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HELPFUL TIPS
Renting Vs. Owning:
Building Equity In Your
Future
Excerpts Courtesy of
FosterFolly News
For many Americans,
owning a home is the
cornerstone of their
financial wealth. In
fact, building equity in
a home, combined with
tax advantages offered
by both federal and
state governments, has
driven homeownership to
record levels in recent
years. However, millions
of renters continue to
have misconceptions
about the home-buying
process, often delaying
a home purchase by
saying "it's too
complicated." Buying a
home is not as
complicated as it may
seem. With a thorough
understanding of the
process, owning a home
can be a very real
possibility for many
renters.
One of the key steps in
determining whether you
should be a homeowner
versus a renter is
understanding what
happens to the money you
pay each month for rent
or mortgage.
For example, let's
consider a renter with a
monthly payment of $600.
Over five years, that
person will have spent
$36,000 on rent. In 10
years, that number rises
to $72,000. That would
be $72,000 without
building any equity, or
ownership, in return.
If the same monthly
payment were applied to
a mortgage, a portion of
each month's payment
would go toward paying
down the principal (the
price at which you
purchased the home less
a down payment), which
would allow you to build
ownership in the
property. In addition,
the interest that you
pay each month, as well
as any property taxes,
may be deductible on
your federal income
taxes--a tax advantage
not available to many
renters (consult a tax
advisor or the Internal
Revenue Service
regarding the
deductibility of
interest).
"What renters often
don't realize is that in
the long term, they
can't afford to not buy
a home, particularly as
rental rates increase in
many parts of the
country," says Jim
Ferriter, executive vice
president for GMAC
Mortgage.
Market conditions are
very favorable for
first-time homebuyers.
If you have been
thinking about making
the move to owning a
home versus renting, now
is the time to start
seriously looking at
homes.
On the flip side,
probably the greatest
advantage of renting is
the flexibility it
offers in terms of
moving. Also, the ease
of knowing you are not
responsible for many
repairs that might arise
or for the upkeep of a
yard is appealing to
many people of all ages.
Renting is a good step
towards homeownership
because it helps a
person understand the
discipline of meeting a
monthly obligation, and
it can possibly improve
a person's credit score
when payments are made
on time.
If you decide to move
forward on the process
of buying a home,
consider these tips from
GMAC Mortgage:
• Attend a first-time
buyer workshop to learn
about the home-buying
and financing process.
In addition, there are
many online resources,
such as
smartedgebygmac.com,
that offer information
about financing your
first home.
• Check your credit. Be
aware that your credit
history may affect the
interest rate, and the
type of mortgage program
for which you may
qualify. You may want to
work on improving your
credit before purchasing
a home.
• Find an experienced
real estate
professional. A real
estate agent can be
invaluable in helping
you through the process
of buying your first
home.
• Get preapproved for a
mortgage. It is one of
the best ways to
determine how large of a
monthly mortgage payment
you can afford and will
give you an indication
of your price range as
you shop for homes. You
will want a preapproval
letter when you bid on a
home, as some sellers
may not accept offers
from buyers who have not
demonstrated some
ability to finance the
purchase.
"Owning a home is a
great opportunity to
begin building equity
and it can offer
numerous other
advantages," added
Ferriter. "No one should
be intimidated by the
process involved with
buying a home. Using
these tips, you can be
in your new home sooner
than you think."
For more information and
useful online tools on
renting versus owning,
please go to
www.gmacmortgage.com or
call (800) 888-GMAC.
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