Is it Really a Financial Suicide to Buy Your Own House?

Is it Really a Financial Suicide to Buy Your Own House?

Buying your own house is your personal preference. However, huge socio-economic influences might affect rates of house ownership. Thus, keen consideration is a need in this matter.

Your decision to purchase a home may depend on the market you are in – the relevance of buying a home in one state may not be as relevant in other states. This is because  American lifestyle regards home ownership to a particular degree. Social and emotional stress, as much as financial issues can also influence your buying decision.

Costs of Buying & Owning Your Home

Upfront & Closing Costs

Purchasing a home involves various paid in advance costs.  Some are paid in cash after the seller gets your purchase proposal, while some are settled at the close of the sale.

  • Down Payment

Down payment is the percentage of the property’s purchase cost normally paid at closing.  You have to stipulate a down payment in your buying offer, although this is changeable upon the vendor’s approval. The amount may vary depending on the condition of the local market, your credit status, and the nature of approved mortgage loan, which normally go from 3.5% to 20% more of the selling price.

  • Earnest Money

It’s traditional to give earnest money ranging from 1% to 3%  of the purchase cost. This is to let the seller know that you are honest to buy the property. Once the offer is taken, the vendor puts the earnest money into an escrow account which will be credited against the closing expenses.

  • Property Taxes

Since homeowners pay property taxes in advance (typically in 6- months increase), you must reimburse the vendor for the taxes paid between the end of the current tax schedule and the closing date.

  • First Year’s Homeowners Insurance

Proof of homeowners insurance is necessary prior to closing. You must pay the 1st year’s upfront premium.

  • Other Closing Costs

Inspection, taxes, insurance and appraisal are among the various items tied upon closing.

Recurring Costs

Homeownership entails a lot of periodic costs. These are payments included in your monthly    escrow premium, while other costs are paid individually.

  • Property Taxes

Property taxes rate frequently changes every year, and the rate will also differ by location. Your state or country sets your property taxes which will be used in paying for infrastructure, schools and other vital services.

  • Loan Payments

You have to pay monthly for the principal and interest of your mortgage loan for a period of 15 to 30 years.

  • Private Mortgage Insurance

Private mortgage insurance premium will be included in your monthly escrow obligation if your lender is a private firm. Down payment is below 20% of the purchase cost of your property.

  • Homeowners Insurance

This insurance premium varies every year and is based on the changes in the appraised value of your home.

  • Utilities and maintenance

Utilities and maintenance include gas, electric, water, cable, Internet, house repairs, and more.

  • Special (One-Time) Costs

Costs that happen only once can include moving cost, furnishing, improvements, as well as renovations.

So, is it really financial suicide to buy your own house? That’s completely up to you. If you’re a homeowner thinking of looking for a place to rent, or a renter  eager to buy a home, it’s important to analyze and weigh out the benefits, costs, and  challenges of renting versus owning a home. You can check out tools and real estate experts like Pink Pearl Real Estate to help you in making a wise decision.

Categories: Real Estate

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