There's no place like home...
But should you rent or own?
Simple Steps to Steady Your Nerves
Purchasing a home can be exciting, satisfying and stressful. Achieve the dream, and help minimize the worry, by following these simple steps.
- Be sure you're ready to commit. You want to settle down in the area for at least 3 - 5 years. You feel your job and/or other income sources are stable.
- Review your credit history. High credit scores mean greater loan options and lower interest rates. Review your credit report for errors that may lower your score. Keep in mind, errors happen. It can take up to 60 days for them to be removed from your credit report.
- Know how much you can afford. Evaluate your current expenses and overall budget. Determine the maximum amount your can realistically afford to spend on housing each month.
- Get pre-qualified. Before you begin house hunting, confirm how much home you can afford. Call us at 800-822-6761 or stop by a TD Store for an official Pre-qualification Letter based on your gross income and current debt payments (e.g., car payments, outstanding credit card debt, etc.).
- Research financing options and homebuyer programs. Get started by visiting our Resource Center and taking advantage of The First-time Homebuyers' Kit. Follow-up by researching and leveraging all available local programs and Federal loans available to homebuyers.3
- Get professional help. A buyer's agent will help guide you through the search and bidding process. A real estate broker or agent can assist you with your search and may have access to exclusive listings.
- Create your wish list. Know what your new home must have to make you happy. Know what you're comfortable sacrificing.
- Enjoy the journey! Each step is leading you home.
Some experts believe a real estate recovery is beginning to take hold. Unemployment rates are dropping and interest rates remain low. Whether you're currently renting or you own your home, if you're dreaming of someplace new, this may be a good time to consider whether or not to make your move.
The Pros of home ownership:
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Pro #1 - Tax Deductions
As a homeowner, you may be able to deduct the following costs from your taxes:
- real estate taxes paid to the taxing authority
- home mortgage interest
- mortgage insurance premiums
For more information, contact the Internal Revenue Service (IRS) at 800-829-1040 or visit www.irs.gov.
Pro #2 - Tax Credits
Homeowners making qualified energy improvements may be eligible for residential energy credits. For more information, contact the Internal Revenue Service (IRS) at 800-829-1040 or visit www.irs.gov.
Pro #3 - Equity
Build equity when you make timely mortgage payments. Eventually, the value of your property will be worth more than the money you still owe on your loan (referred to as the loan-to-value ratio).
- You may be able to borrow against your equity to make home improvements, consolidate debt, pay college tuition, etc.1
- If you sell your home, you may receive cash back based on the equity available.
Pro #4 - Freedom
Fix issues and change your decor, structure and landscaping whenever and however you choose.2 You no longer need to rely on a landlord who may or may not maintain the property or approve your changes.
Pro #5 - Privacy
Share your personal and financial information with your qualified lender, not a landlord.
Pro #6 - Refinancing
If you've made consistent mortgage payments, you may eventually qualify for refinancing. Refinancing may save you money by allowing you to:
- lower your monthly payment
- lower your interest rate
- switch to a different type of mortgage
- adjust the length of your mortgage
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The Cons of home ownership:
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Con #1 - Long-term Commitment
Owning may limit your ability to move if you decide you'd prefer a different style or size home, to live in a different neighborhood or accept a job opportunity far away.
Con #2 -Maintenance/Repairs
Whether a small job (fixing a loose floorboard) or a big job (replacing the roof), you either have to do it yourself or hire someone to do it for you and you'll have to pay for it.
Con #3 -Financial Risk
Initial costs associated with purchasing a home (downpayment, closing costs, loan fees) may leave you without sufficient savings for home maintenance and repairs, unexpected expenses or a sudden job loss. Without sufficient savings, unplanned expenses or changes in income may also make you vulnerable to foreclosure and negatively impact your credit worthiness. Finally, if your home depreciates in value and you choose to sell, you may lose money.
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Do what's right for you.
Understand your lifestyle, what you can afford and what makes you happy. Whether you rent or own the cabin in the mountains, the ocean-side cape cod, the suburban matchbox or the downtown loft, if it feels right, meets your needs and fits your budget, you're home.
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