To be or not to be a homeowner? This is a valid question on the minds of many potential homeowners. For some households the choice is easy–they have no desire to be a homeowner. Their choice is to be a renter. Maybe they like the freedom to move from place to place. They do not want the responsibility of maintenance and repairs. Others may have the desire to purchase a home but are unable due to bad credit, lack of credit, too much debt or not enough income. Some folks might have all their ducks in a row but still need to find that perfect home. Whatever the choice, people who wish to become homeowners should consider their options and weigh the pros and cons of homeownership.
An advantage of homeownership is having a stable housing cost. With a fixed-rate mortgage the principle and interest payments will never go up, but be aware that taxes and insurance may increase each year. There could be tax benefits for those who are able to itemize their deductions rather than taking the standard deduction–home loan interest and property taxes paid each year are deductible from taxable income. In addition, mortgage payments are like an investment and, over time, homeowners build equity in their home. Making monthly mortgage payments on time also creates good credit. Owning a home allows the control and freedom to live as one desires – choose paint colors, have pets and make improvements. Homeownership creates stability in a household, creating pride, a feeling of permanence and increasing engagement and connection to the community.
One should also consider the disadvantages to homeownership. There are generally higher monthly costs of supporting a home since often the utilities and maintenance are more expensive than rent. When renting, repairs are the landlord’s responsibility, whereas these obligations fall to the homeowner upon purchase. There is less mobility associated with homeownership. Selling a home could take weeks, months and, depending on the market, sometimes a year or more. As seen over the past several years, the housing market has suffered from the economic downturn. There are no guarantees that a home will increase in value and, in some communities, housing values have dropped significantly. In general, owning a home should be viewed as a long-term investment. The good news is that history has shown that homeownership is a good investment over time.
It is important to educate oneself prior to making the decision to become a homeowner. Homeownership can be a complicated and intimidating process, and education gives one the tools and knowledge needed to be successful. Participating in a pre-purchase homeownership class from a reputable source provides instruction and knowledge about the home purchase process. (To assist with finding a high-quality pre-purchase education class, look for an organization that has adopted the National Industry Standards for Homeownership Education and Counseling at homeownershipsta dards.com). Education enables one to make an informed decision about what can be the largest purchase and most important investment a person will make in their lifetime. Classes include information on budgeting, savings, credit, affordability, mortgage financing, home inspection, homeowner’s insurance and the roles of real estate agents and lenders.
If, after empowering oneself with knowledge about homeownership, the decision is made to be become a homeowner, then there are a number of steps to be taken. Dependent on an individual’s situation, these steps can take several months or even longer to complete. They include: creating a realistic budget; finding a reputable lender to determine a loan amount; deciding on home type and then finding the home, perhaps with the assistance of a real estate agent; making an offer and upon acceptance entering into a purchase contract; having the home examined by a professional home inspector; securing home and title insurance; and, last but certainly not least, closing the loan giving the purchaser the deed to the property.
Becoming a successful homeowner can indeed be very rewarding. In the words of one recent first-time homebuyer, “Without a homebuyer class, I never would have taken that first step off the edge of the world into the land of the homeowner. I’m at the age where most people are paying off their mortgage, and though I have a good job that I love, because of the wage scale… I am low-income. The class taught me that I could do this, no matter what my age. I learned about all the pieces and where I would run across them in this journey and where I could look for financial assistance to make all this come about–and I did. I closed on a house last week that is perfect for me. It took me two years, but it happened.”
To be or not to be a homeowner is a question that can only be answered by weighing present and future household needs and educating oneself on the pros and cons of homeownership. The time to purchase a home, in the opinions of some, has never been better due to all-time low interest rates and reduced property prices. Though the ability to borrow dollars for purchasing a home has tightened, there’s not a better place to start the adventure than educating oneself by attending a homebuyer education class near you.
Brendan R. Moles is the housing services coordinator at Missoula’s Homeword (homeword.org).