One of the goals that many people want to meet is to have a home of their own, so much so, that there are those who think that renting a house or apartment is throwing money away. However, buying a home is not an easy decision, and the process can be very stressful and complicated. Because of this, here I explain what you should know before buying a house so that the process is not so difficult.
1. You must have good credit
In order for a bank to provide you with a home loan, you must have a good credit history and a high score. Since in this way, your chances of being accepted will increase and you will be able to obtain a lower interest rate.
2. You must know and choose how you are going to finance the house
In the market there are different types of mortgage loans to which you can apply to buy the house. After you establish your budget and define how much money from your savings you will use to buy the house, you must compare different mortgage loans. In this way, you can choose the one that best suits you. Banks in the United States generally do not finance 100% of the home, therefore you may have to pay closing costs, down payment, etc.
3. Find out if you can get help from the government
The Federal Housing Administration (FHA) offers a home financing program, with which you can get FHA home loans if you can't qualify for a traditional mortgage, don't have good credit or can't pay more than 3.5 percent of the initial fee.
Similarly, the Department of Housing and Urban Development (HUD) offers a Housing Choice Voucher Program (also known as Section 8) to help low-income people purchase a home. You can contact HUD offices to apply for the program.
4. Know how much tax money you will have to pay
Depending on the state where the house is located, you will have to pay a tax when buying it. For example, the New York State transfer tax applies to any property transfer over $ 500 at a flat rate of $ 2 for every $ 500, or 0.4 percent of the total cost of the home. Similarly, New York City imposes a 1% tax on properties valued at $ 25,000 or more.
5. You must know if the house requires other monthly expenses
Before making an offer, you should know if the house you want to buy is part of a residents' association or requires a maintenance fee. Since, in addition to paying the mortgage, you would have to pay once a month a fee to the association for the maintenance of the community.
Is It Better to Buy a House or Rent?
Without a doubt, deciding between buying a home or renting it is one of the most difficult and important financial decisions. Since depending on the decision you make, it will affect your finances in different ways. Because of this, here I explain the advantages and disadvantages.
Advantages of renting
- The process and procedures to rent a home is much easier and faster than buying a home. Usually the process consists of signing a contract and obtaining insurance for the apartment.
- The monthly payment on a rented house is usually much cheaper than the monthly payment on a mortgage loan.
- You will have more flexibility when it comes to moving. Since if for some reason, you do not like the area where you live or decide to move for work, when renting it is much easier to change your home.
- When renting you do not have to worry about repairs or maintenance of the house, since it is the responsibility of the owner.
- You do not need so much savings, because to rent a home you only have to pay 2 to 3 months in deposit.
- If you rent, you will not have to resort to mortgage loans therefore you will be debt free.
Disadvantages of renting
- One of the disadvantages of renting a home is that the owner can increase the rent at any time, if not stipulated in the contract.
- Depending on the state you live in and your budget, your rental housing options may be limited.
- If you want to make a repair, paint or decorate the house to your liking, you must have permission from the owner.
- It is not a stable or "safe" home, since when the contract ends the owner can decide to stop renting the home.
- If you invest in improvements or remodeling, you will lose the investment when you move.
Advantages of buying
- When buying a house it gives you stability, since it is your property and you decide when to move.
- You can make all the remodeling and repairs you want.
- Having a mortgage loan can help you develop good credit, if you pay on time.
- After you pay the mortgage loan, the house is yours and you do not have to pay the monthly fee.
- You can generate extra income, since you can rent a part of the house such as the basement or a room.
- Buying a home has tax benefits, which you can deduct on your tax return.
Disadvantages of buying
- The process of obtaining a home loan is tedious and complicated. Since you have to fill out a number of documents, obtain insurance, etc.
- You will have a debt to pay for 20 or 30 years and if for any reason you lose your job or do not have enough income, your house can be seized.
- The home can lose its value over the years due to an economic crisis in the country or problems in the area where you live.
- It is much more difficult to move since you would have to sell it.
- You are responsible for maintenance and all unexpected expenses.