Buy a Home, Build a Fortune
Home ownership is one of the best ways to build net worth.
Statistics show that the value of homes rise about 4 percent every year, and this means in 30 years a home you buy for $100,000 will be worth around $300,000.
A home is one of your greatest assets, and home ownership can be a very good tool to build a fortune.
Figures also show that the value of their homes represents about 40 percent of the owners' net worth (net worth is the difference between what you own and what you owe).
This is especially true for those who have low- and middle income.
However, owning a home involves a few responsibilities also.
Some financial advisers consider home ownership to be a liability, because if you own a home, it will cost money.
And it is not only the mortgage: the owner has to spend money on maintenance, repairs, property taxes and insurance, and it is more than sure he will have unforeseen expenses.
With the subprime mortgage crisis, a lot of people give a second thought before buying a home.
The reason because people got into trouble with the real estate bubble is that they started to buy larger homes than they could pay for.
Lenders wanted to increase their businesses and they started to offer interest-only mortgages, or adjustable-rate mortgages with low "teaser" rates.
This way more people were qualified for loans.
On the other hand buyers have their fault also: for some time they thought they can afford homes that were way too expensive for their incomes, and they were looking for lenders who would help them buy without assessing their real financial possibilities.
However, after the crash lenders dropped their "creative" techniques and returned to the established practices that help assess buyers' financial possibilities in a realistic manner.
This way home buyers can only buy homes they can really afford.
The first step of buying a home is figuring out how much you can afford to pay.
It is recommended to be conservative with the estimate, because it is more than sure you will have unexpected expenses.
If you are too optimistic, you can easily find yourself in financial straits even if you choose an "affordable" home.
Conservative lenders usually use the 28 percent/36 percent formula to calculate how big a mortgage you qualify for.
The percentages mean your housing costs and total monthly debt.
Your housing costs, including principal, interest, taxes and insurance (PITI) should not exceed 28 percent of your gross monthly income.
Your total debt (PITI, car loan, personal loan etc.
) should not be more than 36 percent of your gross monthly income.
Statistics show that the value of homes rise about 4 percent every year, and this means in 30 years a home you buy for $100,000 will be worth around $300,000.
A home is one of your greatest assets, and home ownership can be a very good tool to build a fortune.
Figures also show that the value of their homes represents about 40 percent of the owners' net worth (net worth is the difference between what you own and what you owe).
This is especially true for those who have low- and middle income.
However, owning a home involves a few responsibilities also.
Some financial advisers consider home ownership to be a liability, because if you own a home, it will cost money.
And it is not only the mortgage: the owner has to spend money on maintenance, repairs, property taxes and insurance, and it is more than sure he will have unforeseen expenses.
With the subprime mortgage crisis, a lot of people give a second thought before buying a home.
The reason because people got into trouble with the real estate bubble is that they started to buy larger homes than they could pay for.
Lenders wanted to increase their businesses and they started to offer interest-only mortgages, or adjustable-rate mortgages with low "teaser" rates.
This way more people were qualified for loans.
On the other hand buyers have their fault also: for some time they thought they can afford homes that were way too expensive for their incomes, and they were looking for lenders who would help them buy without assessing their real financial possibilities.
However, after the crash lenders dropped their "creative" techniques and returned to the established practices that help assess buyers' financial possibilities in a realistic manner.
This way home buyers can only buy homes they can really afford.
The first step of buying a home is figuring out how much you can afford to pay.
It is recommended to be conservative with the estimate, because it is more than sure you will have unexpected expenses.
If you are too optimistic, you can easily find yourself in financial straits even if you choose an "affordable" home.
Conservative lenders usually use the 28 percent/36 percent formula to calculate how big a mortgage you qualify for.
The percentages mean your housing costs and total monthly debt.
Your housing costs, including principal, interest, taxes and insurance (PITI) should not exceed 28 percent of your gross monthly income.
Your total debt (PITI, car loan, personal loan etc.
) should not be more than 36 percent of your gross monthly income.
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