If you're currently renting an apartment or house, it makes good financial sense to consider becoming a homeowner in the foreseeable future. There are pros and cons to owning your own home -- and it's not for everyone -- but for most people, the advantages far outweigh the disadvantages.
An exception would be if your job requires you to relocate frequently. In that scenario, the potential benefits of building up equity in a home would be greatly diminished.
On the other hand, if you plan on staying put for more than a few years, then the tax benefits and investment value of owning real estate could put you on a stronger financial track than if you continued shelling out your hard-earned money to a landlord. You've probably heard the argument before: "If you pay rent, you have nothing to show for it at the end of the year". However, when you buy a home, an increasing portion of your monthly payments is applied to your actual ownership of the property (as opposed to how much you owe the bank).
Tax Advantages of Home Ownership
In most cases, you can deduct all of your home mortgage interest from your federal tax returns, according to the IRS. More specifically: "The only costs you can deduct are real estate taxes actually paid to the taxing authority, interest that qualifies as home mortgage interest, and mortgage insurance premiums."
However, since everyone's financial situation is different and there is no "one size fits all" approach to financial management, it's always best to consult with an experienced CPA, enrolled agent, or knowledgeable tax preparer. There may be other tax benefits you could qualify for as a homeowner, too, including getting tax credits for installing a solar energy system. The government's Energy Star program says tax credits on new solar energy systems are available through the year 2021.
Getting the Process Underway
Two key steps to becoming a home owner are finding out your credit score and meeting with a mortgage lender to determine how much of a real estate loan you could qualify for. An experienced real estate agent can also provide you with a wealth of guidance and information on how to become a homeowner. They can fill you in on many of the exact steps, requirements, and advantages of buying your first home. A buyers' agent can also help you assess your readiness to take the plunge into home ownership.
In addition to finding out your credit score, which will impact your mortgage interest rate and the type of loan you may qualify for, other vital information can be gleaned from a detailed personal budget. Although the amount of rent you now pay will provide some insights into your potential house-buying budget, there are a lot of variables which will impact how much of a mortgage you could comfortably afford.
