The Value of Home Ownership
More and more people every year are buying homes instead of renting.
What's the difference?
Renting
With renting, you pay a certain
amount of money every month to a landlord
who owns the property. In exchange, the landlord lets you live there.
You may also have to pay a security
deposit. This is the money that the landlord keeps until you
move out. It is used at that time to cover any damage you might
have caused. If you have pets, you may have to pay a pet deposit.
Usually, when you rent a place, you sign a lease
for a certain period of time. Most leases are for one year. The
lease covers how much per month you pay, late-payment penalties,
policies about whether you can have pets, and other things. Renting
has some advantages. One advantage is that the landlord is usually
responsible for upkeep of the property. For example, someone who
rents a place may not have to mow the lawn or fix a broken water
heater.
Renting also has some disadvantages. A renter has little say about
the property. Therefore, the landlord may not let you paint the
walls a different color or make other decisions about the property.
The landlord could even sell the property and you might have to
move. No matter how much rent you pay, you will never own the property.
Homeownership
Most people who buy their homes can't pay for them outright -
they have to borrow money from a bank or other financial institution.
When you are buying a home, you get a loan that requires you to
make monthly mortgage payments
to the institution that loaned you the money. The loans
are for a long time - often up to 30 years. Although that may seem
like forever, at the end of the period, you will own the home outright
and never have to make a mortgage payment on it again.
There are many advantages to owning a home. One of the biggest
advantages is that you get a tax
break if you are buying a home. This means that you will get
credit on your tax return
that you would not get if you were renting.
Another important advantage is that when you are buying a home,
you are building equity. Equity
is the difference between the value of the home and what you owe
on it. Here is an example. Let's say that you bought a home 3 years
ago for $100,000 and your mortgage loan is $80,000. The house today
is valued at $110,000. You have $30,000 worth of equity ($110,000
- $80,000 = $30,000). Equity is good because it helps you improve
your financial standing.
Who can own a home
You may be wondering whether you or your family could own a home
one day. The answer is yes! In olden times, not every one could
look forward to homeownership. At the beginning of the 20th Century,
for example, it was very hard to buy a home.
But these days, almost anyone can own a home.
Becoming a homeowner
The first step to becoming a homeowner is to find a home you like.
One place to start is to read the For Sale ads in the newspaper.
Another way is to take note of For Sale signs as you look around
your town.
Ultimately, you will probably meet with a real estate agent who
will find you property for sale in the neighborhood you like. The
agent will also help you make an offer on the property, find financing,
sign a contract, and negotiate for the best deal.
Most people can't just pay cash for a home. A prospective homeowner
will have to take out a loan called a mortgage. Banks and other
financial institutions, such as credit unions, loan people money
for mortgages. To get a mortgage, you will have to prove some things
to the lender. This is called qualifying.
You will have to show that you are old enough to buy a house, that
you have a good job and a track record of paying your bills on time.
You will also have to show that you can afford the home and that
you have enough money for a down
payment - a percentage of the amount you want to borrow. Applying
for a loan and getting approval can take more than a month.
But if all goes well, you get the loan! After that, you will attend
what's called a closing
conference with the people who are selling the home. The closing
conference, which is usually held at a lawyer's office, is where
the buyer and seller sign paperwork that exchanges the ownership
of the home.
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