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Tips before buying a house

Owning a home brings a sense of pride and freedom unparalleled to rent. You are not bound by landlord rules if you own your home. Your monthly payments create balance. Buying a home can be the first step in building a long-term plan. But it is important to understand the entry and exit of your own home before entering the water.

TABLE OF CONTENTS

Equity Advantage

The biggest advantage of buying a home is that you own it. You can paint the walls any color you like. You can change the location, put in a basketball hoop, or turn your unfinished basement into a movie theater. You can do almost anything you want with your home as long as you follow all building or local rules.

Back to you Heritage. You will never see that money again when you pay the rent, but part of the mortgage payment goes towards the loan principal when you buy it. This increases your percentage of free and open ownership.

Tax Benefits

Your home is a commodity. You can make money if you sell more than you originally paid for. This benefit may not be deductible in some cases.

You can redeem up to $250,000 in capital gains tax, or up to $500,000 if you and your spouse apply together when selling your primary home. You must own and live in the property for the last two to five years before the sale. You cannot use this tax benefit within the last two years.1

Owning a home can also bring other tax benefits. Property interest and property taxes you pay are generally taxable. You reduce your total tax burden.2 Past

Costs

There are many good things about buying a home, but let’s look at the potential decline. You can contact the owner if you are renting and need repairs. They will fix or fix your problem at no cost, but there can be a lot of unexpected repair and maintenance costs that you wouldn’t have if you had your own home.

Another thing to keep in mind is that you may not be losing money at home. Homes for sale often go up in price, but there are times when the market is volatile or in decline. If so, you could lose money depending on the costs involved in the sale and the value at which you sell the house.

Commitment

You can only commit to a monthly or yearly rent if you rent, but buying a home is a long-term commitment. Pick up and move is not possible with a short term in your own home. He has a big financial responsibility. The sales process can take months.

How much house can you buy?

The first step is figuring out what you can afford if you decide that buying a home is right for you. One of the guidelines that creditors often start with is the debt-to-income ratio (DTI). Many lenders suggest that your total DTI rate should not exceed 36%. Your mortgage loan alone must be less than 28% of your monthly income before taxes.

First, add the total amount of your monthly income (before taxes) to get your DTI rate. Then multiply your total monthly income by 36%. Combine your monthly debt. Compare 36% of your monthly income to your monthly debt numbers.

Now combine all your non-mortgage monthly payments. Subtract this amount from your total monthly income. This number gives you an idea of ​​the huge mortgage payments you can afford. It must be 28% or less of your monthly salary.

Finding the Right Mortgage

It’s time to dump it and move on. You can finance a loan of hundreds of thousands of dollars, so making a wise decision is important. A bad mortgage can affect your finances over time.

The good news is that there is a type of mortgage for almost every homebuyer, and the bad news is that choosing the wrong loan can cost you thousands of dollars in interest over the life of a loan. The most common loans come in two forms, fixed or variable interest rates.

A fixed rate loan gives you stability. The interest rate does not change during the loan period. Your payments are always the same. You continue to pay the same interest as interest rates rise. You can pay more than the current value if interest rates drop, but you can pay less.

you lost that stability fee loan. The mortgage will be adjusted at the current interest rate. This can be profitable when interest rates drop, but you may face higher monthly payments if your interest rate also rises.

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Your deposit. Set at least 20% of the house price when you take out a traditional loan. That’s the total number of lenders who want to avoid paying private mortgage insurance (PMI).

Most lenders will require you to pay the original PMI if you are unable to get 20%. It can be anywhere from 20 to a few hundred dollars a month. Ask if there are other options besides paying PMI if you can’t pay the full deposit.

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