Owning a home is easier than you think

Buying your first home can be intimidating. There’s a lot of misinformation floating around that can lead you to believe that owning a property is out of your reach. But it’s easier than you might think. Here’s what you need to know:

Buying versus renting
Monthly mortgage fees can be lower than the cost of paying rent. Plus, unlike rental payments that almost always rise, you can request a fixed-rate mortgage to lock in your monthly payments for the life of the loan. You can also write off the interest you pay on your mortgage. (It’s tax deductible up to a limit of $1 million, though always consult a tax advisor about your situation.) And, to top it off, you’ll be increasing your net worth by building equity in your home.

Making a down payment
Lenders no longer expect all buyers to have a down payment of 20 percent in order to qualify for a mortgage. According to the National Association of Realtors, today most first-time home buyers put 10% or less down on their homes. There are also government-backed down-payment assistance programs available to help you if you’re having trouble coming up with sufficient funds.

Qualifying for a mortgage
Don’t assume you won’t be able to qualify for a mortgage just because you have a low credit score. If your score puts you in the category of a “risky borrower,” you may be required to pay for mortgage insurance. You may also incur a higher interest rate. But once you’ve paid your mortgage down for a year or two, and you improve your credit score, you should be able to cancel the insurance and renegotiate the loan at a better rate.

Meeting monthly payments
If you can make your rent, you can meet your mortgage every month. Just be realistic. Make sure you have enough money left over to pay your other bills. Most lenders recommend that your total monthly debts, including your mortgage, should not exceed 36 percent of your income before taxes. When you first take possession, you’ll also need to factor closing costs (often two to five percent of the home’s purchase price), plus moving, redecorating and maintenance into your budget and allow for increases in ongoing expenses such as utilities and taxes.

Subsidizing your mortgage
Still not sure your money will stretch as far as you need? Don’t throw in the towel just yet. Consider getting a roommate to help meet the mortgage payments or renting out the basement. If you’re self-employed, moving your office into your home may enable you to write off a portion of the expenses (check with a financial advisor).

Know what you’re getting
Not all mortgages are created equal. Some first-time home buyers, attracted by the low monthly payments, opt for mortgages that don’t allow them to build equity, or, even worse, put them in a situation where they are losing money.