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Buying Your First Home

Buying your First Home

Owning your own 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 over 60% of all households to own their own homes.  In addition, there can be true financial rewards from home ownership.  But, not always.

How Much Home to Consider
Buying and owning a home is expensive.  You will need to consider many different factors:

  1. A down payment (perhaps 20% of the purchase price)
  2. Mortgage closing costs
  3. Monthly mortgage payments
  4. Property taxes
  5. Insurance. 
  6. Utilities
  7. Furnishings

Deciding how much to spend for a home can be complex.  You probably want as nice of a home as possible, but you want to be able to afford it.  What you can afford depends on the size of your mortgage, mortgage rates, costs of home ownership, your other expenses and your income.  One rule of thumb to consider is that the total of your mortgage payment, property taxes and insurance should be no more than 28% of your household income.  Here is a worksheet and a table of mortgage payments to help with the calculation.

Sample Monthly Mortgage Payments for a 30 Year Fixed Mortgage

Interest Rate

Mortgage Amounts

 

$100,000

$150,000

$200,000

$250,000

5.0%

$536.82

$805.23

$1,073.64

$1,342.05

5.5%

$567.79

$851.68

$1,135.58

$1,419.47

6.0%

$599.55

$899.33

$1,199.10

$1,498.88

6.5%

$632.07

$948.10

$1,264.14

$1,580.17


Check out our mortgage calculators to provide more precise payment levels and you can also calculate mortgage payments for other lengths of mortgages.

Worksheet

 

Sample

Sample

 

 

Mortgage amount

$100,000

$150,000

$

$

Monthly payment x 12

($599.55x12)

$7,195

($899.33x12)

$10,792

 

 

Property taxes

$2,625

$2,625

 

 

Insurance

$1,200

$1,200

 

 

Total

$11,020

$14,617

 

 

 

 

 

 

 

Household income

$50,000

$50,000

 

 

Times 28%

x.28

x.28

x.28

x.28

What you can afford

$14,000

$14,000

 

 

Difference

+$2980

Affordable

-$617

Stretching affordability

+ or

+ or

The sample is based on buying a $175,000 house with a 6% 30 year mortgage.  As the chart shows, this person can probably comfortably afford buying the home with a much larger down payment.  As a practical matter, the person could probably be comfortable with a mortgage in the $125,000 to $130,000 range.

Tax benefits from home ownership
Many taxpayers find that the interest on their mortgage and the annual property taxes they pay are large enough to enable them to itemize their deductions instead of using what is commonly referred to as the standard deduction.  The standard deduction for single filers on their 2011 tax returns is $5,800 and $11,600 for joint filers.  For many homeowners, their interest and property taxes exceed those amounts.  Be sure to keep track of when you pay your property taxes.  Some taxing districts have due dates close to the end of the year and you must have paid the tax before December 31st to get the deduction.

The IRS also allows you to exclude any gain on selling your house up to $500,000 if you file a joint income tax return and meet certain requirements.  You may want to investigate these tax advantages further or talk to a tax accountant to completely understand the tax advantages.

Potential gains from selling your home
The housing market in many areas of the country is currently suffering.  While that may be bad news for existing owners, it can be very good news for those buying their first home.  When the housing market improves, and the odds are good that it ultimately will, the value of your home may rise. 

Summary
If you are like millions of others, owning your own home is a primary financial and lifestyle goal.  The pride of home ownership and the financial rewards are attractive.  Just make sure you understand that there can be some downsides before you make the decision.

Contact a Representative Today

Back to Education Resources

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Personal Banking Security Measures for the 21st Century

clientuploads/21st-Century-Securitysquare180.pngMany of us are constantly connected to the online world these days. This means that the potential is there for our computers and personal information to be compromised which greatly increases the risk of ID theft and financial fraud to occur. However, by taking some basic precautions you can significantly reduce the risk of your computing environment being compromised. Following these simple guidelines should help your computing environment become more secure:

Keep your computer and software up-to-date

Keep your computers and network equipment secured with the latest software updates and enable automatic updates whenever possible.  This includes updates to third party applications such as Java and Adobe Products.  

Use hard drive encryption

In the event your machine is lost or stolen, drive encryption can prevent others from accessing the data on your hard drive.  The purpose is to encrypt or scramble your data on your machine so that it can only be read with your encryption key.Many operating systems offer drive encryption.  Microsoft offers Bitlocker and Apple has FileVault. There are also other third party encryption offerings.   

Enable your firewall

Think of the firewall to your computer as the fence around your property.  If there were multiple holes cut in the fence, it wouldn’t be very useful at keeping people out.  Firewalls are typically enabled by default on Windows machines, but double check to make sure it’s on.  Here are instructions to do so if you are using Windows 7. Only allow necessary applications inbound access through your firewall. The same principles apply to your network firewall. 

Configure your screensaver

Set an auto-locking screensaver so your account gets locked out after a few minutes.  This is useful if you forget to lock your machine when are away from it. On Windows machines this can usually be done by pressing the “Windows Key” and the “L” button simultaneously.

Make your passwords stronger

The longer and more complex the password, the better.  At least 16 characters with a combination of upper and lowecase letters, numbers, and special characters is a best practice.

Configure your router

Use the strongest wireless security available (currently WPA2-CCMP) with a long and complex password for your wireless network. Disable WPS on your wireless router for greater security.   

 


Think that some secure banking information
of yours has been compromised?

If you suspect that your personal financial information has been compromised, call MutualBank Customer Support at 800-382-8031.


 

Monday, April 7, 2014

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Buying Your First Home

Buying your First Home

Owning your own 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 over 60% of all households to own their own homes.  In addition, there can be true financial rewards from home ownership.  But, not always.

How Much Home to Consider
Buying and owning a home is expensive.  You will need to consider many different factors:

  1. A down payment (perhaps 20% of the purchase price)
  2. Mortgage closing costs
  3. Monthly mortgage payments
  4. Property taxes
  5. Insurance. 
  6. Utilities
  7. Furnishings

Deciding how much to spend for a home can be complex.  You probably want as nice of a home as possible, but you want to be able to afford it.  What you can afford depends on the size of your mortgage, mortgage rates, costs of home ownership, your other expenses and your income.  One rule of thumb to consider is that the total of your mortgage payment, property taxes and insurance should be no more than 28% of your household income.  Here is a worksheet and a table of mortgage payments to help with the calculation.

Sample Monthly Mortgage Payments for a 30 Year Fixed Mortgage

Interest Rate

Mortgage Amounts

 

$100,000

$150,000

$200,000

$250,000

5.0%

$536.82

$805.23

$1,073.64

$1,342.05

5.5%

$567.79

$851.68

$1,135.58

$1,419.47

6.0%

$599.55

$899.33

$1,199.10

$1,498.88

6.5%

$632.07

$948.10

$1,264.14

$1,580.17


Check out our mortgage calculators to provide more precise payment levels and you can also calculate mortgage payments for other lengths of mortgages.

Worksheet

 

Sample

Sample

 

 

Mortgage amount

$100,000

$150,000

$

$

Monthly payment x 12

($599.55x12)

$7,195

($899.33x12)

$10,792

 

 

Property taxes

$2,625

$2,625

 

 

Insurance

$1,200

$1,200

 

 

Total

$11,020

$14,617

 

 

 

 

 

 

 

Household income

$50,000

$50,000

 

 

Times 28%

x.28

x.28

x.28

x.28

What you can afford

$14,000

$14,000

 

 

Difference

+$2980

Affordable

-$617

Stretching affordability

+ or

+ or

The sample is based on buying a $175,000 house with a 6% 30 year mortgage.  As the chart shows, this person can probably comfortably afford buying the home with a much larger down payment.  As a practical matter, the person could probably be comfortable with a mortgage in the $125,000 to $130,000 range.

Tax benefits from home ownership
Many taxpayers find that the interest on their mortgage and the annual property taxes they pay are large enough to enable them to itemize their deductions instead of using what is commonly referred to as the standard deduction.  The standard deduction for single filers on their 2011 tax returns is $5,800 and $11,600 for joint filers.  For many homeowners, their interest and property taxes exceed those amounts.  Be sure to keep track of when you pay your property taxes.  Some taxing districts have due dates close to the end of the year and you must have paid the tax before December 31st to get the deduction.

The IRS also allows you to exclude any gain on selling your house up to $500,000 if you file a joint income tax return and meet certain requirements.  You may want to investigate these tax advantages further or talk to a tax accountant to completely understand the tax advantages.

Potential gains from selling your home
The housing market in many areas of the country is currently suffering.  While that may be bad news for existing owners, it can be very good news for those buying their first home.  When the housing market improves, and the odds are good that it ultimately will, the value of your home may rise. 

Summary
If you are like millions of others, owning your own home is a primary financial and lifestyle goal.  The pride of home ownership and the financial rewards are attractive.  Just make sure you understand that there can be some downsides before you make the decision.

Contact a Representative Today

Back to Education Resources

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