This year, just as every year, financial goals make up a significant share of resolutions for many of us – one of those financial goals is buying a home. Setting a goal to buy a home is exciting, and reaching that goal is even more exciting.
This is because there are so many benefits to purchasing a home. However, achieving such a huge financial goal requires preparation and financial readiness. In this blog, we will share some of the most important benefits of buying a home and our top financial readiness tips for homebuyers.
Benefits of Buying a Home
In terms of benefits, buying a home offers more than opportunities to customize your space, gain greater privacy, and enjoy other quality-of-life enhancements. It also provides several critical financial benefits.
It is an excellent long-term investment. While buying a home requires a financial commitment from you, it can also give back to you even more than you put into it. This is because real estate property usually appreciates over time. Even when the housing market takes a dip, it eventually comes back even stronger, making it worth the wait for patient homeowners looking to turn a profit down the road.
You build equity. When you are paying rent, you aren’t building equity. While some of your monthly mortgage payment goes toward interest and insurance, much of it builds equity in your home that can be available for financing if you ever need it. Building equity grows your net worth and makes it easier to set your sights on purchasing a larger or more luxurious home in the years ahead. If you need more insight on cost of renting or purchasing a home try our free calculator.
You can get a tax deduction.* When you own a home, you can deduct the interest you pay on a loan for your primary residence from your federal income taxes. This can save you thousands.
Homebuying Financial Readiness Tips
Before buying a home or even getting pre-approved for a home loan, prospective homebuyers should take several steps to ensure they are financially ready and prepared for the entire homebuying process.
Identify whether homeownership is right for you. Homeownership is not for everyone. If you like to move often, purchasing a home may be outside your best financial interest since it can take several years to realize monetary gains from homeownership. While there are many benefits to buying a home, homeownership has its downsides, and weighing the pros and cons is essential. For example, consider whether you are ready to take on the home maintenance that comes with buying a house, including the unexpected costs that can come with repairs.
Improve your credit. Getting your credit in the best shape possible before applying for a home loan is incredibly important. Paying off debt, making all payments on time, and resolving errors on your credit report can help improve your credit, giving you access to lower interest rates and saving you money. If you haven’t checked your free annual credit reports recently, do so now at annualcreditreport.com.
Save for a down payment. Different lenders and different loans require additional amounts for a down payment on purchasing a home – but even if you qualify for a special mortgage with a low down payment option, you must begin building your savings as soon as possible. Be sure to save extra for unexpected expenses, closing, moving, and more.
Get organized. The months leading up to buying a house are a great time to get all your financials in order. Start by creating a budget, which can help determine how much of a mortgage payment you can afford. You should also take this time to ensure you have access to essential records required in the borrowing process, like identification, financial statements, tax returns and pay stubs.
Get help. Buying a home is a considerable effort, and you should not go alone. Much like finding the right home, finding the right mortgage for you takes time and is a process best navigated with experts. At Meritrust, our home loan specialists are experienced and knowledgeable in the entire homebuying process and can help you through it from start to finish.
Ready to get pre-approved? Meritrust makes it easy with our online application.
*Meritrust does not offer tax advice. Please contact a tax professional for advice applicable to your situation.
