Buying a Home is the American Dream. It is more than a place you put your hat at the end of the day. It defines you, protects you, and prospers with you. Yes, Home Ownership is a noble pursuit, but it always starts with this first, important question: Should I buy or Rent my Home? The answer, surprisingly, is not so obvious.

Now the question of “affordability” is an important one, but that’s not the subject of this article. We have a free calculator at our website. You’re welcome to use it. The subject of this article, however, deals with the questions that must be answered, before a renter can migrate into the magical realms of HOME OWNERSHIP.

Here are 5 MAGIC POINTS that you need to examine, on whether or not to BUY or RENT your next Home:

1. EXPENSES

2. COMMITMENT

3. MONTHLY PAYMENTS

4. TAX RETURNS

5. WEALTH

1. EXPENSES:

Renting a home requires that you give a check to the landlord each month. That’s it. You’re done. Everything else is simply taken care of for you. When you OWN a home, you are in business for yourself, and this means that you must handle all of the expenses yourself.

1. You are responsible, of course, for the monthly mortgage payment to the bank…

2. You must pay all your utilities, including phone, gas, electric, cable, trash, water, etc.

3. Don’t forget your responsibility to take care of maintenance. Not having enough money in the bank account is not a good enough excuse. If it’s broken, ya gotta fix it!

4. Don’t forget your Homeowners Association Dues, your Membership Fees, Property Taxes, Special Assessment taxes, insuranceyada, yada, yada.

When you rent a home, you give the landlord a check. When you buy a home, you must ensure that all expenses are met and managed every single month, forever…

2. COMMITMENT:

Renting and Buying have different financial commitments.

1. To rent a home usually requires a lease. Sometimes it’s month to month; sometimes it’s a 12 month lease. But, no matter what, there’s always a way out. Your commitment is limited to the time you choose to stay and reside there.

2. When you buy a home, you usually sign a 30 year mortgage, which most people would argue, is like forever. You are committed to ensuring that the payment is delivered to the bank or lender every single month, on time. They don’t care if you want to move at some point. You can sell your home of course, but you can’t just break your mortgage, like you can break your lease.

Buying a home requires a long-term, financial commitment. Renting a Home simply requires that you cut a check each month you reside at the home of choice.

3. MONTHLY PAYMENTS:

It always appears that a renter will pay less each month on monthly payments. Let me shed some light on this subject. Examined closely, this is as far from the truth as the moon to the Earth. Let’s use an example:

1. As a renter, you pay $800 a month, let’s say, that increases 5% each year. The math may differ with you and your landlord, but you get the idea. Barring rent-control, this is inevitable. Simple enough.

2. As a Homeowner on a fixed rate loan at $1000 Principal and Interest per month, the payment never changesNeverNot ever

3. In other words, the renter’s monthly rent will eventually SURPASS the homeowner’s mortgage paymentMuch faster then you might expect.

In this example, our Renter’s Monthly Payments will exceed our Homeowners Mortgage Payment, in about 6 years.

4. TAX RETURNS:

A renter usually does receive a tax benefit from the State and Federal tax boards each year, sometimes referred to as a “renter’s credit”. But the Homeowner receives a deduction on the Interest paid on their loan. This is a huge benefit to the homeowner.

1. Let’s use the same example with our $800 renter. At the end of the year, our renter might receive a $600 renter’s credit on their 1040EZ form when doing their taxes. Simple enough.

2. Our Homeowner, on the other hand, paid a total of $12,000 in mortgage payments, of which about $11,500 went towards INTEREST. This INTEREST is a write-off.

3. Let’s see$600 versus $11,500. Hmmm. I like that math. That equates to a nice healthy tax return for most of us, come April of next year.

Take those thousands of dollars in tax return, and go on a nice Cruise around Jamaica!

5. WEALTH:

It’s arguably much, much harder for a renter to build wealth. There is no built-in mechanism for appreciation, whereas the homeowner has postured themselves wisely for the future.

1. Let’s say we have a renter that wants to get wealthy. Great! They must go find a business to run, or a stock to invest in, or come up with a great invention, or be the next rock star, or follow a family friends “tip”, and go do Cattle Futures from August to September (just an example, folksI don’t know anything about cattle). In any event, most people would be concerned that our renter is following the proverbial “pipe dream” towards wealth.

2. But let’s say we have a homeowner who wants to build wealth. Great! What do they need to do? Simple.NothingPay the mortgageLive in the houseGo work your job. That’s it. Real Estate appreciates in value, on average, over the long haul, like no other financial vehicle. It is a virtual certainty, and it is automatic. The homeowner controls the total value of the home. That’s the magic of leverage.

3. Let me drive the point home: Someone might buy a house at $150,000, let’s say, and over the course of 7 to 10 years, it is completely reasonable to suggest that this very same house could be worth around $600,000.

Renters do not have a built in advantage for building wealth, whereas Real Estate appreciates in value as a virtual certainty. They don’t call home-ownership the “American Dream” for nothing!

SUMMARY:

The subject of deciding on whether to Buy or Rent, is not simple. In the end, it boils down to a question of complexity. Being a Renter is simple. Being a Homeowner is more complex, and yet, that does not mean that it is not within your grasp. It IS!!! There are so many people that are just waiting in the wings, yearning to help you get there. Real Estate Agents, Mortgage Brokers, Friends, Family, etc.

With all of these resources around you, just about anyone can own a home, and in this great country, the American Dream of Home Ownership is completely within all of our grasps!

But do me a favor. Give yourself the time to examine these important questions first. Look within. As we all get older in life, we yearn for more. Buying versus Renting is a common theme in this journey. As we wave goodbye to the younger years, we say so long to the simplicity of life, and we say hello to the promise of prosperity, wealth, and a better tomorrow. We also say hello to higher, more complex things. Often times, it’s simply the willingness to accept complexity that will get you to the understanding you need.

Best of luck on your journey, from Renting to Owning your next Home!

We’ve enjoyed providing this information to you, and we wish you the best of luck in your pursuits. Remember to always seek out good advice from those you trust, and never turn your back on your own common sense.

About The Author

Tom Levine provides a solid, common sense approach to solving problems and answering questions relating to consumer loan products. His website seeks to provide free online resources for the consumer, including rate-watch, tips and articles, financial communication, news, and links to products and services. You can check out Tom’s website here: http://loan-resources.org , or you can email Tom at info@loan-resources.org .

Copyright 2004, by LoanResources.Net

Disclaimer: Statements and opinions expressed in the articles, reviews and other materials herein are those of the authors. While every care has been taken in the compilation of this information and every attempt made to present up-to-date and accurate information, we cannot guarantee that inaccuracies will not occur. The author will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.

Publisher’s Directions: This article may be freely distributed so long as the copyright, author’s information, disclaimer, and an active link (where possible) are included.

info@loan-resources.org

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So you’ve been renting an apartment for a while and your friends are
all buying houses and settling down to nice, quiet suburban
lifestyle. Is this something you should be doing too? To put even
more pressure on you, every other evening news cast is talking about
the rapidly increasing value of houses in your area.

Before you rush out and buy the first house you can get a loan for,
perhaps it would be wise to stop and decide if buying a house is
really what you should be doing. To help you, here are four things to
think about.

1. How long will you live there?

If your job requires frequent moves, or you are pretty sure you will
not be in the same city in five years, do not buy a house. Real
estate prices do sometimes dip and if you move you may have to sell
your house at a loss.

2. Are you a Flipper?

Flipping is the art of buying a house, living in it for a time as
you fix and improve it and then selling it for a profit. You then buy
another house, live in it for a time, and sell it for a profit. The
risk here is similar to that in the previous paragraph; the resale
value of the house may go down. So if you are going to be a flipper,
be sure to buy a house you would want to live in for the next ten
years.

3. Does renting cost more than owning?

Sometimes you can find a house that is actually cheaper to own than
the place you are currently renting. If you are purchasing a house
purely for the sake of less cash outflow each month, be sure to
consider all the costs of ownership: mortgage, insurances,
maintenance, snow removal, etc. If you still find that owning is more
cost effective than renting, go for it.

4. Is it what you really, really want to do?

Occasionally owning a house is what you really want to do, even if
it doesn’t make economic sense. In that case, make sure you do your
homework, consider the three thinking points above, and make the best
choice you can. Buy the most house for the least money in the best
neighborhood.

Buying a house can be an emotionally charged time in your life. It
is also an enormous user of your resources. Take your time and be
confident that you are ready to move into another stage of your life
where you can be proud to say “This is my house.”

Roger Sorensen

America’s Financial Guide can be found at ==>http://www.Slave2Work.com Subscribe to Money Basics via http://www.slave2work.com/ezine.html

Slave2Work.com - Are you ready for financial freedom?

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When applying for a mortgage loan, you’ll likely encounter the term “FICO” at some point. And even if you don’t hear the phrase mentioned, FICO is there in the background, affecting your chances of loan approval and influencing your interest rate.

So what is FICO, and how does it affect your chances of qualifying for a mortgage loan?

FICO is a computerized credit-scoring model named after the Fair Isaac Corporation, the company that developed it decades ago.

How FICO Affects You
The big three credit-reporting bureaus - Experian, Equifax and Trans Union - use the FICO scoring model to convert your credit history into a credit score. Mortgage lenders in turn use that score to decide whether or not you qualify for a mortgage loan, and to determine what interest rate you’ll pay.

Of course, there are other factors that influence these decisions, but FICO plays a leading role. In other words, your FICO score helps mortgage lenders determine your credit worthiness, how likely you are to pay off your debt, and what risk category you fall into.

The higher your FICO score the better, as evidenced by the scoring brackets below:

650 - 850: The “go ahead” category. Low risk to lender. Applicant has good chance of qualifying for a mortgage loan.

620 - 650: The “possible” category. Moderate risk to lender. The lender will likely request more information from the applicant to base their qualifying decision on.

620 or below: The “risky” category. Highest risk to lender. Applicant will probably have trouble obtaining a mortgage loan.

FICO Factors
Your FICO score is based on your credit report (which is your credit history on paper). Your credit report includes such things as:

• Your debt-to-income ratio
• Number of credit cards held
• Credit card balances
• Other outstanding debt
• Payment history
• Payment delinquencies

How to Keep a High FICO Score
There aren’t any “quick fixes” when it comes to raising your FICO score. Improving your credit is a gradual, cumulative process. Paying off credit cards will help, but it’s best to take a more preventative approach:

Pay your bills on time. Don’t apply for credit too often. Minimize your debt (to improve your debt-to-earnings ratio). In other words, keep a clean financial record.

Conclusion
Think of FICO as a little man watching how you handle your finances peering over his librarian-style glasses and scribbling notes onto a clipboard. Give him good things to write about, and you’ll have less to worry about when you apply for a mortgage loan.

* Copyright 2006, Brandon Cornett. You may republish this article in its entirety, provided you leave the byline, author’s note and website hyperlink intact.

About the Author

Brandon Cornett is the editor of HomeBuyingInstitute.com, one of the Internet’s largest and most respected libraries of home buying information — more than 100 expert articles in 12 different home buying categories! Put this knowledge to use by visiting http://www.HomeBuyingInstitute.com

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