Things to be considered Before Buying Home:

Owning a house brings a sense of pride to all people around the world, you aren’t bound by any rules of the landlord and it is an asset too.

Advantages of Owning a Home:

There are several advantages of owning a home. The obvious one is that the home is yours; you can make all type of alterations and arrangements.

The next benefit is that some of your monthly mortgage payment comeback in the form of equity. The rent you pay while renting a house never comes back. The other obvious advantage is that the home is your asset and you can sell it and make use of that to meet your expenses. If the home is bought under some kind of a loan then it would provide tax benefits.

Disadvantages of Owning a Home:

The major disadvantage of owning a home is that you have to take care of maintenance activities. Incase of a rented house you would you would just make a call to the landlord and he would solve the problem.

The next thing to consider is the that you may loose on the house; it’s an extreme case and may happen if the real estate prices go down alarmingly. The final disadvantage is that since home is a long term proposition you can’t keep changing your location as you may have done in a rented house.

Affordability:

The next thing to be considered while buying a home is to decide how much you invest in it. A guideline is to use the debt-income-ratio. It shouldn’t exceed 36% and your mortgage debt should be less than 28% of one’s monthly income.

This is done as follows multiply your gross income by .36; the resultant value should be the maximum debt that you could afford per month. Irrespective of the guidelines the thing to consider the level debt that you may be comfortable with.

Choosing an Appropriate Mortgage:

After deciding upon how much to invest in home the next thing to do is to determine what type of mortgage to choose. Choosing an apt mortgage plan is necessary as choosing a wrong one may cost you a lot of dollars on interest.

There are basically two type of mortgage plans fixed and adjustable interest rate loans.

Incase of fixed interest rates you can be sure about the amount that you need to pay each month for your loan. The benefit with fixed plan is that you may feel safe even when the interest rates go up but when the interest rates go down you may feel bad.

The thing with variable interest rates is that you may have to sacrifice some stability about the amount to be paid every month. It would be beneficial when the interest rates come down which is very unlikely in the current scenario.

The Down Payment:

In any mortgage some amount of down payment has to be made. In traditional system a down payment of 20% of total amount to be borrowed should be paid. The advantage of this 20% is that one need not worry about Private Mortgage Insurance amount that you may have to pay if the down payment percentage goes below 20%.