Apr 12, 2016

Are You Ready to be a Homeowner?

By Griff Christensen


home·own·er

Definition: a person who owns their own home.

While it may be no big deal to snatch up something off of the sale rack at the local department store, the decision to buy a home requires thoughtful planning and decision making.

Whether you’re taking the leap to becoming a homeowner for the first time or you’re a repeat buyer, buying a home is a financial and emotional decision that requires the assistance, experience, and support of a team of  professionals including a REALTOR®, a mortgage lender, a title/escrow company and a range of other individuals. 

What is your why?

The decision becomes emotional when you think about why you want to move.  If you’re a first-time buyer, you may be looking to establish roots into a neighborhood and looking forward to customizing your home without having to ask for your landlord's permission.  Also, since you have stability in your career  you are ready to commit to living in the same community for 5-7 years.

When considering purchasing a home you're considering a lifestyle choice that requires you to think about how you like to spend your time and the type of community where you want to live—such as a rural area without nearby neighbors, a high-rise building in a city or a home within a planned community with recreational amenities.

Understanding your priorities for a home will help you narrow down your real estate decisions and make the process easier.

Homeownership can also be a powerful way to increase your personal wealth for you and your family, since you’ll be building equity in your home as you pay off your mortgage.  Also, there may be some tax advantages that apply to the amount of interest you pay on your home mortgage.

Are you financially ready for homeownership?

While your dream home may not be a reality right away, you can take steps toward becoming a homeowner the moment you earn your first paycheck.

In order to qualify for a mortgage to buy a home, you’ll need good credit, a history of paying your bills on time while still saving money and a maximum debt-to-income ratio—your gross monthly income compared to the minimum payments on all recurring debts—of 43% or less. Some lenders have stricter guidelines, so the lower your debt-to-income ratio, the better your chances of a loan approval.

While loan programs are available with low down payments of 3.5% to 5%—and a few programs offer no down payment at all—you’ll still need some savings to pay for closing costs, moving expenses and an earnest money deposit on a home.  Consult with your lender and Realtor about actual numbers needed to pull off a smooth transaction.  It also is a very good idea to have some cash reserves on hand after you buy to take care of the incidentals that always pop up.

Saving money and preserving or improving your credit history are essential elements to homeownership.

How much house can I afford to buy?

Housing prices vary from one location to another, but you can use the mortgage calculator on my site to estimate the difference in monthly mortgage payments for the list prices on each home.  Also, figured into the monthly payments is an estimate of the last years property taxes. You also need to include homeowners insurance,  homeowners association dues (if any) in your housing costs.  Be sure to consult with a mortgage lender for more precise figures based on your current situation.

In addition to your housing costs, you should think about your plans for the future and how you spend your money.   A lender will tell you how much you can borrow, but that lender won’t know how much you spend on vactions, golf or your plans for potentially reducing your work hours when you have a family.

Next steps

Once you’ve considered the emotional and financial aspects of becoming a homeowner, your next steps should be to contact a reliable, experienced REALTOR®  (ME) to become your partner in the home-buying process and to meet with a reputable lender who can discuss your options for financing your purchase. 

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