Persistent misinformation about the mortgage process, coupled with faulty cost assumptions concerning routine property maintenance can often lead renters to decide against buying a home of their own.
But, in truth, a bit of research and a calculator can bring surprising results that just might tip the scales the other direction and make home ownership a reality.
One of the biggest obstacles renters face is the lack of a down payment. However, state and local housing authorities often have programs or initiatives that allow prospective buyers to obtain between $5,000 and $20,000 for a down payment. These frequently go unused and can range from no-strings grants that don’t have to be paid back to no-interest loans that are re-paid when the home sells. And they’re not just for low-income folks. Buyers can sometimes earn as much as 140 percent of the median income and still qualify.
Never heard of down payment assistance programs? You’re not alone. An October 2015 survey by the nation’s leading organization dedicated to providing affordable housing found that 40 percent of respondents knew nothing about these programs.
Other incentives to keep in mind include the fact that property taxes and mortgage interest are tax deductible. That can make quite a difference in the cost of home ownership, especially in the first years of a mortgage loan when the interest eats up a bigger chunk of your payment than the principle.
Then there’s the issue of routine maintenance on your new house and how much that will cost. The same NeighborWorks America survey cited above also found that prospective home buyers’ routine maintenance estimates are wildly inflated. People thought home repair costs would average more than $15,000 a year, when the actual cost is more likely between $2,000 and $6,000 a year, the survey found. That translates to between two percent and four percent of the home’s value.
Property taxes and insurance, which are generally incorporated into your mortgage loan, are also standard costs associated with owning a home. Taxes likely will be between one percent and three percent of the home’s cost, while insurance is about one-half of one percent.
Other cost considerations to keep in mind when deciding whether to purchase a home of your own include how much time you plan to spend in it and whether you’ll have to pay HOA fees. Finally, as any experienced home owner will tell you, an emergency home fund is essential. Things will definitely go wrong, and it’s best to be able to pat yourself on the back for your preparedness rather than have to plunk down your credit card or take out an emergency loan.
You might not know it, but affordable home ownership is attainable.