Before Buying Your First Home

Owning a home has been part of the “American Dream" for years. The pride of ownership and sense of “belonging somewhere” have been strong factors in motivating more than 60 percent of households to own their own homes. In addition, there can be true financial rewards of home ownership. But, be careful.

Here are some financial issues to consider as you move toward owning your own home.

Home values rose substantially in most parts of the country seven to 10 years ago. With a strong economy and low mortgage rates, the demand for housing pushed up the prices people were willing to pay. These rising values enabled many to reap large profits when selling their homes. However, home values do not always appreciate and certain areas can be hit hard when a slowdown in demand occurs. In many areas, the housing market started this downward trend in 2006, and has been slow to show signs of recovery.

If you plan to stay in an area only a short period, renting may be economically advantageous. The costs of buying a house (realtor's commission and closing costs), moving (hiring a mover or renting a truck) and getting a mortgage (points and loan origination costs) can add up. If the value of the home has not risen by that total when you are ready to sell, you may end up losing money.

If you have a great apartment with low rent, it may be very difficult to own the home you want at anything close to your current costs.

Home ownership provides financial flexibility. Your home may be the most valuable asset you own. It can serve as a reflection of your financial stability and can even be a source of collateral for other borrowing. With a home equity loan, you essentially are pledging the equity in your home for additional borrowing. Home equity loans can be a low-cost way of consolidating debts, perhaps at a lower interest rate. Be careful, though, because home equity loans put your home at risk.

If you are like millions of others, owning a home is a primary financial and lifestyle goal. The pride of ownership and the financial rewards are attractive. With careful consideration and planning, you can likely make this dream a reality.