Right At Home

Are You Financially Ready?

Once you've decided that you are ready for homeownership, you need to determine if you are financially ready. How do you know if you can really afford to own a house and all the costs that go with it? You can start by reviewing your financial condition. Test yourself with some financial exercises to determine where you stand.

One of the first things a lender will want to know is your debt to income ratio to see if you have too much debt. Next, determine if your assets exceed your liabilities by calculating your net worth.

Your credit report can affect your ability to purchase a home. Obtain the most recent copies of your credit scores from each of the credit bureaus to review your credit score. If you find inaccuracies or fraud, contact the credit bureau to resolve it. Credit health is a crucial part of financial health. To be approved for low-cost loans and home financing, you need to stay on top of your credit score and payment history. If your credit score has been affected due to missed or late payments, it may difficult for you to apply for a mortgage for the time being. However, there are lenders out there that will lend you the money but it comes with a cost of higher interest rates. In general, best interest rates are offered to individuals with the best credit scores.

By now you should have a good idea of how much home you can exactly afford and what it will cost you.

A Home Divided: Investment or Shelter?

If you are currently renting, you may have thoughts about buying a home. There are some very good benefits to invest in a home, but there are also reasons to consider carefully about taking this step, especially if this is your only investment.

Why would I want to invest in a home?

You'll be buying a piece of real property rather than putting money in a landlord's pocket each month. You are investing in something that has value. At the end of the day, you own it.

If housing prices increase in value, you'll be able to use the equity in your home for low-cost loans. You may also be able to sell your home for more money than you paid for it.

This is the only investment that can give shelter for you and your family. You can't live in a mutual fund.

The cost of rent may be similar to the monthly mortgage payment to the bank. Determine which is more economical, renting or buying, based on your payments and accomodation information. Making mortgage payments forces you to save, and after 15 to 30 years you will own a substantial asset that can be converted into cash.

What are the dangers of putting all my money in my home?

When house prices decline you can lose money by selling when prices are lower.

Homes can get damaged by fire, wind, or water. Protect one of your most important assets with the right home insurance. Home insurance can be building insurance that only covers the outside of the buildings or contents insurance which will cover the contents of the house against theft or other damage from fire, vandalism, lightning, storms, explosions, etc. Make sure you get all the details and facts about the policy that you feel is right for you because in the aftermath of a fire or flood you may realize there were many gaps in your policy. Be very careful in choosing your policy so you can have the best protection and be taken care of in case of a disaster.

It may take some time before you can sell your home to get your money. Depending on the housing market, selling your home might not be the best option for the time being.

First-time homeowners are often startled by the hidden costs of owning a home. The traditional measure of housing expenses, which includes principal, interest, taxes and insurance, are just the beginning.

Remember: Don't Put All Your Money in the Same Type of Investment

A good investment can turn into a bad investment when you don't understand how it works. Anyone who recommends you put ALL of your money in any of the following investments is giving you bad investment advice.