I have to say, I do agree with what I am hearing on the news and talk radio these days…now is the time to buy a home! But, only if you’re ready. As a potential home buyer, you have to have your ducks in a row, and plan out what you want and how you want to achieve those goals!
A friend of mine, who also happens to be a Real Estate Agent, Nicole Maxwell, has a blog that I’m following, that she updates several times a week, all about the Real Estate Industry. From homes for sale and tips for cleaning to cool new things for your home and navigating pitfalls while home buying. If you like to keep up with Real Estate or are looking for a home right now, she can get you started…and she has also put together some tips for me that correspond to this post in a series of 10 basic steps you need to know/take for home ownership. Check out her blog at: http://maxwellsellsgtown.blogspot.com/
The Financial Tips:
Always have a down payment – When you take out a mortgage, the bigger your down payment, the lower your monthly payment and the shorter your finance time can be. We recommend having a 20% down payment and a 15 year mortgage (if you can afford such a short finance time). Another added bonus of a 20% down payment is that you avoid the cost of mortgage insurance!
NEVER finance more than you can afford – Banks will lend you more than you can afford. It’s just the nature of the game, the same as credit cards who give you more credit than you can easily pay off. As the buyer, you should know how much you should spend…DO NOT rely on the bank to tell you what you should spend…rely on YOURSELF or a trustworthy financial counselor. Typically you want to keep your monthly payment below 30% of your take home pay per month. 25% is better, but most people can do 30%. You should know the amount you can afford per month before you look for homes. It will give you a price range of homes to look at.
Emergency Fund – When you buy a home you need an emergency fund. The emergency fund protects you from the unexpected expenses that occur…and you WILL have unexpected expenses. New furniture that you didn’t know you needed, light fixtures that need to be replaced, new paint, plumbing work etc. All of this adds up, and if you don’t have the funds to cash flow the expenses, then you either have to wait to fix it or finance (credit card) it. You should have enough money for at least 3 months worth of expenses, and any additional money to cover incidental and decorating expenses…we recommend $1,000 to $2,000 for decorating/incidentals for the average family.
Know the expenses involved with buying a home – Closing costs, inspection fees and earnest money are all costs that “crop up” when buying a home, and you should be prepared to cover those costs. All of these fees and costs range in price, so ask your Realtor what you should set aside.
Now, I’m sure that there are tons more tips I could give you, but these will get you started, and safeguard you against the basic financial pitfalls of home buying for the average buyer. So, are you ready? Well, if you can say “yes” without a doubt, then you’d better get started on the process!
