Becoming a Home Owner

Are you considering buying a home? The answers to these three questions can help you make the decision.
What are the steps to buying a house?
Although buying a home is a unique process for everyone, here are a few steps you will likely take when you buy a home:
  1. Determine how much you can afford to spend on a home.
  2. Save up money for a down payment.
  3. Get pre-qualified for a home loan with a lender.
  4. Use the web and drive around neighborhoods you like to search for homes within your price range. To evaluate a home you’re interested in, check out this Home Value Estimator Calculator .
  5. Work with a realtor to find your home and make an offer.
  6. Start the mortgage process, making sure you find a lender you can trust. Organize your paperwork.
  7. Consult with your mortgage lender on the right loan for your needs.
  8. Close on your new home and enjoy.
 
How much home can I afford? 
Before you start shopping for a home, it’s important to know how much home you can afford. Relax. Few people pay the full price for a home out of their savings. That’s where a home mortgage loan comes in.
 
You will need money for: 
  • Down payment. Aim for 5% to 20% of the cost of the home at a minimum. 
  • Closing costs. If you do get a mortgage, you will need to pay fees called closing costs. These generally range from 2% to 5% of the cost of the home. For more information about closing costs and other fees, check out this article .
  • Your monthly loan payment. You can get an estimate from a lender or loan calculators online. To estimate what your monthly payment will be, check out this easy calculator .
  • Taxes and insurance. These vary by location and may be due once or multiple times per year. 
  • Household utilities. The electric, gas and water companies can provide a good estimate. Asking the previous owner is a good way to figure out a monthly estimate.
  • Furnishings and upgrades. New homeowners are sometimes unprepared for these costs. Although, if you purchase a home warranty, some of the unexpected costs could be covered. Check local policies to see if this feels right for your needs.
 
Are there tax benefits for owning a home?1
Generally, yes. Here are ways owning a home might save you money on taxes: 
  • Deduct prepayments of interest (points) and other closing costs. 
  • Deduct any interest you pay on your mortgage. 
  • Tax breaks for money you spend on energy efficient appliances, solar panels or other renewable energy.
If owning a home is one of your goals, ask yourself the questions above and decide whether now is the right time for this exciting adventure.
 

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1 The tax information contained here is not intended to be used, and cannot be used, by any taxpayer for the purpose of avoiding tax penalties that may be imposed on the taxpayer. It was written to support the promotion of the products and services addressed herein. Taxpayers should seek advice based on their own particular circumstances from an independent tax advisor. Consumers should consult a tax advisor for further information regarding the deductibility of interest and charges.
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