For many, owning a home is still at the center of the quintessential American Dream. Not only can you boast accomplishment and pride, being a homeowner gives you a sense of community and stability. However, that’s not all—A home you own can also be a solid foundation for the future of your finances and can help you build long-term financial wealth.
If you’re teetering on the edge of your homebuying journey or are hesitant to take that first step, consider how owning a home could be more beneficial than you think.
Benefits of Owning Your Home
Buying a home is arguably one of the biggest financial investments you can make in your lifetime. Check out how it can actually give back:
Appreciation: The longer you stay in your home, the more likely it is to increase in property value. What does this mean? Well, if you ever decide to sell your home, you can get bigger profits or if you end up using it as an investment property, you can increase monthly rental income, resulting in more cash in your pocket. If you’re in a highly desirable location and have done any improvements or renovations to your home, your home value can be positively affected over time.
Equity: Generally speaking, the higher your home value, the more equity you can gain. This term refers to the difference between how much you owe on your mortgage and how much your home is currently worth. You can tap into your equity in a variety of ways, including a cash-out refinance, home equity loan or home equity line of credit (HELOC). Why would you want to? You can use this equity to buy a new home, use it for retirement, consolidate your debt, or even fund bigger purchases instead of incurring debt on your credit card.
Tax Benefits: Perhaps the most popular tax benefit to owning a home are potential tax deductions. You may be able to deduct your mortgage interest, mortgage points, private mortgage insurance (PMI) or state and local tax (SALT), helping you save money and offset homeowner costs. Make sure you consult a financial advisor to clarify any homeownership tax benefits before you dive into each tax season.
Savings: Buying a home saves you from any unannounced rent hikes and (as stated previously) can give you a number of tax breaks. You are also much less likely to be stuck with any inefficient appliances that could cause you to spend more on utilities. More importantly, you won’t continue paying rent well into your golden years, will likely fully own your home by then and shouldn’t have to worry about monthly mortgage payments.
Stability: With a fixed-rate mortgage, you won’t have to worry about a landlord increasing your monthly payments. Your mortgage will be relatively stable, so you shouldn’t have to rework your budget for other expenses every month or year.
Mortgages Available for First-Time Homebuyers
Fortunately, there are many loans that first-time homebuyers may be able to access. It all depends on your individual needs, budget and eligibility. Make sure you do your due diligence before deciding or applying as each loan has different guidelines.
FHA Loans: Insured by the Federal Housing Administration (FHA), these loans only require a 3.5% down payment, which makes them a common choice for many first-time homebuyers who may not have enough funds for larger upfront costs.
VA Loans: If you’re an eligible U.S. military member or surviving spouse, you may be able to take advantage of home loans backed by the U.S. Department of Veterans Affairs (VA), which may not require any down payment or private mortgage insurance (PMI).
USDA Loans: If slow living is more your vibe, a mortgage backed by the United States Department of Agriculture can help you buy a home in rural areas and some suburban properties with no down payment.
Fannie Mae and Freddie Mac Conventional Loans: There are a number of conventional loans designed specifically for first-time homebuyers and low-income borrowers who need low down payment options. Eligible borrowers can pay as little as 3% down.
State First-Time Homebuyer Programs: Many states and local governments offer first-time homebuyer programs that offer favorable benefits, including lower interest rates and tax credits. Find out what’s available to you in your state to see if you can take advantage of these programs.
Renovation Loans: Some first-time homebuyers go for a fixer-upper because they’re often more affordable than “ready to move in” homes and they can really incorporate their own personal touch through renovations. Believe it or not, there are a handful of mortgage options for that too.
Go Forth with Confidence
After you have a basic understanding of the “whys” and “hows” of buying your first home, it’s then time to decide to embark on the homebuying process. There’s no one-size-fits-all home loan, so make sure you make decisions that are best (and possible) for you and your family. That may include recruiting a knowledgeable lender and/or real estate agent to help you along the way.
Owning a home is both mentally and emotionally rewarding—While also being a financial investment that could benefit you for years to come.
This article is intended for general informational and educational purposes only and should not be construed as financial or tax advice. For more information on financial planning or investment advice, consult a registered investment advisor or financial planner.
Subject to credit approval. Terms and conditions may apply. Subject to VA eligibility requirements. Property insurance is required on all loans secured by property. The United States Department of Agriculture Rural Development (USDA-RD) Single Family Housing Guaranteed Loan Program assists approved lenders in providing low to moderate income households purchase or build homes in rural areas subject to eligibility requirements. The maximum loan amount an applicant may qualify for will depend on the applicant’s repayment ability. The applicant’s ability to repay a loan considers various factors such as income, debts, and assets. Regardless of repayment ability, applicants may never borrower more than the area’s loan limit (plus certain costs allowed to be financed) for the county in which the property is located. Eligible borrowers can receive 100% financing without private mortgage insurance.
This information is intended for educational purposes only. Products and interest rates subject to change without notice. Loan products are subject to credit approval and include terms and conditions, fees and other costs. Terms and conditions may apply. Property insurance is required on all loans secured by property. VA loan products are subject to VA eligibility requirements. Adjustable Rate Mortgage (ARM) interest rates and monthly payment are subject to adjustment. Upon submission of a full application, a mortgage banker will review and provide you with the terms, conditions, disclosures, and additional details on the interest rates that apply to your individual situation.
