Are you unsure about becoming a HOMEOWNER?

Thinking that you can't afford to BUY a home?

Are you worried about whether home buying is a good INVESTMENT?

Buying a first home can be an intimidating process. But the first step is making those first decisions: I want to own my own home; I can afford to own my own home; owning my home makes sense for me financially and emotionally. If you are still struggling with those first decisions, here are some facts that might help you make that first step towards becoming a homeowner.

You Can't Afford NOT to Buy a Home!

Over the last ten years, the cost of rental housing in the U.S. has increased an average of 3 percent per year. That means that an apartment or home renting for $750 per month will cost more than $978 a month in ten years. If you rent the same home for ten years, the total amount you would pay for rent will equal $103,000!

Year... Monthly Rent....... Total Annual Rent
1 ....... $750.00 .............. $9,000
2 ....... 772.50 ............... 9,270
3 ....... 795.70 ............... 9,548
4 ....... 819.60 ............... 9,835
5 ....... 844.20 ............... 10,130
6 ....... 869.50 ............... 10,434
7 ....... 895.60 ............... 10,747
8 ....... 922.50 ............... 11,069
9 ....... 950.00 ............... 11,401
10 ..... 978.60 ............... 11,743

Total rent paid over ten years $103,177

Tax Advantages of Owning a Home Result in Savings:

None of that $103,177 is returned to you, either through savings or as an investment. Homeownership, on the other hand, has tax advantages over renting a home, and those advantages can help save you money. Unlike you monthly rent, part of your monthly mortgage payment "comes back to you" in tax savings. Here's an example:

You purchase a home that costs $110,000. Your down payment is $10,000 (plus closing cost - expenses incurred to actually process the transaction). You finance the balance with a 30-year fixed rate mortgage at 6.5 percent interest. Your monthly payments (not including utilities, maintenance, insurance, etc.) are:

Monthly Mortgage & Tax Payments:

Mortgage ........................................... $632
Property Tax (@ 1.25% tax rate*) .......... 115
Total Monthly Payment ....................... $747

Tax savings per month (assuming a 30% income tax bracket):
Mortgage interest rate tax deduction ..... $161
Tax deduction for property tax ............... 34

Total Monthly Tax Savings ................... $195
Total Monthly Cost After Tax Savings .... $552
*property tax rates vary by city and county

You actually save $195 a month by owning your own home. On a yearly basis, the savings is even more dramatic:

Total Annual Costs:

................................................... Homeowner ...... Renter
annual mortgage/rental payment ..... $7,584 ......... $9,000
real estate taxes ........................... 1,380 .......... 0
mortgage interest tax deduction ..... -1,940 .......... 0
tax deduction for property tax ......... -408 ............ 0
mortgage principal accumulation .... -1,116 .......... 0
appreciation ................................. -4,950 .......... 0
Total Annual Cost .......................... $550 ........... $9000
*Based on 4.5% annual appreciation rate, from the NATIONAL ASSOCIATION OF REALTORS Median Sales Price data series.

Homeownership is a Good Investment:

For the majority of Americans, their home is their largest financial asset and a major player in their investment portfolio. It's a good thing, too, since stock market value has declined since 1998, while home price appreciation has increased. The NATIONAL ASSOCIATION OF REALTORS estimates that home value rises, on average, by 4.5 percent a year. That's a steady return on investment; one's own home is a much less volatile asset than stocks, bonds or mutual funds.

Article provided by First American Title.