But the question is, are you financially and emotionally ready to own a home?
Many military-friendly lenders can help you buy a home – you just need to know what to look for in a mortgage and how to use your benefits effectively. However, it's vitally important to understand that homeownership comes with advantages and costs. So below are crucial things to know about homeownership and military personnel. Read on to learn more.
Benefits of Homeownership
Before you start the process of buying your first home, it’s helpful to understand the wide range of benefits that come with homeownership. Here are five ways owning your own home can benefit you financially, socially, and more.
While renting, your costs can fluctuate from month to month or year to year. If your rent goes up or down, you might have to change what you're spending on other necessities like food and transportation. However, when you own a home, it gives you a monthly payment that never changes. You know exactly how much money is coming in each month and can adjust your budget accordingly. Most lenders offer over 30 years for a fixed-rate mortgage, meaning over 30 years of payment stability.
Purchasing a home is one of your best financial moves. As you pay down your mortgage, you build equity. This process can take years or decades (or longer), but it’s what makes homeownership so valuable.
Your home's value will likely appreciate over time, no matter where you live. While renters see their monthly payments rise along with rent and utilities, homeowners see those same increases accrue to their equity instead. You can take out a line of credit against that equity—it's called a home equity loan or second mortgage—or even sell it outright if you choose to.
Freedom to Change or Update Your Home Decor or Landscaping
Unlike renters, homeowners can change their home's interior and exterior however they like. In other words, you can redesign your home to be exactly how you want it. Whether that means adding a new wing or changing paint colors, you're in control. There are no restrictions on what changes you can make, so customize your living space however best fits your personality.
Improve Your Credit
Owning a home is one way to establish credit. In addition, even if you don't have enough credit to secure a loan for your home, your lender may use other factors—like income and job history—to determine whether you qualify for a mortgage. Homeowners also are eligible for better interest rates than renters. If you pay your bills on time, you'll generally get better deals than those who live in rented homes.
Owning a home has many tax benefits. The main advantage is mortgage interest deduction. This deduction can reduce your taxable income and save you money at tax time. However, other deductions may be applicable depending on your situation. You should consult a CPA for more information about these deductions.
Potential Challenges of Homeownership
Despite all of these advantages, there are still several drawbacks to homeownership that you should beware of to help you make informed decisions. Here are some of the potential challenges of homeownership that you might encounter on your journey:
New Monthly Expenses
Homeowners have to pay several expenses every month, including mortgage payments, insurance premiums, and taxes. However, your monthly mortgage payment will typically cover a portion of these expenses. Additionally, there are plenty of regular bills you'll have to pay on top of your mortgage, including your utilities.
Maintenance and Repair Costs
After you buy a home, there will always be something that needs fixing. And you’re in charge of these expenses. This can include plumbing, electrical, and sometimes carpentry jobs.
Relocating Can Be Challenging.
When it comes to moving to a new city, homeowners have less flexibility than renters. It would help if you recognized that you're stuck in your new abode unless you can buy out your mortgage company or refinance with another lender. This can make it very difficult for service members to move frequently. Additionally, it may come as a surprise to many homebuyers, but there are also costs that you'll have to pay when reselling your home.
Default Can Happen
It's hard to miss a mortgage payment, especially if you intend to stay in your home long-term. However, many homeowners fall victim to defaulting on their mortgages after they lose their jobs, undergo divorce, face health issues, etc., and can't make payments. Defaulting can be costly and may cause you to forfeit your home.
When buying a home, you should plan to pay upfront costs. However, the amount you'll need to cover these upfront costs varies depending on the type of mortgage you choose and the loan's size, among other factors. Below are the typical upfront costs you can expect when buying a home:
- Down Payment
- Earnest Money
- Home Inspection
- Closing costs
If you're an active military member, a veteran, or a legal surviving spouse, there are ways to own your dream home while making it affordable in the process. Regardless of your situation, there are essential things you need to understand before committing to buy your new home. This will help ensure a smooth process without surprises along the way.