Monday, June 03, 2013
Why You Should Buy a Home
June is National Homeownership Month. Many Americans lost their homes during the recession and some have not fully recovered or do not desire to become homeowners again. When owning a home you need to create a budget to help manage your finances and debt to make sure you can stay in your home for as long as you like and reduce the chances of filing for bankruptcy or foreclosure.
Before you buy a home you need to prepare for the home buying process. Estimate your monthly mortgage payment. Subtract the difference of the estimated monthly mortgage payment and your current rent (if you pay rent). The first month add $100 to a savings account. The second month add $200 to the savings account, the third month add $300 and keep doing this until you save the entire amount of the difference from what you currently pay for rent and your estimated monthly mortgage payment.
This will ease the burden of having to adjust to paying your first mortgage payment because you will have already budgeted your money to accommodate for the mortgage payment. Your mortgage payment should be no more than 38% of your total monthly income. This will ensure that you do not live above your means and hopefully have extra cash to pay for unexpected expenses and plan for retirement. The advantages of buying a home are:
1. Build equity
2. Generate wealth
3. Access to equity for unexpected expenses
4. Tax benefits
5. Access to protection such as insurance and warranties
The disadvantages of buying a home are:
1. Maintenance costs
2. Increase in payments due to insurance or tax increases
3. Insurance and tax payments
4. Protection costs for insurance and warranties
Here are 9 tips to help prepare you for buying a home:
Step 1. Know Your Limit. The amount of home (sale prices) you can afford depends on your income, credit rating, current monthly expenses, down payment and the interest rate. There are many options for owning a home such as: buying a condo, townhome or single family home.
The Real Estate Settlement Procedures Act (RESPA) act relates to closing costs and settlement procedures. The act requires consumers receive disclosures during the home buying process and outlaws kickbacks.
Step 4. Use programs. Several companies offer home buying programs such as Home Free and NACA as well as state governments to assist with down payment and closing costs. Visit www.hud.gov/buying/localbuying.cfm to find home buying programs in your state.