Can you really afford a house? If so, how much house can you afford? To determine this answer will take serious financial planning, and the best time to start is at least six months before buying the home.
Although buying a new home may seem like an American Dream or romantic venture, the reality is that the house you can afford depends on your current income and debt obligations. You must be able to pay your mortgage, satisfy all your current debt, and still have money left over each month to put in the bank. When you consider all these issues, you may find you will actually be shopping for a lower-priced house than the anticipated dream home.
If after careful financial evaluation, you realize you cannot afford the house of your dreams, don't feel tempted to count on expected annual raises, thinking that eventually you'll be able to afford the higher payments. Most raises are generally 4% to 7%. In bad times, you won't get a raise, while inflation overtakes you. In the worse case scenario, you may get laid off and you won't be able to afford your monthly bills. If you don't have a budget that includes a savings account worked out on a spreadsheet, you are faced with a serious debt problem waiting to happen. If you cannot recite from memory all the creditors you owe and how much you owe them, you have a credit problem.
MONTHLY BUDGET SHEET
At the top of your planning list, you must determine what your mortgage payments will be, while not ignoring other monthly expenses. Remember, you need this complete research, and an organized budget sheet, to guard against becoming seriously in debt.
For example, besides the home loan, monthly expenditures to add to your budget sheet may include:
* Homeowners insurance,
* Homeowners Association Fees,
* Flood insurance,
* Mortgage insurance,
* Utilities,
* Garbage,
* Cable TV,
* Groceries,
* Lawn service,
* Pet groomer,
* Doctor and veterinarian bills,
* Auto loan and/or unexpected auto repairs,
* Drycleaning bills,
* Savings account,
* Lunch money for spouses and kids, and many other obligations.
Second on your list is to clean up your credit report.
YOUR CREDIT REPORT
Your credit score is the single most important factor determining whether you'll get approved for a mortgage, car loan, refinance loan, or credit cards, and what your APR will be. If your score is low, you'll pay very high interest rates, up to 23%. Most people are also unaware that their credit score also affects how much they pay for car insurance rates too. Many insurance companies run a credit check on you before selling you insurance.
CALCULATING YOUR CREDIT SCORE
You should get your credit report at least once every year to verify it for accuracy, and make certain your credit score is up to par. If your credit is clean and you have your down payment ready to go, you won't need as much time to plan for a new home.
Everyone has a credit score calculated at the time your credit report is requested. It's based on over 100 different proprietary variables and algorithms developed by Fair Isaac (FICO). The range is 300 to 850. You can get your credit score from Equifax Score Power, True Credit, or Consumerinfo.
Most lenders consider people above 650 to be prime borrowers, meaning they will most likely be approved at favorable rates. According to a credit report from Equifax, 71% of the people with a credit score from 500-550 will default on their credit. Another 51% of buyers with a credit score from 550-600 will default on their credit. It is for this very reason that lenders run your credit report and focus on your FICO Beacon score.
FACTORS AFFECTING YOUR CREDIT SCORE
The most important factor affecting your score is the length of your credit history. College students generally have low scores, while 30-somethings have higher scores. If you have too many accounts open, they can lower your credit score also. Opening several department store credit card accounts and excessive financing accounts also lowers your beacon score.
So, take an inventory of your credit cards. Do you have department store credit cards, appliance store credit cards, and computer store finance cards that are no longer used? What's worse, even if a store is defunct, your account may still appear on your credit report as open. Call all sources and close these accounts since you never use them.
Just remember, it takes about 30 days for the closing transactions to appear on your credit report. Once you successfully dispute and remove negative items from your credit report, wait 30-60 days and order another copy of your report to verify that the bad debt was removed and you now have a higher score.
Genesis Font is an SEO and Developer for LoansInteractive.com > Mortgage and Loan Officer Websites. We also offer Quality Web Hosting Services.
At a time when the entire world's attention is focused... Read More
Most consumers are aware of the importance of their credit... Read More
You should thoroughly consider your business needs when selecting a... Read More
Now that we are in the month of June I... Read More
Has anyone been to the gas pumps lately? Soon $3... Read More
1. Lighting & Light Bulbs Install low energy light... Read More
Things are so expensive these days. We seem to be... Read More
Single Mother's in need of Financial GuidanceBudgeting is key to... Read More
For most of us the process of getting out of... Read More
You have probably accomplished a great deal with your life.... Read More
Millions of people give a lot of thought to financial... Read More
Budgeting. It's a word we're all familiar with. Everyone knows... Read More
Holy Shenanigans! More STUFF?Loosing one's business due to lack of... Read More
When people speak about the increasing age expectancies, they generally... Read More
We all know that money doesn't grow on trees, but... Read More
Chapter 7The potential chapter 7 debtor should understand that a... Read More
Are your financial muscles well toned and healthy or flabby... Read More
Whatever your reason for having a tight budget, the truth... Read More
Saving for a Down Payment is hard work, so it's... Read More
Finding a stable and secure income that will come year... Read More
Financial freedom cannot be achieved without budgeting. Budgeting involves tracking... Read More
Christians are called to be good stewards of God's resources.... Read More
Those who keep a watchful eye on where their money... Read More
One of the biggest challenges facing black RELATIONSHIPS today are... Read More
I have been a loyal user of Quicken(R) for more... Read More
With interest rates being at an all-time low, I can... Read More
If you are the normal consumer, then you've probably experienced... Read More
Next to our physical health most of us are primarily... Read More
1) HOW TO LOOK FOR A JOBA) The Chronological Curriculum:1.... Read More
You've decided you want a bigger, better and more desirable... Read More
The recommendations for military base closings have been released and... Read More
Would you know what to do if you suspect that... Read More
Most Americans have been brought up to be concerned about... Read More
Did you know that 43% of all married couples argue... Read More
Confused about whether you can contribute to a Roth IRA?... Read More
The British government at the beginning of this year officially... Read More
Most consumers are aware of the importance of their credit... Read More
I have been a loyal user of Quicken(R) for more... Read More
The recommendations for military base closings have been released and... Read More
Australians, in general, constitute some of the worst savers in... Read More
Would you know what to do if you suspect that... Read More
Does it feel like you have to be Sherlock Holmes... Read More
Sorting out your personal finances can be a tricky and... Read More
With interest rates being at an all-time low, I can... Read More
1. Lighting & Light Bulbs Install low energy light... Read More
If you've developed a household budget to get your spending... Read More
The gas that we fill our tanks with every week... Read More
1) HOW TO LOOK FOR A JOBA) The Chronological Curriculum:1.... Read More
Christians are called to be good stewards of God's resources.... Read More
Recent security breaches at several credit card companies continue to... Read More
If You Have an Existing Account and 5 Minutes, You... Read More
It doesn't take much for you to get behind on... Read More
You no longer look at the pictures of homes cause... Read More
Creating a budget can be a very difficult task. Although... Read More
Financial freedom cannot be achieved without budgeting. Budgeting involves tracking... Read More
Many don't realize that our basic utility bills provide the... Read More
I thought I was through with exams when I finished... Read More
Address labels are many things to many different people. If... Read More
With the A-level results coming out, the long wait for... Read More
Have you ever stopped to think about how your "mood"... Read More
We all know that money doesn't grow on trees, but... Read More
Sticking to a budget can be difficult, but with so... Read More
Commonly referred to as the first of the three major... Read More
Predatory lending exists in the mortgage industry. It's typically when... Read More
Of course, these don't have to be done in any... Read More
I have to admit, I do it too. I complain.... Read More
Personal Finance |