Preparing For Home Ownership.

In preparing for home ownership, you must ask yourself a number of important questions.

Why buy a home?

Owning a home has many advantages over renting. Through home ownership:

• Build equity with every payment rather than financing your landlords’ equity
• Build equity through the increase in value of your home over time.
• Stabilize monthly housing costs.
• Establish a deductibility of your interest and real estate taxes in most instances.
• Have the privacy and the freedom to live by your own rules.
• Have the ability to adapt the home to meet your own needs and preferences rather that those of others.

Can You Afford To Buy A Home?

The first step in determining whether you can afford to buy a home is to prepare a realistic budget.
1. Determine Your Income
Figure out your monthly take home pay (your income after taxes and deductions are taken out)
2. Subtract Fixed Expenses
These are the payments you must make each month. Usually, the amount of the payment remains the same throughout the year. Examples of fixed expenses are utilities, car loans, student loans, installment payments, credit card bills, etc.,
3. Subtract Flexible Expenses
These are the expenses that you control each month. Included are groceries, clothing, transportation, and entertainment. Figuring the amount of your flexible expenses may help you evaluate what you are spending your money on and make adjustments as needed.
4. Subtract Monthly Savings
Make a fixed savings expense. Include in your budget to put away for savings. Then stick to it. Make it a habit to put that amount aside each month, otherwise, you may find yourself spending this money on flexible expenses!
5. Analysis and Pre-qualification
By comparing your non-housing expenses to your actual take home pay, you can see how much you can afford for housing related expenses. Finding out how much of a home you can afford can be accomplished by becoming pre-qualified with a lender of your choice. The lender can calculate your anticipated monthly payment and can give you’re an estimate of the most your can pay for a home. See our resource guide for some lenders we have worked with successfully in the past.

What Are The Costs of Purchasing?

When you become pre-qualified, a lender gives you a “good faith estimate” of the total amount of money that you will be required to have. Generally, you will be required to have.

• Down Payment:
  This can be as little as 3.5% with some lenders or 0% with a VA or other special loan programs, which may meet your particular needs. Obviously, the more money you have as a down payment, the less your borrowing costs and monthly payment will be. However, do not leave yourself without adequate savings for emergencies and the other costs associated with home ownership (e.g. decorating, furnishing, repairs, etc.,).
• Property Appraisal
• Credit Report
• Title Insurance
• Pre-paid Interest
• Mortgage Insurance
• Property Insurance
• Attorney’s Fees
• Moving Expenses
  

What Are The Costs of Ownership?

You should consider that you will have the following basic types of expenses as a homeowner.

• Monthly Mortgage Payment
  Each monthly mortgage payment consists of both principal and interest.
  The amount of your monthly payment depends upon the amount you borrow, the term of your loan, and the interest rate. As you make your payments, the principal balance is reduced and you build equity. Use the following link to our mortgage calculator to determine your payment.