Is Homeownership right for you?
What are the advantages of homeownership?
How much can I afford?
What are the risks?
Myths about homeownership

Is Homeownership right for you?
Buying a home is the largest purchase most people will ever make. Homeownership has great benefits. Homeownership also comes with certain responsibilities.

Are you ready for homeownership? Look at your current situation and determine if:

• You have continuing and reliable source of income prior to applying for the loan
• You have a credit history that shows you are ready for homeownership
• Your total debt is manageable and you can afford to take on the costs associated with homeownership
• You have money saved for down payment and closing costs

Once you fully understand your current situation, it is important to look at the pros and cons of homeownership to make the best decision for you and your family.

What are the advantages of homeownership?
There are many great reasons to own a home:

• You will have a place that is yours. You'll own it, have a place to raise a family and become a part of your community. You can pass your home down to your children and their children, creating security for generations to come.
• You may pay less to own a home than you would to rent - and it is yours at the end.
• Homeownership can reduce the federal income taxes you pay. You can deduct the interest on your mortgage and property taxes you pay on your home on the tax returns you file each year. These tax savings partially reduce or offset the actual cost of owning your home.
• Your monthly payments won't ever go up if you choose a fixed-rate mortgage.
• You build a good nest egg. Owning a home is the single greatest source of financial security and independence for the majority of people who have taken this step.

How much can you afford?
To get a quick idea of what you can afford to spend, multiply your annual gross income (before taxes) by 2.5. For example, if your annual household income is $50,000, you might be able to qualify for a $125,000 home. This is just a rough estimate - the actual number will vary based on factors such as your debt and credit history.

Mortgage lenders typically use the housing expense and debt-to-income ratios to more accurately determine how much you can afford to spend on your mortgage.

• Housing expense ratio - Mortgage lenders recommend that your monthly mortgage payment should be approximately on fourth of your monthly gross income. Housing expense includes your principal and interest payment, property taxes, homeowners insurance and any other costs that are related to housing costs.
• Debt-to-income- ratio - This figure includes your housing costs and all other debt. This would include, but is not limited to, credit cards, car loans, student loans, child support, and alimony. Lenders generally like this number to be between 30% and 40% of your gross income.

A mortgage lender, realtor or housing counselor can help you better understand these guidelines.

What are the risks?
Overall, homeownership is a good investment for most people, but there are risks. If you understand the benefits and risks of homeownership, you can make the best decision about when to buy a home. So what are the risks?

• Monthly housing expenses can increase. Your monthly mortgage payment may be larger than your current rent. These higher monthly payments may be offset by a tax benefit at the end of the year. Talk to a tax professional to understand your particular situation.
• You become your own landlord. If an appliance breaks, you will have to pay for its repair or replacement. You are also responsible for the maintenance and upkeep of your home and property.
• You must sell your house to move. Depending on the local real estate market, you might not be able to sell your home quickly. You should also factor in the likely expense of hiring a real estate professional. Fees can be negotiated and vary across regions. They also vary from professional to professional.
• Property values can depreciate. You can lose value in your home for a number of reasons, such as a recession, the condition of your home, or a drop in a neighborhood's home values. If your home loses value and you have to sell it for less than you owe. You will be required to repay the full mortgage.

Myths about Homeownership
Myth: You need great credit to become a homeowner.
Fact: You may still be able to buy a home with less-than-perfect credit. And remember, you can improve your credit over time.

Myth: You need to put 20% down to buy a home.
Fact: There are many types of mortgage products and programs that allow low or no down payment.

Myth: You can't buy a home in the U.S. if you are not a citizen.
Fact: You can purchase a home if you are a legal resident.

Myth: If you don't have a bank account or credit cards, you can't qualify for a mortgage.
Fact: Having a bank account is always a good idea and helps you establish credit. However, lenders can approve you for a mortgage even if you don't have a bank account or credit cards. Lenders may use alternative credit sources such as rent, utilities and car payments.

Myth: You can't get a mortgage if you've changed jobs several times in the last few years.
Fact: You can change jobs several times and still get a loan to buy a home. Lenders understand that people change jobs. The important thing is to show that you have had stable income.