cleaning foreclosures
What factors should I consider before buying a house?
My dream is to own a home, but; at what cost? I see how my parents struggle to pay rent, tax, insurance, homeowner’s association dues, lawn care, and high electric bills without getting ahead and I don’t want that.
First, could someone explain why buying a home is important if you can rent without all of these financial pitfalls? Second, what should I look for in mortgage agreements that are signs of a bad deal? (I don’t want to end up like so many people and lose my home to foreclosure or other bad arrangements) Third, is there a reputable company out there that can clean up my credit (honestly) so I can finance a home at a lower interest? Lastly, Would renting for now, cleaning up my credit and then moving into a home sound better then rushing into now? What do you think?
So many questions! It’s good that you are thinking about these things. The first reason of owning a home is that it provides you with equity, which is money that you can access when you sell th house to buy another house or when you want to retire. Equity comes in two forms, one is through paying down youy mortgage as part of the regular amortization schedule of your mortgage. The second is from the appreciation in the house, which looks sketchy now, but will return to positive trends within the next few years.
Since interest is also deductible from your taxes, the federal government is essentially helping you finance your home. Assume that they are paying for something like 25% (depending on your tax rate) of your home. You don’t get that from renting. There are also intangibles, like pride in ownership. It is really nice to own a house and make it your own santuary. You do what you want to it.
As for mistakes, the worst mistake is to over pay and over extend yourself. From an overpayment perspective, look at other properties in the market you are interested in and tryand find out what they are selling for. Make sure your purchase is not way off the mark. Do your homework here. It may take several months to get a feel for the market, but it does not sould like you are in a rush (nor is the market screaming for you to get in). Next is to figure out what you can afford. Don’t buy more house than you are comfortable with. What % of your salary can you afford to go towards the mortgage, taxes and insurance. You will also need a maintenance fund to take care of things that happen (roof, boiler, etc). When the time comes, look into mortgage products, and do not get a teaser loan that may expereince a big increase in payments.
I think improving your credit is a good idea. There’s no rush to buy a house right now, so use the time wisely. But I think home ownership is a very good thing.
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