This is a checklist to determine if that dream home purchase, which you are thinking about stretching to, is actually the right decision. It is real a set of rules but if you read through it completely you should be a little bit more clear on whether you are going to proceed with such a life changing purchase or not.
If it is the right time and the right thing to do then it is a great opportunity to get into. If it is the wrong timing and you choose to go ahead anyway then it can be a burdensome and downright painful experience that will leave you feeling like you have been burned. So, to get it right take an honest look at your personal circumstances
Twelve Checklist Items That Determine Your Home Buying Status
- If it is out of your price range or the numbers don’t add up then do not buy now, wait until you can afford it.
- Be mindful; make sure that you are doing it right.
- Remember that you are purchasing the location and that means that you need to be satisfied that it is the right neighborhood. Research the community resources such as schools and crime statistics carefully before decide.
- No more questionable financing! You need to stick to the traditional home loan that you understand and requires you to make monthly payments that do not result in negative amortization (increase in loan balance due).
- Banks and mortgage brokers make money by maxing out your borrowing capacity. So, whatever they say that you can make in payments and balance, reduce it by twenty percent. Remember, a conservative attitude is your friend and your lender is a mercenary seeking payment.
- Lending standards have gone up in recent years and that is a good thing. You will have to be meticulous in your financial recordkeeping to make sure that you get the best deal that is available for you. Understand that it is a lengthy process, even if it is all smooth sailing, and that you must be patient throughout.
- The biggest mistake that borrowers who got into trouble in the financial crisis was to assume that by taking on huge debt they would be able to get better terms later on and refinance at a higher value. The lesson is that you cannot make assumptions and that if you cannot afford a home at the current rate then you should not buy it.
- As trite as it sounds, less really is more. When you buy less than you can afford you have more for the life that you intend to live in your new home. Also it means easier payments or faster repayment and greater abundance throughout your life.
- Know your credit score. If it is above 750 on all three major credit agencies you are in a good position to finance. If your score is below 750 then you may have higher rates.
- Can you buy and then stay put for five years? Generally speaking, this is the minimum time before it is worth owning your home. Moving more frequently will cause you to pay way too much in fees each time. If you cannot stay put that long then rent until you can.
- Like owning a car there will be extra costs when you least expect them with home ownership. Allow for this in your budget as well as for regular monthly and annual expenses.
- You need to be certain of your job security and that you will be able to make payments over an extended period. If you foresee any rough patches in employment in the near future then you need to hold off on buying until you can be confident of financial stability.
Why So Tough On Home Buying?
All of these might seem like a really strict approach to home buying. It used to be assumed that if you could qualify and occupy a home you were set. It was a general assumption that home values only ever increase. Today, we know that this is necessarily true. Add in the risks and uncertainties of the modern job market you have to understand that doing it right is a great way to avoid bad home ownership experiences.