If you were to ask 100 women “What would you like to achieve financially?” Buying a house or apartment is usually one of the answers. Some women think that they will never be able to own a home, which is not true! In fact, there are plenty of success stories from homebuyers who never thought they’d get there. Additionally, homeowners tend to be more financially successful in other areas of their financial lives. I’ve seen it over and over again.
The benefits of owning a home include: building equity, saving money on taxes, and an integral step toward building wealth. With interest rates this low, this is a great environment to buy a home. This article is a checklist of tips and guidelines for buying a home. If you already own a home, some of these tips will help you refinance your home. Real estate is not a substitute for stocks, but it does play an important role in your financial standing.
1) CHECK YOUR CREDIT. Get a recent copy of your credit report, especially your FICO score (the score lenders use to determine your interest rate). Verify http://www.myfico.com.
2) HOW MUCH HOUSE CAN YOU AFFORD? Start with your monthly payment and plug it into a mortgage calculator. (Excellent in [http://www.eloan.com:] Affordability Calculator). This site tells you how much house you can afford assuming certain numbers. For example, if you make $6,000 per month before taxes, you can pay between $125,000 and $345,000 assuming $25,000 as a down payment. There are different options with actual monthly payments. If you don’t have enough money saved for a down payment, create a separate savings account and work out a savings schedule. Only borrow what you can afford!
3) ORGANIZE YOUR DOCUMENTS. Gather the following documentation: tax returns for the last 3 years, recent paychecks, bank statements, investment statements, and all other financial statements.
4) WHAT IS THE BEST MORTGAGE FOR YOU? Understand the different mortgage options. Most are based on a 30-year amortization cycle: fixed, adjustable, and hybrid rates. Hybrids are very popular now; Fixed rate for a certain amount of time and then adjusted annually. Consider a 15 or 20 year fixed rate mortgage. The payments will be a little higher, but you’ll end up paying much less interest over the life of the mortgage and you’ll be debt-free much sooner.
5) SHOULD YOU PAY POINTS? One point is equal to 1% of your loan amount. You pay a point to receive a lower interest rate on your loan. If you get a low enough rate, it may be worth paying points.
6) SHOP AROUND. Work with a mortgage broker or visit a few mortgage websites: http://www.e-loan.com, http://www.bankrate.com
7) PRE-APPROVAL 6 MONTHS BEFORE BUYING A HOME. Get pre-approved for a loan from the bank or your mortgage broker. It speeds up the process and, in a competitive market, gives you an edge.
8) MINIMIZE YOUR DEBT. Avoid expensive purchases so you don’t add to your debt load.
9) SAVE MONEY ON TAXES. Points paid for a first-time home (not refinancing) can be deducted in the year your home closed.
10) BEWARE OF THE COSTS. Don’t ignore transaction costs and watch closing costs very carefully. There are also a lot of hidden costs to buying a home: moving, minor renovations (especially if you’re buying an older home). Make sure you are prepared.
11) DIVERSIFY, DIVERSIFY, DIVERSIFY. Don’t tie up all of your assets in your home.
12) PAY YOUR MORTGAGE AUTOMATICALLY. Get it taken from the bank account automatically every month. Don’t ruin your credit and don’t forget to pay every month on time.
13) REFINANCING?
· Compare interest rates.
Start with the bank that currently holds your mortgage. They can give you a good deal just to keep your business.
Avoid paying points. When you refinance, you can deduct only a portion of the points each year, so it’s generally not a good deal.
· Don’t try to outsmart the market and wait for interest rates to bottom out. If the numbers make sense to you, go for it.
14) PMI INSURANCE. You will have to pay PMI monthly if you make less than a 20% down payment. Once you’ve been paying off your mortgage for more than a year, ask your lender to reconsider.
15) BAD CREDIT? DON’T HAVE ENOUGH FOR THE DOWN PAYMENT?
You can use your investments or securities as collateral to buy a home.
· Consider a low-documentation, no-documentation, or high-risk mortgage. You’ll pay a higher interest rate, but it will help build your credit and equity.
Also, check out these government agencies:
freddy mac http://www.freddiemac.com.
fannie mae http://www.fanniemae.com.
· http://www.hud.gov/fha.
16) OTHER MORTGAGE OPTIONS:
biweekly mortgages,
Personalized mortgages: usually offered by local banks,
· Use the investment portfolio as collateral and a smaller initial cash payment.
17) HOME INSPECTION. Have someone with accreditation do an inspection (www.nahi.org).
18) REMODELING? If you remodel, be diligent about keeping records. The right improvements can lower your taxable earnings when you sell.
19) CAN’T AFFORD TO SHOP NOW? But do you want to get into real estate? Check out REIT stocks or REIT mutual funds, http://www.investinreits.com.