For many young people, home ownership is a dream that seems daunting and difficult to fulfill. Newlyweds, recent college graduates, and twenty-somethings who are working in their chosen fields for the first time often end up renting because they feel overwhelmed at the thought of purchasing a permanent residence and living with a mortgage every month. However, recent changes in the real estate market combined with great offerings from the federal government have made it more and more possible for young men and women to live the American dream.
Why Not Rent?
While renting is a flexible option if you are planning to move in a short period of time, it is not a good investment overall. Buying a home will help to build not only your credit score but also your equity. Also, despite that real estate prices are currently rather low, the market is a very variable thing; it is highly unlikely that, if you keep the home you buy for a few years, you will lose money on it. Rather, you should end up making money when you are ready to move on. There are so many houses available right now, and many sellers who are willing to negotiate lower-than-listed prices. This is a terrific time to buy and starting building equity for later.
How Much Money Will I Need?
New graduates, newlyweds, and other young people often fear that they will be unable to purchase a home because they have not had a lot of time to save up for a down payment and other costs. However, how much money you need depends largely on the price of the home you wish to buy and the types of loans for which you qualify. There are federal mortgage programs that are tailor-made for buyers with less than stellar credit, as well as for buyers who do not have a lot of money to put down on a house, townhouse, or condo.
Regardless, you will need to pay three separate fees up front: earnest money, a down payment, and closing costs. The first, earnest money, is a good faith deposit that you will make when making an offer on a home. It shows the seller that you are serious about buying the property. It will be kept in an account for you and applied toward your down payment when it is time to close. The down payment is a percentage of the value of the home you are buying that must be paid in order for you to obtain a home loan. It shows the lender that you are putting forward some money and taking some risk yourself. How much you need for that depends on your lender, but various options are available whether you have 5%, 10%, 20% or more. Finally, you will also need to pay closing costs that cover the work that has been done to put your mortgage package together and get the house into your name(s).
What Are the Benefits?
There are some great benefits right now for first-time buyers, including an $8,000 tax credit that can be given to eligible buyers who have not previously owned a home or had a mortgage. This is money that will be returned to you at the end of the fiscal year, when you file your income taxes. People who have mortgages also receive other great tax deductions on their interest-related payments, so you can expect not only one large tax credit but also smaller refunds over the years as a result of having a mortgage.
Now is a great time for newlyweds, recent grads, and other young people to buy their first homes. What are you waiting for?
