Let’s say one morning you wake up and realize that, yes, buying a home is the right thing to do for yourself. You’re tired of throwing away money on rent and figure that it’s time to get into a home of your own. But you have reservations.

After all, if it’s your first time, you’ve got questions. You might be a little nervous that you’ll mess up, and it’s normal to feel that way. You are probably spending hundreds of thousands of dollars and making the most important financial purchase of your life.

You will find that being an informed individual about the home buying process is empowering for you. Lucky for you that you came to the right place. So let’s get started buying your first home!

Consider if Buying a Home is For You
Many people harbor secret fears about buying a home, and some of those fears are justified. Not everybody is cut out to own a home, and if you’re one of those people, it’s better to find this out now than when you’re under contract.

Renting vs. Buying
You might decide that renting is better for you than buying, because buying a home has its drawbacks.

THINGS BEING EQUAL it’s almost always better to own your home rather than to rent. After all, you build equity and get to write off your mortgage interest. And if you play your cards right, when you sell you’ll be eligible for one of the best tax breaks around. But that doesn’t mean that everyone should be a homeowner. If your move is short-term or if interest rates are high and property values deteriorating, it may be worthwhile to deal with a landlord for a while.

Number Crunching
Keep in mind that while home ownership provides security, it almost certainly won’t give you the returns provided by equities. If history is any indicator, you can reasonably expect an 8% to 10% annual gain on your stock portfolio. Home prices, on the other hand, typically follow the rate of inflation over the long term.

That said, home ownership has a signficant tax advantage. Married couples can earn up to $500,000 in gains on home sales tax-free, while singles get $250,000.

Other Factors
Of course, buying a home isn’t strictly a financial decision. For most folks, the thought of constantly worrying about losing our security deposit every time we pound a nail or paint a wall isn’t particularly appealing. Here are some other things to consider before making your purchase:

This may sound simplistic, but first and foremost you should find a neighborhood and a home that you just plain like.

Moreover, you should check on the sales price trends of homes in that neighborhood. If it looks like the area is declining in value, then avoid commitment: You’re probably better off renting.

Finally, don’t forget that even with the tax-breaks of home ownership, you will still be incurring out-of-pocket costs that you wouldn’t encounter as a renter — from the cost of ripping down wallpaper to repairing a leaky roof. So before you buy, estimate how much those costs will be. After all, you don’t want to live hand-to-mouth — even if it is in your own home.


Renting
Pros
Flexiblity (can relocate easily)
Can invest money elsewhere (stock market)
No upkeep fees (drippy faucets, broken dishwashers, etc.)

Cons
No equity
Annual rent increase could outpace inflation

Buying
Pros
Tax-break: deduct mortgage interest and property taxes
Potential tax-free capital gain
Emotional satisfaction

Cons
Property tax and upkeep
Mortgage costs
Less flexibility should you want to move; in very bad housing markets, you could lose principal

Reasons to Buy
On the other side of the coin, there are many more benefits to buying. Keep these reasons in mind if you start to get cold feet.

Pride of Ownership
Pride of ownership is the number one reason why people yearn to own their home. It means you can paint the walls any color you desire, turn up the volume on your CD player, attach permanent fixtures and decorate your home according to your own taste. Home ownership gives you and your family a sense of stability and security. It’s making an investment in your future.

Appreciation
Although real estate moves in cycles, sometimes up, sometimes down, over the years, real estate has consistently appreciated. The Office of Federal Housing Enterprise Oversight tracks the movements of single family home values across the country. Its House Price Index breaks down the changes by region and metropolitan area. Many people view their home investment as a hedge against inflation.

Mortgage Interest Deductions
Home ownership is a superb tax shelter and our tax rates favor homeowners. As long as your mortgage balance is smaller than the price of your home, mortgage interest is fully deductible on your tax return. Interest is the largest component of your mortgage payment.

Property Tax Deductions
IRS Publication 530 contains tax information for first-time home buyers. Real estate property taxes paid for a first home and a vacation home are fully deductible for income tax purposes. In California, the passage of Proposition 13 in 1978 established the amount of assessed value after property changes hands and limited property tax increases to 2% per year or the rate of inflation, whichever is less.

Capital Gain Exclusion
As long as you have lived in your home for two of the past five years, you can exclude up to $250,000 for an individual or $500,000 for a married couple of profit from capital gains. You do not have to buy a replacement home or move up. There is no age restriction, and the “over-55″ rule does not apply. You can exclude the above thresholds from taxes every 24 months, which means you could sell every two years and pocket your profit–subject to limitation–free from taxation.

Preferential Tax Treatment
If you receive more profit than the allowable exclusion upon sale of your home, that profit will be considered a capital asset as long as you owned your home for more than one year. Capital assets receive preferential tax treatment.

Morgage Reduction Builds Equity
Each month, part of your monthly payment is applied to the principal balance of your loan, which reduces your obligation. The way amortization works, the principal portion of your principal and interest payment increases slightly every month. It is lowest on your first payment and highest on your last payment. On average, each $100,000 of a mortgage will reduce in balance the first year by about $500 in principal, bringing that balance at the end of your first 12 months to $99,500.

Equity Loans
Consumers who carry credit card balances cannot deduct the interest paid, which can cost as much as 18% to 22%. Equity loan interest is often much less and it is deductible. For many home owners, it makes sense to pay off this kind of debt with a home equity loan. Consumers can borrow against a home’s equity for a variety of reasons such as home improvement, college, medical or starting a new business. Some state laws restrict home equity loans.

* Should You Buy a Home Before Getting Married?
Tips for home buying with a partner or significant other before tying the knot, plus how to handle the financial details of homeownership without plans to ever marry.

Before Buying a Home, Get Your Finances In Order
Line up your financing, set aside a down payment and study the loan programs available. By doing your homework, you will know exactly how much you can pay and what it will cost you.

* Order a Free Credit Report
Give yourself time to clean up a credit report that contains mistakes. Dispute errors. Try to reduce your monthly debt obligations now by paying down those loan balances.

Find a Lender
Check out places to get a mortgage and compare rates and fees. Start with your own financial institution, then interview a few mortgage brokers and choose a loan product you completely understand. We have in house mortgage lending with Reliant Mortgage, a trusted source we have done business with for several years.

* Determine a Down Payment
The more you put down, the lower your monthly mortgage payment. Here are 12 places to find a down payment.

* Consider FHA Loans
FHA loans carry competitive interest rates, come with minimum down payment requirements and allow sellers to pay some or all of your closing costs.

* Get a Pre-approval Letter
Showing the seller you are already pre-approved for a loan gives you an edge during offer negotiation.

Choose BLC Real Estate to guide you in the right direction
With so much information available online, you might wonder why you need an agent at all. But all local markets vary from one another, and a good agent can guide you by giving you information based on experience and market knowledge.

* Why Hire BLC Real Estate?
Our agents have years of experience and can help you to avoid making mistakes such as choosing the wrong home or offering too much.

Learn How to Avoid Home Buying Mistakes
The best way to avoid making a mistake it to learn from the mistakes others have made. Buying a home in a desirable location is your best defense. Remember: location, location, location.

* First-Time Home Buyer Tips
Start your search right here by signing into BLC Real Estate’s integrated website that will allow you to search the entire Multiple Listing Service, including specific searches such as Foreclosures and Short Sales, and don’t rely on print because most homes are not advertised in the newspaper.

* Our Agents Preview Homes for Sale for you
Our agents will research homes before showing them to you, and tour only those that fit your parameters.

* Avoid the Top 3 Home Buying Blunders
We at BLC Real Estate protect your earnest money deposit by writing contingencies into your contract.

We present all offers and Negotiate Like a Pro
Although buying a home is not like buying a car, for example, you can still negotiate to get a good price.

Get a Home Inspection and Read Disclosures
Never buy a home without getting a home inspection.

* What a Home Inspection Covers
Go through this list and make sure your home inspector doesn’t miss anything crucial.

* Material Facts
Besides disclosing lead-based paint, which any home built before 1978 can contain, sellers should notify you of major defects.

* Do a Final Walk-Through
Always do a final inspection a few days before closing to make sure the property is in the same condition as when you agreed to buy it.

Closing on Your Home
Transactions generally close within 30 to 60 days after your offer has been accepted. Remember to reserve movers or a moving truck early because many people move at the end of the month.

* Home Insurance
Shop for insurance rates carefully. Often, the company that insures your automobiles may offer you the best policy rates. We have worked with Rose Insurance in Salem, MA for several years and they have consistently offered competitive rates and great service.

* Title Insurance Policy

You might think you don’t need a title policy, but it’s the cheapest form of insurance you can buy, and you pay the premium only once. Difonte and Panagiotidis is one of our trusted attorneys that offers a free Purchase and Sales review prior to closing and competitive title insurance policies.