Thursday, August 26, 2010

Qualifying Yourself

Today, 1 in 20 homes are in foreclosure.  There is plenty of talk out there about how lenders are tightening their lending practices and standards to avoid one of their financed homes from being an addition to that statistic.  That being said, with 30 year fixed rates below 4.5%, an abundance of inventory, and depressed home prices, I believe now is one of the greatest times in recent history to purchase real estate, that is, if you can qualify yourself first.

What About Finances?
First things first, lenders are going to expect your financial situation to be in order.  Most lenders are satisfied with a down payment of 10-20% but a down payment isn't the only hoop you'll have to jump through to purchase a home.  Lenders will focus on your ability to pay your monthly mortgage along with the associated taxes.  A good rule of thumb is that your monthly home expenses should be no more than 25% of your total household income.  For example, if your family brings in $5000 per month, the costs associated with your home should be no more than $1250 per month.  If you are over that percentage, it might be a good idea to re-determine your needs and potentially downsize your home expectations.  An experienced realtor can help you understand exactly what you can afford.

Your Crazy Life...
Life is very uncertain.  Getting into a home at the wrong time in your life could be quite a disappointment.  Job security is the main concern for most, simply because if they lose their income, they can lose everything.  If you are comfortable in your job, it may be best to set aside an emergency fund, just in case your employer isn't as comfortable with you.  Family obligations are another major concern.  Be certain that when you're planning on buying your home, that your family can still expect you to fulfill your normal obligations.  Buying a brand new home and commuting an extra hour per day could really put a strain on your relationships.

The Upside
With the right discipline and planning, home ownership is substantially more beneficial than renting.  Building equity, and making your house a home will always be beneficial in the long run.  Be sure to look within to determine exactly what you can afford.  Chances are you'll be very happy with your decision to buy, especially in this market. With a very small time investment and the right realtor, you can make your dreams of home ownership a reality.

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