12 Best Reasons to Become a Homeowner

June is National Home Ownership Month. One of the happiest times in my life was when I became a homeowner.  I feel a great sense of accomplishment and have been blessed to remain in my home despite the economic woes of the country and many other homeowners because I bought a home for much less than the amount I was approved for.

The best time to buy a home is during with fall and winter season when demand is low. However, many Americans purchase homes during June, the start of the summer season. Owning a home is one of the best ways to generate wealth.  However, owning a home requires financial discipline and sacrifice.  Create a budget or spending plan to help manage your finances to make sure you can stay in your home for as long as you like and to help reduce the chances of filing for bankruptcy or foreclosure. 

Your monthly mortgage payment should be no more than 32-38% of your total monthly income.  This will ensure that you have extra cash to pay for unexpected expenses and will reduce the chances of using a credit card and going into debt. Here are twelve smart reasons to become a homeowner:

Credit. 

Increases your credit score when you make payments on time and proves that you are a responsible spender.

Own.
You become a proud owner. You have the ability to do anything you want to your home unless you live in a HOA or a historic district.

Inexpensive. Mortgages are cheap.
You can get a 30 year fixed loan for less than five percent.

Taxes.
Provides a tax write-off. You can write-off your interest payments, points, and real estate property taxes.

Financial security.
Homeownership increases your net worth due to appreciation which helps build equity.

Peace of mind.
You don’t have to worry about increases in your monthly mortgage payment unless there is an increase in your taxes or homeowners insurance premium. However, if you pay your taxes and homeowners insurance premium on your own your monthly mortgage payment will remain the same.

Invested. 
Becoming a homeowner means you are vested and have a stake in your neighborhood. You will become more concerned about your neighborhood and work with your neighbors to make improvements.

Knowledge. 
You will gain knowledge about the home buying process, realtors, lenders, interest rates, home prices, and sales trends.

Protection. 
Buying a home offers some inflation protection. Studies show that over the long-term housing tends to beat inflation by a few percentage points a year.

Risk capital. 
If the economy grows (increases) that will result in a domino effect and real estate prices will increase.

Responsibility.  
Provides more financial responsibility in other parts of your life such as planning for retirement, paying for college, and reducing spending.

Save.
It forces you to save your money to ensure you are able to pay that monthly mortgage payment and helps you become more disciplined with saving and spending.

Why Homeownership is Important

June is National Homeownership Month. 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.

 

Step 2. Know your rights. There are several government acts that protect borrowers’ rights.  The Fair Housing Equal Opportunity for All act prohibits discrimination and intimidation of people in their homes, apartment buildings, condominiums and all housing transactions including rentals and sales. 

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 3: Shop for a loan. Save money by doing your homework. Talk to several lenders, compare costs and interest rates and negotiate to get the best deal possible. To show you are a serious buyer and to have a competitive edge over other buyers get pre-approved for a loan and use the pre-approval letter when shopping for a home.  Shop around with several lenders and get at least 4 quotes on loans to make sure you are getting the best price and terms. Contact a loan officer or mortgage lender instead of a broker to assist you with buying a home.  Ask for a list of current mortgage interest rates, if the rate is fixed or variable and the loan’s annual percentage rate (APR) which includes the interest rate as well as points on the mortgage loan and may include broker or lender fees. 

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. 

 

Step 5. Look for a home. Check the crime statistics, quality of schools, location of police and fire department, grocery stores and pharmacy when looking to purchase a home. Select a real estate agent and make a list of items and features you wish to have in the home.  Also ask if the home has lead paint.

 

Step 6. Make an offer. Work with your real estate agent to make an offer on the home you wish to buy. Make sure the real estate agent is working for you only and not working for you and the seller.  You need a real estate agent who has your best interest in mind. 

 

Step 7. Get a home inspection. Make your offer on the home you wish to buy dependent on a home inspection. Hire your own inspector who is unbiased and who will tell you the condition of the home (inside and out) and any potential problems that could happen in the near future.  Be sure to ask the inspector any questions that you may have or if you need further explanation.  Request a pest and lead inspection.

 

Step 8. Shop for homeowners insurance. All lenders require that you purchase homeowner’s insurance. Shop around to find the best deal possible.  Try to get a bundled package to include your car and home insurance to get discounts and ask what other discounts are available. 

 

Step 9. Settlement/Closing. Make sure you plan at least 2 hours in your schedule for the settlement.  Bring your Good Faith Estimate with you and compare fees – the fees will be different from the final paperwork but should not be too much more than the good faith estimate. Read all the settlement paperwork before signing it and don’t let the settlement attorney rush you. If there is a mistake on the form ask the settlement attorney to make the adjustment and give the forms back to you to sign during settlement.

9 Effective Steps to Buying a Home

June is National Home Ownership Month.  One of the happiest times in my life was when I became a homeowner.  I feel a great sense of accomplishment and have been blessed to remain in my home despite the economic woes of the country and many other homeowners. 

The best time to buy a home is during with fall and winter season when demand is low.  However, many Americans purchase homes during June, the start of the summer season.  Owning a home is one of the best ways to generate wealth.  However, owning a home requires financial discipline and sacrifice.  Create a budget or spending plan to help manage your finances to make sure you can stay in your home for as long as you like and to help reduce the chances of filing for bankruptcy or foreclosure. 

Your monthly mortgage payment should be no more than 32-38% of your total monthly income.  This will ensure that you have extra cash to pay for unexpected expenses and will reduce the chances of using a credit card and going into debt. The advantages of owning a home are:  it increases your credit score, proves that you are a responsible spender, provides stability, provides a tax write-off, increases your financial worth, and provides you with an asset that will appreciate over time.

Renting should be a short-term option not a long-term solution.  Although becoming a homeowner may not be an option for everyone, owning something of value should.  You can:  become an entrepreneur, invest in a profitable business or purchase investment property.

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).  Start reducing your spending at least 3 months prior to looking for a home and use the money to save towards downpayment and closing costs and to save the difference between your current payment and your estimated mortgage payment.   Here are 8 tips to help you buy a home:

1.      Fix any errors on your credit and pay down debt

2.      Find a real estate agent

3.      Get pre-qualified

4.      Find the best loan

5.      Use home buying programs

6.      Find a home  and make an offer

7.      Get a home inspection, home energy audit, lead and radon tests

8.      Shop for homeowners insurance

9.      Prepare for settlement and closing and confirm in writing all dates, dollar amounts and what is needed from you