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Tips for First-Time Homebuyers


Dreaming of Owning a Home?  Tips for First-Time Homebuyers

Buying a home is an exciting prospect for any family.  You may have heard interest rates are at close to all-time lows.  You may be tired of worrying if your landlord will raise your rent, let you get that puppy your kids have been begging for, or whether that bright purple paint from your daughter’s room will come out of your security deposit one day.  Whatever your motives, you’re probably asking yourself, “Is now the right time to buy?”  Here are some simple tips for evaluating whether this is right for your family and what to expect if you do decide to buy.

Consider Your Lifestyle

Buying a house is regarded as the American Dream, but is it right for you?  Sure, there are benefits to ownership – for example, you have the stability of generally fixed payments without worrying about raised rents or lease renewals, you can build an ownership interest (equity), and you can live how you want to live (pets, remodeling).  However, with these benefits come less flexibility to move and more financial responsibility.  Unlike in a rental, you have to pay for that leaky roof or burst pipe.  And you can’t pick up and leave easily.  Ask yourself if you’re stable and settled, not only in terms of location, but also professionally and financially.

Look at Your Finances

Can you make a down payment and qualify for a mortgage?  Look at your savings to determine how big a down payment you can afford.  Generally, 20% down or more is ideal to allow you to have a manageable mortgage payment and already some equity in your home.  Then to consider mortgage options, check your credit score and look at your income and debts.  Generally, lenders want your monthly debt payments (including your new mortgage) to be less than 43% of your monthly income.  So if you already have a car payment and a student loan payment, you want to make sure your income makes up for those debts.

Lastly, ask yourself, “What can we afford?”  Don’t rely on lenders, mortgage brokers, or real estate agents to tell you what is financially best for you.  Even if you qualify for a mortgage, don’t take that as the final word.  Seriously look into how much your family earns vs. spends a month.  Then ask yourself if you are comfortable with that monthly payments.

You Decided to Buy…Now What?

Do your homework.  The most important thing is knowing what you’re signing up for.  Read all of your loan documents carefully before you sign them.  Know the terms of your mortgage.  Is it a 30-year or 15-year?  Is it a fixed or an adjustable rate?  It sounds simple, but a lot of people lost their homes in the mortgage crisis because they had adjustable rate mortgages and couldn’t afford their monthly payments when the rate reset.

Plan & Budget.  Keep in mind that you’re now not just responsible for your mortgage payment, but also property taxes, insurance, and repairs.  Set aside money for the unplanned emergency so you won’t be in crisis when it happens.  You don’t want a leaky roof or a health issue to cause you to fall behind.

In sum, buying a house is a very thrilling, rewarding endeavor for any family.  Make sure you fully understand and can handle the financial responsibilities, and put yourself in a position to thrive.

If you need additional information, please contact the Legal Aid Foundation at (805) 963-6754.  Legal Aid is a non-profit law firm that can provide free information for first-time homebuyers under its Foreclosure Prevention Program.




June 24, 2016

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