Home ownership is an intrinsic part of the American dream.  It is great to be able to walk through the front door and know you are stepping into a house of your own, instead of paying rent to someone else.  Owning a house is a reason to be proud, but it is also a great financial move.  Your home is probably one of the largest investments you will hold, and over time, it should reward you abundantly.  

Here are ten good reasons for owning a home:

1.  
   1. Real estate appreciates in the long term
   2. The alternative is to pay rent, which does nothing to improve your finances
   3. The interest on your mortgage is tax deductible
   4. You can borrow against your home equity in an emergency
   5. The equity portion of your mortgage payment is a form of automatic savings
   6. A home is a leveraged investment using other people’s money
   7. A home purchased with a fixed rate mortgage has a stable payment schedule that becomes easier to pay over time due to inflation
   8. Owning a home is a good way to diversify your assets
   9. Home ownership clear of debt will help you retire comfortably
   10. Pride of ownership helps increase you self-confidence

Buying your first home can be a scary process, especially for young people that are just starting out.  When you sign on the dotted line, and commit to a mortgage payment that is a significant portion of your income, it can be a daunting process.  But if you follow some common sense guidelines, this process does not need to be so intimidating: 

1.  
   1. Buy only a house that you can afford.  How big a home can you comfortably afford?  A good rule of thumb is to take your annual household income and multiply by 2.5.  So the average American family with a household income of $72,000 should comfortably afford a $180,000 home.
   2. Don’t commit more than 25% of your income to a mortgage payment.  Your total debt should not be more than 33% of your income.
   3. Save enough to put down 20% of the value of the home so that you can avoid private mortgage insurance payments that only protect the lender.
   4. Have a six month cash reserve that you can use in case of an emergency, such as a job loss, or to pay for any major repairs.
   5. Live in the house long enough to build some equity.  If you plan on moving within 2-4 years it may not be worth purchasing a home due to closing costs.
   6. Do not get an interest only mortgage.  With this type of mortgage you only build equity through price appreciation.  If the house value goes down temporarily you may find yourself in a negative equity situation, meaning you owe more on the house than it is worth.
   7. Be careful with adjustable rate mortgages.  An increase in interest rate can quickly make the house unaffordable.

Home ownership rate in the US is about 69%.  Only a few countries such as Ireland, Spain and Italy have a much higher rate of ownership, around 80%.  The Midwest has the highest rate of home ownership in the US, and, as expected, the older the age group, the higher the rate of ownership.  Although homes may seem very expensive in the US, they are still cheaper than in many parts of Europe.  However, with the recent sharp increase in house prices in the US in the last 5 years, house affordability is becoming a problem for the average American.

Changes in the real estate market create concerns about whether it makes sense to purchase a home in a particular market environment.  Whether you buy now or later, home ownership is still one of the most important steps towards financial success.  If you plan on living in the house for a long time, it really does not matter if the home price fluctuates in the short term.  In the long term you will not regret having made your purchase, even if your timing is not perfect.