Benefits of Homeownership 

• Equity Growth: As you pay down your mortgage and home values appreciate, you build equity - potentially one of the biggest contributors to long-term wealth. 
• Predictable Payments: With a fixed-rate mortgage, your principal and interest payments stay the same – even if rates rise. 
• Tax Advantages: Mortgage interest and property tax deductions can reduce your taxable income. 
• Personal Freedom: Make changes to your home without needing landlord approval. 
  

That’s all great stuff, but before you buy a house, it’s important to understand the home-buying process as a series of steps, from assessing your readiness to closing the deal. 

With the movement of interest rates difficult to predict, it’s no surprise that a lot of folks are asking themselves: “Is now really the right time to buy?” The first step is assessing your financial readiness and goals to determine if homeownership fits your current situation. 

Spoiler alert: there’s no one-size-fits-all answer. But understanding the full home-buying journey can help you make a confident decision. 

The Real Costs of Owning a Home

Most people know they’ll need to budget for a down payment and a monthly mortgage payment. But it’s important to have enough money set aside for both expected and unexpected costs throughout the home-buying process. 

According to Clever Real Estate, the average annual non-mortgage cost of homeownership is $24,529, which includes: 

• Property taxes 
• Homeowners insurance 
• Utilities
• Maintenance and repairs 
• HOA fees (if applicable) 
• Appliance replacement and home upgrades
• Services such as internet, cable, and ongoing home maintenance 
• Monthly mortgage payments (get an idea of current rates here.)

Note: some of these expenses come with renting as well. Home prices and the purchase price of properties can vary widely, directly affecting affordability. The current value of a home, determined by an appraisal, impacts the loan amount you can secure and plays a key role in negotiations. 

A home inspection is highly recommended, and an inspection contingency can protect buyers by allowing them to back out or negotiate if significant issues are found. Buyers can sometimes negotiate credits for repairs after the inspection. 

Tax returns are often required by lenders and mortgage lenders to verify your income during the loan application process. Understanding your financing options is crucial, as lenders evaluate different properties and offer various loan types to fit your needs. Many states offer assistance programs that can help offset some of these costs. 

Why People Buy: The Long-Term Upside

Despite the costs, homeownership still offers a clear path to building wealth. Key factors influencing the decision to buy include the potential for equity growth and predictable monthly payments, which can provide financial stability for buyers and borrowers. Access to homeownership can help buyers and borrowers build long-term wealth and achieve greater financial security. 

Over time, as you pay down your mortgage and your home (ideally) increases in value, you build equity. That equity becomes a financial asset – something renters don’t typically benefit from. It can also be borrowed against with favorable terms with a home equity loan or a HELOC. 

The benefits of homeownership are reflected in your interest rate, plus the interest rates you secure on other loans, as these directly affect your monthly payments and the overall cost of borrowing. 

Location, Location, Location – for Starters.

Demand, supply, and location are important factors that affect the appreciation of home values and the potential for building equity. When assessing a property's value, comparing similar homes in the area can help determine a fair price. 

To complete the homebuying process, the buyer negotiates a deal, signs the necessary documents, and finally moves into their new home, achieving the goal of homeownership. 

Not Sure If You’re Ready to Own? Ask Yourself These Questions

Buying a home is a financial and lifestyle decision. If you’re feeling uncertain, consider the following Financial Readiness Checklist to help guide your decision: 

Financial Readiness Checklist: Down Payment and Other Essentials 

• Do I have a stable source of income? 
• Can I afford a down payment (ideally 10-20%) and closing costs? (There are some important alternatives to this seeming requirement.)
• Do I have at least 3-6 months of expenses saved in an emergency fund? 
• Can I qualify for a mortgage with a manageable monthly payment (ideally less than 30% of gross income)? 
• Am I prepared for surprise expenses like a new roof, water heater, or major repair? 
  

Lifestyle Considerations: 

• Am I planning to stay in one place for at least 3-5 years? 
• Do I prefer rent over mortgage payments?
• Does owning a home support or limit my long-term goals (career, travel and family plans)? 
  

Still on the Fence? You Don’t Have to Figure it out Alone

Homeownership is one of the biggest financial commitments you can make, and it’s normal to feel overwhelmed. That’s where we come in. GreenPath’s NFCC- and HUD-certified counselors are here to help you. Whether you’re actively house hunting or just testing the waters, it helps to talk through your finances with someone who can offer unbiased support. 

This article is shared by our partners at GreenPath Financial Wellness, a trusted national non-profit.