A starter home is the first home you buy. Many Americans who have not yet owned a house have not done so for one of three reasons. They feel they are financially unqualified, do not realize the investment potential of home ownership or are waiting to buy their dream home as their first purchase.
The three biggest affordability issues are usually the down payment, the monthly payment or a bad credit history. If you are limited by any one or more of these problems, help is available. The first thing to do is visit a mortgage lender and find out exactly where you stand as a borrower. Ask for recommendations regarding the things that must be addressed in order to improve your chances to obtain the financing you will need. A credit counselor may be another alternative to consider.
Since the Tax Reform Act of 1986 and with some limitations within the Tax Cut and Job Act of 2017, home ownership is the single biggest tax shelter available to most people. Mortgage interest and property taxes are still deductible from your taxable income. Because of the leverage factor, the increase in home values gives you a very nice return on the actual cash invested in your home. The buildup of equity through inflated value and a decreased loan balance provides a forced savings account that enable home owners to build personal wealth.
Should you stay out of home ownership until you can afford to buy the ideal home? The best to get to your dream home is to get on the bottom rung of home ownership as soon as possible and work your way to your dream home. The money accumulated through home ownership, coupled with the growth of your earnings, enables you to buy better quality housing with each purchase.
ADVICE: Don’t be discouraged or ignorant about your chances to become a homeowner. Investigate the possibilities. Talk to a Realtor® about the availability and price of homes and a lender about your financial situation. As I have written before in the column, your first home purchase is the most real estate purchase that will ever make. Take your time, do it wisely and as the foundation of your investment future, your rock solid first home purchase will support you and your financial portfolio for life!
