Everyone wants the American dream and purchasing a home is a great way to achieve it. One sure way to build wealth for generations to come is to become a homeowner. But if you are not careful, just as building wealth can be achieved through homeownership so is destroying it as well.
Know what you can afford
If you are in the market to purchase a home, chances are, your loan officer may approve you for the maximum amount you and your spouse could afford. But what about the future? For instance, if you are approved for $200,000 based on current income, what happens if your spouse loses his or her job? For this reason, you should take less than the maximum approval amount. Create a cushion in your budget so your house note will be less than 25% – 30% of your take home pay. Of course you can’t prepare for everything, sometimes things just happen! But having this cushion would allow you the opportunity to save for a rainy day.
Yes you can afford the gated home, but can you afford the upkeep?
When it comes to purchasing your home, be reasonable. Of course you may want the gated home, but with it, may come extra expenses. A larger home equates to a larger insurance, utility, or maintenance bill. And hey, if you got it – get it! But if not, use wisdom! Ask yourself; will you be able to afford the upkeep? What happens if there is an increase in property taxes, insurance or utilities in the future?
Seek out foreclosures or repos
Just as you look for shoes or electronics on sale, think of purchasing a home the same way. There are many homes available for “sale,” such as foreclosures and bank repos. If you are in the market for a home, consider these options first. But be careful, many websites promise to provide listings for a cost, but this information is available for free. Here is a link of resources found on Kemberley.com, but don’t stop there. Do research and contact both banks and government agencies. You will be amazed at what you can find.
Deal with a reputable mortgage lender
There are many lenders out there, but be careful before signing on the dotted line. First, search for the lowest interest rates in your area. Bankrate.com offers a great tool to help locate lenders. Second, do comparison-shopping between two or three lenders. Ask about their closing costs and any additional fees. Also, don’t be afraid to get clarification regarding fees. Many lenders will use different names for the same fees. Finally, do your research! Check with local business bureaus and state boards to determine whether complaints have been filed and the lender has proper licensing.
Remember: your choice, your future!
Kemberley Washington is a CPA and professor. Subscribe to her blog – Kemberley.com. Follow her on Facebook or connect with her Twitter. Like, Love, Tweet or Share this post!