Are You Financially Ready To Buy A Home

Dated: 02/08/2016

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What a big leap to make from renting to owning!  There are so many reason why renting is a good idea, but on the flip side owning a home has it's advantages too. How do you know when to cross that bridge? Hopefully these pointers will help you decide.

  1. Do the math. Are you throwing your money away on renting when you could be building equity in a home? Renting is great when you need someone to take care of the lawn,  maintenance and taxes for you. But at the same time there are tax benefits to owning a home. You are loosing out on using your interest and property tax as a write off on your income tax. At the same time you are building equity in one of the largest saving plans you can contribute to. 

  2. Utilize Local and State Grants. The state offers grant programs to get renters out of apartments and into homes. To add to this most cities often have grant monies available, but these are usually for first time buyers, whereas the state grant can be used by anyone. (Income limits do apply) This grant money is used to assist buyers with down payment and closing cost. If combined with seller contributions, a buyer can get into a home with little to nothing down. Your mortgage company most likely will require that your savings account balance will cover at least two months worth of house notes. This is called reserves. 

  3. Stability. reports that most homeowners keep their home an average of 7 years before selling. Is it wise to purchase a home if you only plan to live in that area for only a short time? Example: A college student will live in some form of student housing or an apartment for 4 years. The average rent in the Houston area for a 2 bedroom 2 bath apartment for roommates currently is $1,400 to $2,400 depending on how close to the city you would like to live. Divide by two and that is still $700 to $1200 a month. This means a student will spend $33,600 on housing alone while in college. To buy a small starter home in those same areas would be $100,000 to $200,000. The note would be about the same as rent, but at the end of the 4 years your options are to rent the home for income or sell the home. 

  4. Job Stability. To qualify for a mortgage, you must be able to prove job/income history for at least 12 consecutive months. If you are self employed or are paid commission, you must provide a 2 year history. Your house note generally can not  exceed 40% of your net income. The exact numbers are case by case and should be discussed with a mortgage company before you start your search for a home. Your Realtor should be able to assist you in finding someone for your unique situation.

  5. Credit Rating. As you are well aware of your credit rating effects most everything now. (Your phone, insurance, car note, ect) Purchasing a home is no different. Yes, you can get a mortgage with shaky credit. Yes, you will pay a higher interest rate. The good thing is, you can always refinance at a lower rate when you get your issues resolved. Currently, interest is so low that even with a lower credit score your interest won't be as high as it was just a few years ago when rates were at 6 to 7%. And to think, we thought those rates were low because in the late 80's early 90's we were still paying upwards of 10 and 11%.   

So the question remains,purchase or rent? Be informed first and foremost. Contact a Realtor and mortgage company to see what you can afford, if anything. Second, compare your pros and cons of renting vs. purchasing. Noisy neighbors, little to no parking, carrying groceries in in the rain, not being able to entertain and no privacy to doing lawn work, being able to have parties inside or out, being able to decorate as you choose, having a pet and much much more. 

Call or visit my website today to see if you are ready to make that next step. 409-539-8234

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