Buying a Home

  • Are you ready to buy a home? Many people are not prepared. Is that you? When will you be ready? Here are some guidelines that should help you in answering these questions.

 

  • Have 20% of the price of the home set aside for the down payment. It is important to become a good saver prior to buying a home. This will also help you avoid Private Mortgage Insurance (PMI).

 

  • Get rid of your debt before you buy a home. This may delay your home purchase. Trust me, it’s worth it. Walking into a home debt free will reduce the stress of this very big decision.

 

  • Keep your payment below 30% of your gross pay. This payment includes the mortgage, taxes, and insurance. Do not let a bank tell you what you can afford. You make that decision. Keep that payment under 30%.

 

  • Do not buy a starter home. You are not settling now just so you can buy bigger later. Starter homes are a very bad financial decision in many ways. Stay away.

 

  • You have no intention of moving within 5 years. It will take you approximately this amount of time to recoup your initial costs. The way you make money with your home is by living there for a looooong time. Here we are talking decades.

 

  • Your credit score is high which means you will receive the best interest rate banks have to offer. Raising that credit score can save you many thousands of dollars over the life of the loan. Strive to hit 760 and you will get the best interest rate the bank/credit union will offer.

 

  • Your emergency account will not be depleted after making the down payment. Being house rich and cash poor can make you a prisoner in your own home. If you don’t have a decent amount of money saved up in an emergency account, don’t buy a home. Wait and be patient with the process. Savings comes before buying.

 

  • Push hard to qualify for a 15 year fixed rate loan, but settle for a 30 if necessary. That 15 year loan will save you many thousands of dollars over that time period. It will also provide you a lower interest rate than the 30 year loan.

 

  • The relationship with your spouse or significant other is strong. Owning a house can be stressful, don’t bring a strained relationship into the mix. If you have issues, be patient and wait until they have been worked out.

 

  • Homeownership can be a wonderful thing, but it is not for everyone and it certainly is not right for people who are not financially prepared. Wait as long as you need and don’t let others push you before you are ready. This is a HUGE decision. Prepare carefully.

 

  • It is okay and it certainly is not mandatory that you buy a home at any point in your life. If renting is the best option for you then so be it (homeownership is not for everyone). That is a message you will not receive from the real estate agents, government agencies (city, state or federal), the insurance industry, private businesses, or probably most of your friends and family. Let’s take a look.

 

  • There are many people who need you to buy a home. You will not pay the commissions (real estate agents). You will not pay the property taxes (local government). You will not pay the insurance (insurance industry). You will not pay for all the new “stuff” that will go into your new home (private businesses). You will not pay the sales tax on all that new “stuff” (state and local government). You will not pay for the maintenance, upkeep, and improvements on that new house (private contractors). The federal government? They will receive much less in tax revenue because there are fewer homes being built, worked on and sold throughout the country.

 

  • Here is the bottom line: Take your time with a home purchase. Prepare carefully. Wait until you are ready. And do not let others push you into something that might just cause a great deal of psychological stress and possibly broken relationships. Do what is right for YOU.