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Home ownership builds financial profile, but strings may be attached

The past few years have given young people a unique view of a growing and active real estate market — one that older homeowners know does not remain constant, as shown by the recent housing slump.

But the downturn in real estate and fluctuation in mortgage interest rates still allows some flexibility for first-time buyers.

Generally, buying a home with a mortgage and paying that mortgage on time builds equity and a strong credit report, which is not possible if you’re renting. With every payment to the bank, you own a little more of your home, and by building equity and making your credit report stronger, you also build the opportunity to borrow money at a lower rate through a home equity loan.

Renting may have similar costs to owning a home — in some cases, it may cost almost as much as ownership. Rental units are relatively fixed in number, and their supply has remained fairly constant in recent years.

Demand for nice rental units remains high due to their location in highly ranked school districts, proximity to military bases and overall ease of maintenance. As such, prices remain high on desirable rental units.

Buying or renting is a personal and fact-based choice. You have to weigh your options and decide what’s right for you. This may start at a purely financial level by pre-qualifying for a loan and determining whether you can afford to buy. However, deciding not to buy may be a purely personal decision, as mine was when I moved to Washington and did not want to worry about the upkeep of the property.

Should you decide to buy, please make sure you pay attention to the title report that is generally required before a bank will lend you money for the property.

This is generally one of those “annoying” closing costs that you pay without really knowing what it means or does for you.

But it can be very important. Basically, the bank is looking to ensure that the property is free and clear of other debt or encumbrances that would diminish its value.

As a battle buddy of mine from Iraq learned recently, the title report can reveal restrictions on the property that may cause major inconveniences.

My friend called me a few weeks ago and said he had received a letter from an attorney demanding that he remove from his property some items used by his son for skateboarding. He was very upset because he bought this house specifically so his son could skateboard.

However, when the developer bought the property from a farmer several years ago, the farmer put in several restrictions that would run with the land. My buddy thought that because the home was not part of a homeowner’s association, he could do whatever he wanted on his property.

But that’s not always true, especially in areas of denser population. In my friend’s case, one of the restrictions on his deed banned the display of sports equipment on the property, to specifically include basketball nets or skateboarding equipment — a somewhat unusual restriction, but one that has a major impact for this family.

Bottom line: My friend must remove the equipment or face a lawsuit that he will likely lose.

Had he reviewed the title report with his attorney and explained to his attorney his reasons for buying the property, he would have learned about the restriction before he closed and could have walked away from the deal.

Remember — the real estate agent generally works for the seller and is obligated to tell the seller anything you tell them that could increase the purchase price.

As such, during the home purchase process, it is vital for you to have open, frank, and honest communication with your attorney — the person looking after your interests.

The information in this column is provided for informational purposes only and is not intended to constitute legal advice. Readers are encouraged to seek the advice of an attorney or other professional when an opinion is needed.

Mathew B. Tully Esq. is a field artillery officer in the New York National Guard and a veteran of Operation Iraqi Freedom. He is also the founding partner of Tully, Rinckey and Associates (http://www.fedattorney.com), a law firm in Albany, N.Y. E-mail your legal questions to askthelawyer@militarytimes.com.