Homeownership...To Buy or Not to Buy?

 I’m going through that stage in life when more and more of my peers from high school and college are “settling down,” as we so commonly say. They’ve navigated through their student loan payments and college credit card debt, and landed a secure job.  Now they ask me…Emily, can I buy a home How do I get started? How much house can I afford?

      We will tackle this subject in a few parts to break things down. Hopefully these thoughts can help!

       CAN I BUY A HOME? The answer to this, and many other questions in personal finance is almost always, “it depends” because of the plethora of variables that make the answer “yes” or “no.” While all mortgage underwriting guidelines are different, if you’ve had the opportunity to build a solid credit history and have sufficient income to support a mortgage, YES you probably can!

Photo Courtesy of http://wooderice.com/wp-content/uploads/2014/09/Rent-Or-Buy.jpg

           Many clients ask me, “How do I get started?” If you are asking me, you’ve probably done some exploring in the area you dream of buying a home. You’ve also probably taken a quick inventory of the cost of those homes. Now, take the average price of those homes and use a mortgage calculator. I recommend starting with a mortgage calculator, like BankRate. This will allow prospective homeowners to get an idea of what interest rates look like, as well as their principal and interest payment. At this point you may be ready to sign on the dotted line or rocking back and forth in the fetal position. Take a breath, and keep in mind these calculations do NOT factor in- taxes, homeowners insurance, and PMI (if necessary).

          Now that you’ve got an idea of what your dream home will cost you, I recommend you take a look at your credit report to look at how your credit stacks up. Please, please do not get sucked into one of the credit monitoring “services” out there. If the site requires a credit card, leave the site entirely. In fact, the ONLY place to review your credit report according to the FDIC is www.annualcreditreport.com or call 1-877-322-8228. Here, you can request a free credit report disclosure (available every 12 months) from each of the three major credit bureaus- Equifax, Experian, and TransUnion. Read your report carefully, and ask your financial planner to take a look with you.  Pay close attention to “factors negatively impacting your score.” That will give you an idea of what action you can take to improve your overall credit score and report, which may very well in turn pay off with a lower interest rate on your mortgage.

Photo courtesy of http://www.paulettetupper.com/wp-includes/ms-files.php?file=2014/12/rent-vs-buy-1024x438.jpg

                 Stay tuned! We will be back with MORE helpful tips and answers with Part 2 of “Homeownership… To Buy or Not to Buy?”