Homeownership comes with a long list of benefits and rewards, but it also carries a healthy dose of responsibility. Misjudging or exceeding your financial limitations can have far-reaching effects.
You need look no further than foreclosure rates across the nation in the past half a decade to understand the gravity of buying within your means and being cautious about purchasing a home.
According to RealtyTrac.com 1 in every 230 houses is in foreclosure. Distressed home sales still account for around 1/3 of all home sales. This is years after the 2009 recession.
Preparation for homeownership is prudent and advisable. You should follow some expert tips to get started.
First, have a frank conversation with yourself or your significant other about how much home you can truly afford. You should take into consideration a wide range of scenarios. What if one of you loses your job? What if you become disabled? How long are you planning on living in this area?
You should also calculate the costs of homeownership -- the real costs. You will need to consider closing costs, homeowners insurance, maintenance and repairs, and even decorating costs.
Next, assess the status of your credit report and score. Identity theft runs rampant today. You should make sure that everything on your report is accurate. You should also take a gander at your score. This will give you a good idea what sort of rate you may qualify for. The higher the score the better the rate.
In a final step of groundwork, you should speak to a bank or lender about getting pre-qualified and then pre-approved. Pre-qualified means that the lender is willing to write you a loan. Pre-approval gives you a more exacting budget and proves to a seller that you mean business. Get your paperwork in order for this step. You'll need W-2's, paystubs, and other financial documents.
Once you've established what your home buying budget will be and what you need to do to improve your credit score, you should start the noble task of saving.
It is likely you'll need a large downpayment (around 20 percent of the total purchase price) in today's market. Begin your savings journey by developing a monthly spending budget. Decide how much money you can transfer each month to a savings account and then watch the balance grow.
Finally, start dreaming. Searching for the perfect home can be a tiring task. There are many different kinds of housing. Which is the right fit for you? What amenities are a must and what can you do without? Are you interested in specific neighborhoods or school districts?
Buying a home can be a dream come true....just do your legwork to ensure you make a solid financial decision along the way.
Published: August 8, 2012