Market Overview

Are You Financially Ready to Purchase a Home?


National credit, housing counseling agency Take Charge America shares
important stepping stones

A home is typically an individual's greatest investment. While house
hunting can be exciting, it's critical that buyers consider hidden costs
that aren't included in the home's sale price.

"Jumping into home ownership unprepared can be the start of a financial
downfall," said Mike Sullivan, a personal finance consultant with Take
Charge America, a
national non-profit credit counseling and housing counseling agency
"Owning a home goes far beyond paying the mortgage and utilities each
month. New homeowners should conduct research to ensure they are
financially prepared."

Sullivan offers five financial considerations for potential homeowners:

  1. Calculate real cost of home ownership – A home comes with
    additional costs on top of the mortgage, including maintenance,
    utilities, property taxes, insurance, homeowners' association fees,
    landscaping, moving and more. Before you begin house hunting,
    calculate the estimated costs of these items to get a realistic
    picture of monthly expenses.
  2. Consider your financial health – Many people drain their
    savings to cover a down payment, leaving minimal funds for
    emergencies, which can result in increased debt once they move in. If
    you have excessive debt, a low credit score, no emergency fund or
    struggle with budgeting, work on improving those areas first.
  3. Tally what you can realistically afford – Many people end up
    "house poor," pinching pennies in other areas of their life because
    they purchased a larger house than they could afford. It's generally
    advised that the sum of your monthly mortgage and related housing
    costs shouldn't exceed a third of your income. When coupled with other
    debts, such as a car or student loan payment, total costs shouldn't
    exceed 40 percent. Determine the amount of space you need and utilize online
    financial calculators
    to create your budget.
  4. Get pre-approved for a mortgage – Lenders offer pre-approval
    for mortgages based on your income, debt and credit history. When
    you're pre-approved, you're in a better position to make a serious
    offer on a house, and you can focus your search effectively. However,
    don't assume you're guaranteed a mortgage if you're pre-approved. This
    isn't the time to get a new job, open new credit cards or buy a car –
    all of which set off red flags for lenders.
  5. Assess your future living arrangements – Do you plan to move in
    the next few years, or do you want to settle down? If you don't see
    yourself staying in one place for more than three years, consider
    renting. You'll avoid the extra work and costs associated with selling
    your home, and you can save for whenever wanderlust strikes.

Many local and state programs are available for down-payment assistance.
To qualify, prospective homebuyers must meet certain criteria and
complete a HUD-approved Homebuyer
Education Workshop
, such as the online course offered by Take Charge
America. The course is ideal for anyone new to the home-buying process,
covering need-to-know terminology, getting the best deal, loan
documentation, avoiding predatory lenders and more. Prospective
homebuyers should research available programs in their state before
starting the home buying process.

About Take Charge America, Inc.

Founded in 1987, Take Charge America, Inc. is a nonprofit agency
offering financial education and counseling services, including credit
counseling, debt management, student loan counseling, housing counseling
and bankruptcy counseling. It has helped more than 1.6 million consumers
nationwide manage their personal finances and debts. To learn more,
or call (888) 822-9193.

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