Mortgage Video & Blogging Community

Buying a New Jersey home vs. renting is a big decision that takes careful consideration, however, the rewards of home ownership are  significant.

For many years, purchasing New Jersey real estate has been considered an extremely profitable investment. It is an achievement that offers a sense of pride, financial stability and potential tax advantages.  Since it is a buyers market, having a qualified New Jersey real estate agent is your best resource for finding that great deal in your local market.

There are certain responsibilities associated with owning a home. Landlords will often argue the benefits of renting, and for obvious reason. If you are renting, you’re helping them make their mortgage payment.

The numbers are staggering if you look at it this way -  If you are paying $1,000 per month for an apartment, and you know your rent will increase 5% every year, then over the next five years you will pay your landlord $66,309. If you are currently renting a house, you may be paying much more than that each month. Either way, you gain no equity by shelling out this monthly housing expense and you certainly won’t benefit when the property value goes up!

However, if you were to purchase your own home or condominium, you would be well on your way toward building equity within that same five-year period. By choosing a fixed-rate loan program, you can have the comfort of knowing that your monthly mortgage payment will never go up. In fact, you would have the option of refinancing to a lower interest rate at some point in the future should interest rates drop, and this would cause your monthly mortgage commitment to go down.

In addition to building equity, there are tax advantages that come into play with home ownership. Depending on your tax bracket, owning a home is often less expensive than renting after taxes. Interest payments on a mortgage below $1 million are tax-deductible, and your mortgage consultant should help you evaluate the tax advantages of various loan scenarios, and share this information with your tax consultant to glean feedback on your behalf.

To find the loan program that is right for you, your mortgage consultant will need to evaluate your monthly household income, current assets and savings, as well as any monthly obligations you may have for credit card payments, car payments, child support, etc. These prequalification factors, along with the report of your credit score, will determine how much house you can afford and what interest rate you will pay for financing. It is also important to let your mortgage consultant know what your future goals are, because this will help narrow down which loan option is the best fit for your long-term needs.

There are many different types of loan programs available, including FHA mortgage programs with as little as 3.50% down payment required. FHA lenders rule that the mortgage payment, including principal, interest, taxes and insurance (PITI) should not exceed 35 percent of your gross income, and the PITI plus other long-term debt (car payments, etc.) should not exceed 43 percent of your gross income. These are general guidelines and exceptions are made with compensating factors.

There are also fantastic renovation loans available through the FHA which allows a buyer to borrow extra monies to fix that ” fixer upper” , improve the energy efficiency, buy new appliances, etc. This is a great time to be in the market for a starter home. Prospective buyers should speak with a qualified Mortgage Professional to review their qualifications and budget and assist them on the path to “Home-ownership”!

Housing is an expense that takes a big bite out of the monthly budget. If you are a renter and feel that “home” is more than just someplace to hang your hat, think about the advantages of purchasing real estate. It may be time to take the step into building your personal net worth as a home owner.

———–

Gerald Santoro

732-536-3300 ext 310
Email Gerald Santoro
Licensed Mortgage Banker
Department of Banking and Insurance