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05/29/2009

Are you ready for homeownership?

Especially this years home buyer has all kinds of incentives to buy their first home. Tax credits, low interest and a lot of inventory might be enticing to you to jump into your fist home.

Maybe you had a change in family status or just want to fly the coop and start your own life…but are you really ready?

Here is a small check list for you to find how ready you are really for the responsibility of homeownership.

Do you have money for a down payment and possible closing costs? In many cases you will need between 3-20% as a down payment. The Down payment is based many times either on the agreed value of the home you would like to buy or the mortgage amount you are taking out against the home.

When you have less then 20% you might need to have mortgage insurance also called Private Mortgage Insurance (PMI), the PMI can range between ½ to 1 percent of your principal balance.

You also need to take the closing costs into account and they could run you between 2-7% of the agreed property purchase price. Closing costs could include points, taxes, title insurance, cost for financing your loan and homeowners insurance. Homeowners insurance and taxes in many cases need to be escrowed for later payment.

Do you know how much you really can afford?

As a general rule and this comes from Freddie Mack, your dept to income ratio can be between 30-40%. This includes credit card bills, car loans, housing expenses, Insurance, personal loans, alimony and child support. Your house payment should not be more then 30% of your income to be comfortable. More then that might put you in a bind

3. Have you looked at your credit rating lately?

When buying a home a potential lender will pull your credit and look at your rating and your payment history. This will determine if and how much there are willing to lend to you, so you can buy a home. You have not looked at your rating in a while you might pull your own credit and see what is says about you.

4. Have made major purchases lately or taken out a large personal line of credit?

This alone can lower the amount of money a mortgage company might will lend you to buy a home and it might make it harder for you to get a mortgage.

How well do you know the area you would like to move to?

Have you done your research with the help of your REALTOR on what type and what homes are listed for and what they have been selling for in the last 6 months? When you looking for a big home in an area where only smaller homes are selling you might have to get back to the drawing board and familiarize you more with the area.

Are you ready for the additional expenses that comes this homeownership?

Have you thought off that you will need to cover sooner or later insurance, utility bills, and maintenance for the home. Maintenance that could include a broken heater, leaking roof, or pluming.

Have you thought of why you want to buy a home

Homeownership is a lifetime commitment and should not be decided over night. Just remember that you are facing expenses other then when you renting a home, or is the reason for you to buy a home because your friends just bought one? When it is, you might consider waiting and still rent for a while.

Have you settled down?

Are you planning on moving any time soon? Or do you might think of changing your job or a transfer? Then homeownership might not be a thing for you right now.

Renting still has it’s perks and homeownership does have obligations are you ready to face them?

Do you have an apartment with amenities like an alarm system, pool, hot tub, tennis court and maybe a workout room? Will you miss theses amenities, or when you buy a home with these? Are you ready for the weekly/monthly maintenance that comes with the amenities? You have a maintenance guy you can call when your faucet is dripping, the heater filter, smoke alarm batteries, or broken furnace needs attention. Are you ready to face all those yourself or call a contractor to help you with the issues that will come up when owning a home?

Have you contacted a REALTOR?

Talk to several agent that are in the area, ask friends, family and co workers for referrals. Interview each agent before you make your decision. It is important that the agents personal style will be a good fit with yours.

Bettina Settles