Preparing to Buy

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Preparing To Buy

Buy A Home Guide

Prepare Yourself To Buy A home

Buying a home is not easy, in fact, it's a full time job. That's why you need to be well prepared before you start; being prepared will make the process go smoothly.

The Advantages Outweigh The Disadvantage

You know that owning your own home has financial benefits in terms of tax relief and equity appreciation, owning has nice lifestyle benefits and you can make alterations to suit your owntaste. You know that buying a home means that you are prepared a large term debt and that initially, you will be depleting most of your financial resources. There is no superintendent to call upon, and that there will be maintenance and repair expenditures to be prepared for. There is a possibility of capital depreciation if the neighborhood does not maintain the same value that it had when you purchased the property.

Home Ownership Made Easier (H.O.M.E) Housing Costs: How Much Can You Afford

Just how well do these old guidelines apply to you in today's housing market? Housing should take about 25% of your gross pay or 35% of your take-home pay. When buying a home look for something priced at 2.5 times your gross income.

The reality is that households spend between 21 and 54% of their gross income on housing, depending on age and income level.

Total Cost of Shelter

When thinking about how much you can afford it's important to keep in mind not only the rent or mortgage payments but also all the other costs of running a household. These expenses include taxes, insurance, utilities, household maintenance and repairs, yard and garden supplies, and expenses related to remodeling or home improvements.

The lender's Perspective

When a financial institution reviews a mortgage application, it usually follows two basic guidelines in determining how large a mortgage to grant:

Principal, interest, taxes and insurance (PITI) should not exceed 25 to 28% of gross income, and
PITI plus other long term debt shuld not exceed 33 to 36% of gross income. (note: to calculate principal and interest you may use the mortgage calculator)

Long term debt includes car loans, installment loans, alimony, child support, and balances on charge cards that will take more than 10 months to pay off.

Up-Front Costs

One way to reduce mortgage payments is to make a larger down payment. There are "up-front" expenses that require cash. Many of these are closing costs. Moving costs, minor repairs and furnishings, and money paid to the seller for items not included in the purchase offer.

To determine how much you can afford it may be neccesary to sit down with your financial records and add up how much you spend on all other nonhousing items in your budget. Any remaining money could be used housing-related expenses.

First, review your expenditures to see if you can make cuts in areas to shift more money into housing.

Second, remember that you can deduct mortgage interest payments and property taxes from your income tax, which may help save on federal, state, and local income taxes.

Third, make sure you have shopped around for the best mortgage interest rates and terms.

Fourth, consider alternative forms of homeownership. Equity sharing will reduce your mortgage expenses and make homeownership affordable.

Finally, remember that your first home may not be your dream home. "Starter homes" allow you to build equity while continuing to work toward your financial goal of owning your dream home.

Debt Reduction Planner

Welcome to the Debt Reduction Planner. In several short minutes, you will learn whether you have too much debt and get a plan for reducing debt.

You must have JavaScriptand Java enabled to use the planner.

Debt Reduction Planner is a simple tool designed to help you understand and analyze your debts. THE CALCULATIONS ARE NOT GUARANTEED TO BE ACCURATE. The planners offers methods for reducing your debt, but these methods may not be appropriate for your particular circumstances. You may wish to consult a personal financial adviser before taking any actions with respect to your debts.