Tips for Buyers

7 Reasons to Own Your Own Home

  1. Tax breaks. The U.S. Tax Code lets you deduct the interest you pay on your mortgage, property taxes you pay, as well as some of the costs involved in buying your home.
  2. Gains. Over last five years (1998-2002) national home prices have increased at an average of 5.4 percent annually. And while there's no guarantee of appreciation, a 2001 study by the National Association of REALTORS® found that the typical homeowner has approximately $50,000 of unrealized gain in a home.
  3. Equity. Money paid for rent is money that you'll never see again, but mortgage payments let you build equity ownership interest in your home.
  4. Savings. Building equity in your home is a ready-made savings plan. And when you sell, you can generally take up to $250,000 ($500,000 for a married couple) as gain without owing any federal income tax.
  5. Predictability. Unlike rent, your mortgage payments don't go up over the years, so your housing costs may actually decline as you own the home longer. However, keep in mind that property taxes and insurance costs will rise.
  6. Freedom. The home is yours. You can decorate any way you want and be able to benefit from your investment for as long as you own the home.
  7. Stability. Remaining in one neighborhood for several years gives you a chance to participate in community activities, lets you and your family establish lasting friendships, and offers your children the benefit of educational continuity.

8 Ways to Improve Your Credit

Credit scores, along with your overall income and debt, are a big factor in determining what loan terms you'll be able to qualify for.

  1. Check for and correct errors in your credit report. Mistakes happen, and you could be paying for someone else's poor financial management.
  2. Pay down credit card bills. If possible, pay off the entire balance every month. However, transferring credit card debt from one card to another could lower your score.
  3. Don't charge your credit cards to the maximum limit.
  4. Wait 12 months after credit difficulties to apply for a mortgage. You're penalized less for problems after a year.
  5. Don't order items for your new home you'll buy on credit such as appliances until after the loan is approved. The amounts will add to your debt.
  6. Don't open new credit card accounts before applying for a mortgage. Having too much available credit can lower your score.
  7. Shop for mortgage rates all at once. Too many credit applications can lower your score, but multiple inquiries from the same type of lender are counted as one inquiry if submitted over a short period of time.
  8. Avoid finance companies. Even if you pay the loan on time, the interest is high and it will probably be considered a sign of poor credit management.

This information is copyrighted by the Fannie Mae Foundation and is used with permission of the Fannie Mae Foundation.

6 Creative Ways to Afford a Home

  1. Investigate local, state, and national down-payment assistance programs. These programs give loans or grants to cover all or part of your required down-payment. National programs include the Nehemiah program (http://www.getdownpayment.com) and the American Dream Down-payment Fund from the U.S. Department of Housing and Urban Development (http://www.hooksvanholm.com/).
  2. Get the seller to provide financing. In some cases, sellers may be willing to finance all or part of the purchase price of the home and let you repay them gradually, just as you do a mortgage.
  3. Consider a shared-appreciation, or shared equity, arrangement. Under this arrangement, your family, friends, or even a third-party may buy a portion of the home and thus share in any appreciation when the home is sold. The owner/occupant usually pays the mortgage, property taxes, and all maintenance costs, but all investors’ names are usually on the mortgage. There are companies that can help you find such an investor if your family can’t participate.
  4. Get help from your family. Perhaps a family member will loan you money for the down-payment and/or act as a cosigner for the mortgage. Lenders often like to have a cosigner if you have little credit history
  5. Lease with the option to buy. Renting the home for a year or more will give you the chance to save more toward your down-payment. And in many cases, owners will apply some of the rental amount toward the purchase price. You usually have to pay a small, nonrefundable option fee to the owner.
  6. See if you can qualify for a short-term second mortgage to give you the money to make a higher down-payment. This may be possible if you have a good income and little other debt.