Buying A Home - Even When The Mortgage Seems Unaffordable
As a renter, you may be resigned to a life of renting
, believing you'll never qualify for a home. But before you write off the option of home ownership, be sure to compare your rent versus mortgage payments on an after-tax basis. After comparing these two options, if the mortgage payment still appears too high, don't just throw in the towel. There are several creative options to overcome what seems like a monstrous monthly payment.
One option to afford a home in a nice neighborhood is to seek out several roommates who pay you rent. If the circumstances work out, your rental income could cover over half of the mortgage payment and a significant portion of the utilities. After calculating tax benefits and increasing equity, it's possible for you to make money. Additionally, when the loan is paid off, you would own an asset free of any liens and encumbrances. Time and time again, many singles and couples have taken advantage of this creative arrangement to enter the housing market. Other options to consider include:
1) Building a guest unit by converting a garage, then, or attic.
2) Lower your monthly payments by taking advantage of an adjustable rate mortgage. However with the current disaster in the mortgage industry, it's wise to seek the counsel of the reputable loan agent or real estate attorney before committing yourself to this type of loan.
3) Lower your monthly loan payments with a graduated payment mortgage.
4) Use a balloon mortgage to lower your payments.
5) Consider purchasing a duplex, triplex, or some other income producing home to help you cover the cost of the mortgage.
6) Check to see if your area offers a mortgage credit certificate (MCC) program. With a MCC, the Federal government gives you a mortgage subsidy up to $2000 per year.
7) Add a part time job to bring additional income to supplement your payments.
8) Ask your boss for a raise or housing aid.
9) Consider co-ownership with another friend or family member.
10) Look into an interest rate by down.
11) Consider taking over a low interest FAA or VA loan.
12) Assume a lower equity adjustable rate loan.
Most of the time, the above strategies help lower your monthly payments or increase your available cash. However if you really want to leverage your ability to buy a better home, trying to prioritize and budget your income and expenses.
One eye opening exercise is to list down on your normal monthly expenses and determine where you devote most of your money. Even though most renters value owning a home, they spend most of their income on things such as new cars, electronics, entertainment, and other non-appreciating items. If you can prioritize your budget and eliminate wasteful expenses, you can save more money towards owning a home.
by: Sarah P. Shimanski
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