Should I buy a house? 10 reasons to say “Yes”

• Long-term stability
• Room to grow
• More privacy
• Control over your space
• Consistent budgeting
• Ability to build home equity
• More potential tax benefits
• Opportunities to grow your credit score
• Unique financing options to fit your lifestyle
• Potential to refinance for better terms down the line

1. Long-term stability

If you’re not ready to put down roots, renting can often be the best fit for you. But when you find the place you can see yourself living for the long term, you can’t beat the stability of homeownership. Depending on your loan terms, a mortgage is typically a 15 to 30-year commitment. Even if you sell your home before the mortgage term is complete, it takes at least a few years of staying put for your home loan to be a good investment. That’s years of getting to know your community, settling into your space, and not living with one foot out the door wondering where you’ll live next.

2. Room to grow

Kids. Pets. Plants. Whatever you want more space for, owning a home can deliver. And while apartments are limited to the square footage on your lease, your home has the potential for additions and renovations when your needs change (and if you do decide to renovate, there’s a loan for that).

3. More privacy

Sharing a wall with neighbors is, as the kids say, “not it.” One of the biggest benefits of owning a home is the privacy of a space that’s truly yours, both indoors and out. Especially with more people working from home, having your own quiet, dedicated space is a game changer.

4. Control over your space

One of the biggest downsides of renting is having to leave the space as you found it when you move out. You also have to adhere to the landlord’s policies. When you own your home, you can decorate it however you want, fill it with as many pets as you want, and generally make it feel like home. Just keep in mind that if your neighborhood has an HOA, they may have a few guidelines you’ll need to follow.

5. Consistent budgeting

If you’ve been renting long enough, you’ve probably noticed that rent rises every time you renew your lease. Between that and miscellaneous amenity fees and utilities, it can be hard to budget consistently when you rent. With a fixed-rate mortgage, you can rely on the same monthly payment due every time, until you pay off the loan or refinance for a new rate.

6. Ability to build home equity

This is one of our favorites. Home equity is the amount of your mortgage that you’ve paid off. In other words, the percentage of your home that you own. Unlike monthly rent, every payment you make on your mortgage gets you closer to paying it off entirely, all while your home equity keeps accumulating. And even though renovations may seem expensive upfront, those actually boost your home equity, too. If you need to, you can also leverage your home equity for more flexible funds with a cash-out refinance.*

7. More potential tax benefits

Taxes aren’t anyone’s favorite subject, but you’ll want to hear this one. When you switch from renting to homeownership, you could potentially qualify for more tax benefits like:

• Mortgage interest (applies to the interest paid on the first $750,000 of your home loan)
• Discount points (pre-paid interest on your mortgage)
• Property taxes (exact amount depends on where you live)

How much you can actually write off will depend on your unique financing situation.**

8. Opportunities to grow your credit score

Not only are there plenty of home loans that don’t require a high credit score, but each monthly payment you make helps improve your credit history. You can even leverage that healthier score down the line to get better terms when you refinance your mortgage. Win-win.

Pro Tip: Got credit challenges? We’ve got strategies to help you navigate them here.

9. Unique financing options to fit your lifestyle

Rent is, well, rent. Not much about it changes regardless of your circumstances. When you apply for a home loan, you can choose from a wide variety of mortgages that are actually built for your unique goals. For example, many first-time home buyers enjoy the flexible down payment and credit requirements that FHA loans offer. If you’re not quite ready to take on a house, a condo loan is a great way to transition. And if you qualify, VA loans offer some of the best benefits around.

10. Potential to refinance for better terms down the line

Even though a mortgage is a big commitment, it’s actually more flexible than you think. The rates you have now don’t necessarily have to be the rates you have forever. As you build home equity and credit, you can eventually leverage that to refinance your loan for different rates or cash out. You can even refinance to a different mortgage type altogether (from FHA to Conventional loan is a popular route).

Are there any reasons I should NOT buy a house?

The answer to “Should I buy a house?” really comes down to whether or not the timing is right for you. A mortgage can involve more upfront costs than renting, and a home loan application is a lot more involved than applying for a rental. When you own, you’re also responsible for any maintenance issues that arise. So, if the flexibility of renting still outweighs the commitment of a home purchase, now might not be the right time for you. Just remember that even if you’re not looking to buy a home now, it’s never too early to start planning for it.

*Using your home equity to pay off debts or make other purchases does not eliminate the debt or the cost of the purchases, but rather increases the loan amount of your mortgage to be paid according to your new mortgage terms.

**This material has been prepared for informational purposes only and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before making the decision to buy or refinance a home.

The post Should I Buy a House? 10 Benefits of Owning a Home appeared first on Cardinal Financial.

Tax return season is upon us. As checks come in the mail, renters have the chance to put those extra earnings toward something more than clothes or food. But let’s face it: coming up with that daunting 20% down payment isn’t easy. In fact, saving for a down payment on a home is one of the biggest obstacles that renters face in the transition to homeownership. This year, consider taking your tax refund and putting it toward a down payment, like many other first-time home buyers do.

Any amount helps

If you’re a renter looking to become a homeowner, it’s critically important to have accurate expectations. That means understanding that your tax refund probably won’t be the entire 20% down payment you’d like to provide. It will likely be much lower than that, depending on your situation. In fact, the IRS states that the average tax refund in 2016 was $2,860.

Good news for many first-time buyers is that borrowers who qualify for an FHA loan will only have to provide 3.5% and those who qualify for a fixed-rate Conventional loan may only need to put down 5%, through Cardinal Financial. In February 2017, the median U.S. home price was $228,400, requiring a down payment of only about $8,000 for an FHA loan and $11,420 for a fixed-rate Conventional loan. These estimations just go to show that any amount you receive as a tax refund can be a substantial contribution to a down payment on a home, even if it doesn’t cover the entire cost.

Is it a smart move?

There is wisdom in using your tax return money in this way, but it truly depends on the borrower. While mortgage rates are still historically low, borrowers have the opportunity to use their tax refund and move onto bigger and better homes that might have monthly mortgage payments that are lower than what they’re currently paying in rent.

However, the decision to purchase a home shouldn’t be based on whether the market is good for buying. That may be a factor in your consideration, but before you buy a home, you should make sure that you’re ready to buy a home. It’s as simple as that.

If you are relying solely on your tax refund as down payment money, that could be a sign that you haven’t been able to save any money on your own. In actuality, the only reason why you’ve come upon this extra cash is because you overpaid in taxes last year. If you haven’t been able to save for a down payment, there’s a chance you also have revolving debt and lack an emergency fund. When you apply for a mortgage, you have to prove that you’ll be able to sustain many monthly payments into the future, and if your tax refund is your primary source of down payment money, you may not be able to swing that.

While these are important factors to keep in mind, don’t forget about random repairs. Once the house is yours, your mortgage may truly be cheaper than what you were paying in rent—which is great. However, there are many extra costs of homeownership that can pop up or be forgotten. For example, you may be saving $200 a month to own, but during your first year you may have to cough up $4,000 to replace your HVAC unit. There are some things you just can’t predict.

You decide

How will you use your tax refund this year? If you’re thinking about putting that money toward a down payment, call us and ask one of our Loan Originators if homeownership is possible for you right now.

The post Should I Use My Tax Refund as a Down Payment? appeared first on Cardinal Financial.

We’ve said it before, but it’s often cheaper to buy than rent. But once someone becomes a homeowner, they may come to find that there are some new things they have to pay for. Things they didn’t have to worry about when they were renting. Like property taxes. But this added expense shouldn’t scare people away from buying a home just yet. There’s a little thing called a homestead credit that’s intended to lighten the burden of property tax payments.

It’s just another benefit that can help make homeownership affordable. A homeowner who pays property taxes on their primary residence might want to consider taking advantage of this program. However, not all homeowners are guaranteed to save money via the homestead credit program or to even be eligible for it. It’s best for a homeowner to start by contacting their local government and research the homestead credit rules specific to their individual situation.

The homestead credit is just another perk to homeowners and another benefit that can help make homeownership affordable.

let’s get down to the PITI-gritty

Before we get into the details of the program, let’s talk about PITI. Four things make up a mortgage payment: principal, interest, taxes, and insurance (abbreviated PITI). The principal and interest pieces of that equation concern the home loan. The borrower pays the insurance part to their homeowners insurance company. Then there’s taxes. This part of a monthly mortgage payment goes toward property taxes—that’s where the homestead credit comes in.

homestead credit for dummies

“Homestead” is just an old-fashioned word for a home—more specifically, a homeowner’s primary owned residence. In the U.S., the homestead tax credit law limits the amount of tax assessment increase that can be imposed on homeowners. The program is currently available in 47 states, six of which have unlimited exemption. Other states limit it to a percentage or a fixed amount.

The homestead credit may protect at least some of a home’s value from creditors, property tax increases, and even life events like the death of a spouse by putting a cap on the assessment increase for a period of time. This credit (also called homestead tax credit or homestead tax exemption) can have a significant impact on how much homeowners save on property taxes, regardless of their property value or their income level.

home values 101

Let’s take a step back for a minute. The amount a homeowner pays for property taxes is based on factors that impact their home’s market value. When home values rise, property taxes usually do so too.

One major factor that can affect a home’s value is home renovations. And not just renovations a homeowner makes to their own home, but those their neighbors make to their homes too. Picture Homeowners A and B. Let’s say Homeowner A builds an addition onto their home. This not only increases the value of Homeowner A’s home, but Homeowner B’s too, and that of the whole neighborhood. Making improvements around the house can increase the home values in the surrounding neighborhood. And it can increase the property taxes of the area as well.

Local demands can also affect home values and property taxes. Since property taxes often fund public services in the community like public schools or parks, homeowners in the area could pay higher property taxes to support these local establishments. Similarly, if there’s a lot of real estate investing going on in the area, homeowners might have to pay more in property taxes to help fund those initiatives.

Making improvements around the house can actually increase the value of the surrounding neighborhood.

All about tax assessments

Did you know that property taxes are assessed every so often? The frequency of this depends on a homeowner’s local government. However, they can be reassessed annually, every five years, or only when the home is sold or refinanced. The local government assesses property taxes based on an assessment rate (also called a mill levy) set by the state. But just what is evaluated when a piece of property is assessed for taxes?

An official tax assessor will compare the market value of the home to similar properties in the area. The home’s worth will then be determined by the amount that those similar, nearby properties were recently appraised or sold for. If home renovations and local demands are on the rise, the property taxes could go up. This is where the homestead credit program can cap the property assessment increase for a period of time to give the homeowner a financial break.

The homestead credit can cap the property assessment increase for a period of time to give the homeowner a financial break.

homeownership has its perks

Homeowners across the country save money and benefit from the homestead credit. The application process helps verify that the property owners only receive the benefit of this credit on their principal residence. In addition, once a person submits the application, homestead credit eligibility stays in place as long as the home for which they’re applying remains their primary residence.

While there are different rules and processes for every state, the overall benefit remains the same: homeownership has its perks. And saving money on property taxes using the homestead credit is one of them. If there’s money to be saved, it can’t hurt to do some research and consider filling out an application. Savings via the homestead credit is not guaranteed to every homeowner, so it’s important to talk to your local government or visit your state’s .gov website to find out if you’re eligible and where to apply.

This blog post is intended for educational purposes only and is not to be taken as advice or as a guarantee of savings. Consult your financial advisor or legal counsel before you make any financial decisions toward purchasing a home or applying for the homestead credit.

Did you learn something new about the homestead credit from this blog post? Give us a shout-out on social media!

The post Homeowners Catch a Break with the Homestead Credit appeared first on Cardinal Financial.