Purchasing A Home- Consider As An Effective Investment

It is a big decision to buy vs rent in Colorado, and it takes thoughtful consideration, as most mortgage lenders will agree. But the benefits of home ownership are great. For several years, purchasing real estate has been regarded as an extremely profitable investment. It is an achievement that offers a sense of pride, financial stability and potential tax benefits.

There are certain responsibilities related to owning a home. Landlords will frequently argue the benefits of renting, and for obvious reason. If you are renting, you're serving them make their mortgage payment.

The numbers are staggering if you look at it this way. If you are paying $1,000 a month for an apartment, and you know your rent will increase 5% every year, then over the next five years you will pay your landlord $66,309. If you are currently renting an apartment, you may be paying much more than that each month. Either way, you gain no equity by shelling out this monthly housing expense and you surely won't benefit when the property value goes up!

However, if you were to buy your own home or condominium, you would be well on your way toward building equity within that same five-year period. By choosing a fixed-rate loan plan, you can have the comfort of knowing that your monthly mortgage payment will never go up. In fact, you would have the option of refinancing to a lower rate of interest at some point in the future should interest rates drop, and this would cause your monthly mortgage commitment to decline.

In addition to building equity, there are tax advantages that come into play with home ownership. Depending on your tax bracket, owning a home is often less expensive than renting after taxes. Interest costs on a mortgage below $1 million are tax-deductible, and your mortgage consultant should help you check the tax advantages of various loan scenarios, and share this information with your tax consultant to get feedback on your behalf.

There are also many first time home buyer programs in Colorado. To identify the loan program that is right for you, your mortgage broker will need to evaluate your monthly household income, current assets and savings, as well as any monthly commitments you may have for credit card payments, car payments, child support, etc. These prequalification factors, along with the details of your credit score, will determine how much house you can pay for and what interest rate you will pay for financing. It is also essential to let your mortgage consultant know what your future goals are, because this will help narrow down which loan option is the best match for your long-term needs.

There are various types of loan programs available, such as "low" and "no" down payment mortgage programs. These types of programs demand the first time home buyer in Colorado to provide less than 3 percent of the loan amount as down payment. FHA lenders rule that the mortgage payment, including principal, interest, taxes and insurance (PITI) should not surpass 31% of your gross income, and the PITI and other long-term debt (car payments, etc.) should not exceed 43% of your gross income.

Housing is an expense that makes a big bite out of the monthly budget. If you are a renter and believe that "home" is more than just someplace to hang your hat, think about the advantages of purchasing real estate. It may be time to take the step into building your personal net worth as a landlord.

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