Are You Prepared to Purchase a Home?

May 23, 2013 | Author: | Posted in Real Estate

Article posted by Jerry Armen:

If you’re thinking about purchasing a new home, you’re most likely dreaming about everything you want in a home: four bedrooms, a large master suite, a pool, and a state-of-the-art kitchen. Or perhaps you’re dreaming about the ocean view, the surrounding woods, or the local mountains.

Buying a home is an exciting venture; but it’s also a very serious investment. It’s important to be ready for the responsibilities that come along with owning a home. Just because you might think you’re ready to purchase a new home, doesn’t mean that you are. Here’s how to know if you’re prepared to purchase a new home.

You know how to budget your money. You’ve crunched the numbers and are pleased to discover that you can afford a home. Although you might have the money to buy a new home, you might not have developed the discipline it requires to manage your money and pay your bills on time. This could be a huge problem for a new homeowner — missing just a few months of the mortgage can lead to major default and quite possibly foreclosure.

Before you buy a home, ask yourself whether you can properly keep track of where you money comes from, and where it’s being allocated every month. In addition, find out if you can pay off your regular monthly expenses each month without rolling over the following month or going into debt.

You have a down payment. Part of knowing how to budget your money should include the ability to save a down payment. A large down payment means that you will end up paying less interest on the loan down the line. Having a down payment is also crucial to getting the loan in the first place. Your lender looks at the amount of your down payment. Although the final amount depends on the price of your home, a typical down payment ranges from 3.5 percent to 20 percent of the loan.

You have a healthy credit score. One of the most important factors to consider before buying a home is your credit score. Banks and lenders are serious about keeping the best interest rates for potential buyers with high credit scores. The lower your credit score, the higher your interest rate will be. Instead of rushing into purchasing a new home, consider taking some time to build up your credit score. Good credit gets awarded, which means you will be paying less in the long run.

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