Are You Ready for Home Ownership?

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Home ownership is the high water mark of the American Dream and usually represents the single deepest investment in its realization.  Are you ready for home ownership?  Unless you have prepared adequately, learning to swim in the deep waters that await might be tricky.  The plunge may satisfy in the short term, but swimming the waters of home ownership is more than staying alive in the water; it is about staying afloat while your swimming strokes are confident and skilled.

As the mortgage crisis of 2008 demonstrated, too many people who were lured to the waters of home ownership by terms of no down payment and low, but variable interest rates, and who, therefore, plunged into deeper waters than they were prepared to handle.  They had no stamina.  They were unprepared.  They were not ready for home ownership.  When the interest rates started to rise, when the terms of low interest rate matured, they could no longer afford the payment.  They faltered, had no support of a shallow bottom of the pool to rest on, and began to drown.  Many did.

You must know how to swim in the deep water of home ownership.  Here are some key, preparative measures allow yourself to be ready for home ownership:

1. Start saving money now.  The more you have in down payment cash or investments, the less your mortgage payment will be and the more immediate equity you will have in your home.  But money in the bank is just the first step to be ready for home ownership.

2. Don’t start looking for a home until you know how much home you can afford.  The general rule of thumb is that your home value should be no more than two to three times your gross income.  Your down payment will reduce the mortgage, but there is more expense to home ownership than the mortgage.  More about those costs later.  Until you know what you can afford, you are not yet ready for home ownership.

3. Develop a list of amenities you want and need in a home.  How many bedrooms and bathrooms do you need?  How much square footage do you need to accommodate your household?  Electric or gas kitchen?  A laundry room?  Property size?  Landscaping?  New or used home?  These are not just important; they are essential decisions to be ready for home ownership.

4. How is your credit score?  Your credit worthiness has direct affect on your mortgage interest rate.  Your credit report will indicate your payment history with other credit accounts and whether or not your history demonstrates a clean record of on-time payments.  A high credit score means low risk, low mortgage interest rate and high rating to be ready for home ownership.

5. Understand how home ownership financing functions.  Your down payment represents the amount of immediate equity you have in your home.  The mortgage represents the rest of the value needed to be borrowed in order to buy and keep the home until it is sold or completely paid off, plus the cost of borrowing the money to buy the home; your interest rate.

Your monthly mortgage represents an equally portioned value of principle, money that is going toward equity in the home, plus interest, money which is paying for the privilege of borrowing money to buy the home.

6. Find your chosen home and pre-approve for the mortgage.  Pre-approval will make purchasing a home easier because a lender has already qualified you for a given loan amount and interest rate.  It assures that you are ready for home ownership.

7. Remember that home ownership represents more cost than just the mortgage.  If it is a new home, you must have the means to landscape.  You may need new furniture and kitchen appliances, and a washer and dryer.  If it is an existing home where the previous owner has already taken care of those amenities, there is still the cost of maintenance.  Make sure that you have funds in reserve, or means to handle these necessities without incurring excessive debt which will risk your ongoing credit worthiness.

Being ready for home ownership is more than a dream; more than just learning to swim the waters of home financing.  It is swimming confidently that prevents a nightmare from invading what should be a beautiful, affordable, and pleasing dream of increasing value.

Are you ready for home ownership?  If you know how to swim, the water is ready and waiting for dreams to realize and unfold.

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