownership, there’s no need to worry about whether your rent will increase the following year. In fact, with a fixed rate mortgage, your monthly payments would remain constant. Rising rent concerns would be a thing of the past! There’s nothing wrong with adding a little more consistency into your life. Buying a home can do just that.
Roadblock: You don’t have 20% saved for a down payment
Another homebuying myth is that you must have 20% of your down payment ready to go when buying a home. Although this does eliminate having to pay Private Mortgage Insurance (PMI), it’s not a necessity. In fact, 68% of buyers are making down payments of less than 20%.2
You can look into a variety of down payment assistance (DPA) programs as well. Typically, DPA programs come in the form of a second mortgage with low or no interest rates, offered by city and state government to qualified borrowers, and can be deferred (or in some cases completely forgiven) pending certain requirements for eligibility are met. You can talk to your Guaranteed Rate loan officer for more information on programs in your area.
Some state housing authorities also offer down payment grants, or Mortgage Credit Certificates (MCCs) that can be used to claim tax credit for a potion of the mortgage interest paid in a given tax year. Different from a tax deduction, an MCC provides tax credit to help increase housing payment affordability.3 A knowledgeable tax advisor is a great resource to discuss tax credits and potential tax benefits associated with home purchase.
Benefit: Your home is your palette
Perhaps the best part about owning a home is it’syours. You don’t have to worry about renting restrictions. This goes for many renovation projects too, though some may require a permit. But unlike an apartment, your home can be whatever you want it to be. If you want to repaint the bathroom, repaint the bathroom! If you want to knock down a wall to create a more open space, grab your sledgehammer! You run the show.
The opportunities to renovate and improve your home are endless. Make it a reflection of your style and creativity. Your loan officer can even connect you with a Renovation Specialist to help you obtain financing for your home improvement projects.
Owning a home makes you an active member of a community. It’s your home on your block. You’ll have neighbors you see every day. You’ll experience lasting memories throughout the neighborhood as your family grows and you meet new people. It’s not just a house you’re moving into. You’re joining the surrounding community, too.
If you’re convinced that homeownership is the way to go, contact a loan officer to see how you can make it a possibility.
1Guaranteed Rate Affinity does not provide tax advice. Please contact your tax advisor for any tax related questions
2https://www.housingwire.com/articles/49443-the-average-down-payment-is-much-smaller-than-you-think/
3https://www.fdic.gov/consumers/community/mortgagelending/guide/part_2_docs/mortgage_tax_credit.pdf