Analyzing the Numbers is the First Step in Buying a HomeYou’ve been waiting for the housing market to stabilize and the funds for a down payment are on hand. 2008 is shaping up as the year you make an important financial decision — purchasing a new home. Before you jump in, have you analyzed the numbers? Specifically, have you determined whether you have the financial wherewithal to buy a home, make monthly payments, and maintain your investment for years to come?
The first step in buying a home is understanding your financial picture, with five points to grasp before you take the next step:
Determine how much home you can afford. You may want to live in Beverly Hills but the numbers are indicating that a less tiny L.A. suburb is much more affordable for you. Monthly payment and monthly affordability calculators can go a long way in helping you understand what you reasonably can afford.
What goes into the numbers? Your down payment, points, and closings costs must be considered. Weigh these costs against retirement funds, gift money, and other monies you can use and you’ll know whether you have enough money to get started.
Consider the tax benefits of home ownership. Could it be that you cannot afford not to own a home? If you are in a high tax bracket, the deduction of your monthly mortgage interest, closing costs, and property taxes can reduce your overall tax burden. Taxes for high net-worth people is expected to go up following this fall’s presidential elections if certain politicians have their way. Check with your financial advisor to learn how what your tax benefits will be.
Get pre-approved from a mortgage lender. Realtors like to pre-qualify people when it comes to determining whether (in their minds) you can afford a particular home or not. However, only a mortgage lender can say for sure whether you can afford that home, not the realtor. Get a no obligation pre-approval letter from your lender and bring that with you when you bid on a home.
Qualify for credit. Closely related to the pre-approval letter from a mortgage lender is qualifying for credit — lenders look at two things when it comes to lending money: your capacity to repay the loan and your credit history. Expect your credit reports to be pulled, credit scores obtained, and current salary information and other important documentation supplied.
Once you have analyzed the numbers, the next step is to search for a home. We’ll be discussing the second through seventh steps in the home buying process over the weeks ahead.
Article provided by
SayHomeBuy.com.
Krayton M Davis, Executive Principle
nBuy Associates