What are some of the financial considerations of buying a home?
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Becoming a homeowner is a significant financial step and commitment. There are a few considerations to keep in mind, including understanding the costs of homeownership.
Buying a home and taking out a mortgage might make sense if:
- You’re willing to stay put for a few years. Buying and selling a home are expensive processes involving lots of fees, taxes and commissions. You’ll want to stay in the home long enough to make these costs worth it. Also, if home prices decline, you might find that you can't move after just a few years because you may owe more than the house is worth.
- You have a steady source of income and a good record of paying your bills on time. Lenders will look at your ability to repay the mortgage and how positive your credit history is when deciding if you qualify for a loan.
- You are able to pay for property taxes, homeowners and other insurance , water, and other utilities which might cost more than utilities you might pay for when you're renting. These costs are also likely to increase over the course of your mortgage.
- You can cover the cost of repairs and maintenance. When you own the home, you’re responsible for maintenance and repairs – from small ones like a leaky faucet to major ones like replacing a roof. Be sure to build an emergency fund to cover unexpected expenses.
- The potential tax advantages make sense given your financial situation. Consult your financial or tax advisor to determine whether there are tax advantages to buying instead of renting.
If you are considering buying, you can learn more by following the steps in CFPB’s homebuyer toolkit.