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4 Pros and Cons to Buying Your First Home

by on May 22, 2012

By Samantha Savory

Now that many Gen Y adults are working their way up the corporate latter, finishing up graduate school or settling down with the person they want to spend the rest of their life with, the next logical commitment would be to buy a home, right?  For those lucky individuals that can find a well paying job out of college, many are unsure whether they can afford to and want to buy their own place.

According to the Wall Street Journal, home prices have fallen a staggering 34% from their peak in 2006 and mortgage rates are at a 15 year low, but is the long-term commitment really worth it? Many people are still hesitating because they are afraid of the possible negative outcomes. We all saw the foreclosure devastation that wreaked havoc on the nation over the past three years, so it only makes sense why so many people are scared to take on the risk that comes along with purchasing a home.  Regardless of how low mortgage rates go, so many potential buyers are sticking to renting because they don’t want to risk their credit and all the financial mess that could come with owning a home.

To help you get a better perspective on what option better suits your personal financial situation, here are 3 pros and cons to buying a home:

1. PRO: Pay less monthly payments.  As more people were put out of their homes by foreclosure, they were forced to rent.  This trend forced the price of rental apartments and homes across the nation to spike.  If you buy a home, you will be paying much less for a mortgage than inflated rent.

CON: You have to pay additional fees besides rent since you do not have a landlord.  Property taxes, home owners insurance and other taxes may apply depending on the state that you purchase property in.  These additional costs on top of maintenance expenses could add up to thousands of dollars.

2.PRO: You can earn equity or a return on investment from your first home purchase.  In the long-run, this could allow you to update your home, pay off a major debt or make a new big purchase for your family with the new equity your home has achieved.

CON: There are no guarantees that your properties value will increase over time.  There is also no guarantee that the property you buy will decrease – a problem millions of people faced over the past three years, finding their mortgages upside down and paying more on it than it was actually worth.  Luckily, the worst of depreciating homes seems to be behind us and will likely not happen for a long time.

3. PRO: You can take advantage of tax deductions/credits as a homeowner.  You can deduct your federal and state income taxes in the amount of mortgage interest and real estate taxes you pay each year if you itemize deductions.

CON: Your tax filings will become more complex therefore requiring you to pay more to file your taxes, unless you are an accountant of course.

4. PRO: Mortgage interest rates are at an all-time low which could save you thousands of dollars if you were to buy a home now compared to years into the future when you do not know for sure what the rates will be. Also, home prices are still pretty affordable now because the housing market is still recovering from the housing bubble that occurred over the past three years.

CON: Even though rates are very low right now, once you own a home, you are bound to live there and make the monthly mortgage payments for the term of the loan – usually 15 – 30 years.  Of course, if you decide to move or don’t want to live in that home any more, you can sell it or rent it out, but both of those tasks will cost money and do not happen over night.

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From → Money Management

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