It is a big decision to buy vs rent in Colorado, and it requires thoughtful attention, as most mortgage lenders will agree. But the rewards of home ownership are great. For many years, buying real estate has been considered a quite profitable investment. It is an achievement that offers a sense of pride, economical stability and potential tax benefits.
There are certain responsibilities involved in owning a home. Landlords will often argue the benefits of renting, and for obvious reason. If you are renting, you're helping them make their mortgage payment.
The numbers are amazing if you look at it this way. If you are paying $1,000 per month for an apartment, and you know your rent will rise 5% every year, then over the next five years you will pay your landlord $66,309. If you are at present renting an apartment, you may be paying much higher than that each month. Either way, you gain no equity by shelling out this monthly housing expense and you certainly won't benefit when the property price goes up!
However, if you were to purchase your own home or apartment, you would be well on your way toward building equity within that equal five-year period. By choosing a fixed-rate loan plan, you can have the comfort of knowing that your per month mortgage payment will never go up. In fact, you would have the option of refinancing to a lower interest rate at some point in the future should interest rates fall, and this would cause your monthly mortgage commitment to go down.
In addition to building equity, there are tax benefits that come into play with home ownership. Depending on your tax bracket, owning a home is usually less expensive than renting after taxes. Interest costs on a mortgage below $1 million are tax-deductible, and your mortgage adviser should help you evaluate the tax advantages of various loan scenarios, and share this information with your tax consultant to glean feedback on your behalf.
There are also several first time home buyer programs in Colorado. To find the loan program that is appropriate for you, your mortgage broker will need to evaluate your monthly household income, current resources and savings, as well as any monthly commitments you may have for credit card payments, car payments, child support, etc. These prerequisites, along with the report of your credit score, will determine how much house you can afford and what interest rate you will pay for funding. It is also important to let your mortgage consultant learn what your future goals are, because this will help narrow down which loan program is the best match for your long-term requirements.
There are many different types of loan programs available, including "low" and "no" down payment mortgage programs. These forms of programs require the first time home buyer in Colorado to give less than 3 percent of the loan amount as down payment. FHA lenders rule that the mortgage payment, containing principal, interest, taxes and insurance (PITI) should not surpass 31% of your gross income, and the PITI as well as other long-term debt (car payments, etc.) should not exceed 43% of your gross income.
Housing is an expense that takes a big bite out of the monthly expense. If you are a renter and feel that "home" is more than just someplace to hang your hat, consider the advantages of purchasing real estate. It may be time to take the measure into building your personal net worth as a landlord.
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