Buying a home is an integral part of the American dream, even for Brazilian immigrants. It’s great to be able to walk in the front door and know that the house is yours and that you don’t have to pay rent to anyone. Having a home is a source of pride, but it is also a great financial strategy. Home ownership is probably the biggest investment you will ever have, and this investment should reward you abundantly.
Here are ten good reasons to own a home:
Real estate appreciates in the long run
The alternative is to pay rent, which does not help you to improve your financial situation
In the US, interest on your mortgage can be deducted from your income tax
In an emergency, you can use your home to get a loan
Mortgage payment is an automatic way to save money
Your home is a leveraged investment, financed with money from third parties
A fixed interest mortgage has stable monthly payments that are easier to pay over time because of the inflationary effect
Owning a home is a good way to diversify your investments
A debt-free home will help you retire more safely
The pride of owning a home increases your self-esteem
Buying your first home can be a little daunting, especially for immigrants who are not very knowledgeable about the home buying process in the United States. When you sign the contract and commit to paying a monthly fee that represents a significant portion of your income, you may be a little afraid. But if you follow some common sense recommendations, the process need not be so daunting:
Buy only a house that you can afford. A good rule of thumb to find out what price you can afford is to multiply your annual family income by 2.5. For example, a family with an average income of $ 72,000 per year can comfortably purchase a $ 180,000 home.
Do not commit to paying a mortgage that consumes more than 25% of your income. All of your debts must not exceed 33% of your income.
Save enough to make a 20% down payment on your home. In the USA, with this amount you avoid having to pay the mandatory insurance that only protects those who are financing your mortgage.
Have a six-month reserve for any emergency, such as job loss, or some more expensive repair.
Live in the house long enough to be able to eliminate the debt. If you think you are going to have to move in 2 to 4 years it may not be worth buying a house due to the administrative costs of buying the house.
Do not get a mortgage where you only pay interest. If the home’s value goes down, you may find yourself in a situation where you owe more on the home than it is worth.
Be careful with adjustable interest mortgages. If interest rates rise, you may not be able to pay the mortgage monthly.
About 69% of the population in the United States owns their own home. Only a few countries like Ireland, Italy and Spain have a much higher rate than this, around 80%.
Changes in the real estate market may raise concerns about home ownership under certain market conditions, such as the current crisis. Regardless of whether you buy now or later, home ownership is still one of the most important steps to your financial success. If you live in the house for a long time, short-term price changes do not matter. In the long run you will not regret buying your own home, even if you did not buy it at the best time on the market.