Many Americans at some point in their lives will find themselves as renters. Whether you are just beginning to live on your own, have become recently divorced, or have fallen on hard times; everyone at some point will find themselves as renters. The question then becomes how to determine if you can afford to buy a home.
For starters, you will need to take a long hard look in the mirror and evaluate your finances realistically.
Many financial experts agree that when preparing for home ownership you need to get out of debt and establish a savings account for emergency purposes. This emergency fund will defer for everyone, but most experts agree that you should set aside three months salary at the very least.
People who have experienced life events like divorce, sickness or death can lead them through tough financial times. Getting through these tough times generally require lifestyle changes to get through them. By being proactive rather than being reactive, you get lessen the effect of these financial tough times you experience in life.
Obtaining a free credit report credit three times a year will help you in monitoring your credit history. You are entitled to one free credit report per year from each of the three major credit bureaus. Set up a schedule to obtain your Equifax report in April, your Experian report in August, and the Transunion report in December.
When preparing to purchase a home, it is a good idea to save a minimum of 20% to be used as a down payment. By doing so, you can avoid paying for private mortgage insurance (PMI) in addition to your mortgage, property insurance, and property taxes. It is also a good idea to consider a 15 year mortgage rather than a 30 year mortgage as it will save you thousands of dollars in interest charges.
Online tools such as a Mortgage Qualification Calculator and a Renter Mortgage Affordability Calculator can help you determine how much of a mortgage you can afford safely based on your income and other factors.
In Closing
By getting your finances in order and with a few lifestyle changes you can regain control of your life and become a homeowner in the near future.
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