Perhaps you would like to buy a home, but you just haven’t been able to save enough for a down payment. Recently you may have heard about a first time buyer’s tax credit, and that it may be possible for you to buy a home with very little down. It might sound like a dream come true, but it could be your worst nightmare.
With the advent of easier FHA guaranteed loans, requiring only 3.5 % down payment, the possibility of home ownership may seem to be in your grasp. Then you hear that the down payment can be gift money, and the loan can contain additional funds to help cover your closing costs. Thus, if you have no savings, but can get relatives to help out, what would be so wrong ?
If you have not been able to save any money, it is probably because your expenses pretty much match your income. You have a balance. If you have good credit, you’ve earned it by being careful with your spending. Most financial advisors will tell you that this economy puts you in a position where you should have at least 6 months of income saved in case a crisis, like a job loss or illness, strikes.
The cost of your mortgage is only the beginning of the expense you must consider when buying a house. There is also property tax, insurance, maintenance, repairs, and utilities. These are all significant expenditures. You also need to build an emergency fund. If you add all of these up, and it comes out to less then your current rent, you can maintain your financial balance, and the purchase may be fine.
Many people sincerely believe they can work a little harder, tighten their belts, and make that higher payment. The rate of defaults and foreclosures on mortgages show that is not a realistic expectation.
So what happens if you move ahead, guess wrong, and can’t cover the expenses ? Is it really that bad ? Remember the good credit you built up before you bought the house ? It vaporized. Remember the peaceful evenings in your rental ? They now get interrupted all evening with calls from the bill collectors. Then the bank says enough, you lose the house to foreclosure, and find it is really hard to even find someone willing to rent to you because of your “poor credit risk”.
This may sound like doom and gloom, but its not really. As a real estate agent, I would love to help you find a house to buy. That’s how I earn a living. However, I also want you to be a client for life, and that doesn’t happen if the purchase ends up as a disaster. I encourage my clients to buy within their means, and we always evaluate all the costs that come with the house they are considering. I want them to start out right, without any regrets, or future frustrations.
So, check out those properties, set your goals, and if you’re ready to make a move, do it with a peace about the transaction. Never let others convince you it will be OK, and you can do it. In the end, you are the one with the financial obligation, not your friends or advisors/agents.
Please feel free to email me, or call, if you’d like to discuss your situation in depth.
