Steps to Homeownership: Can you afford it?
Before you become a homeowner, you need to decide if you can afford to buy a home. Although a home is a solid investment, renting may make more sense depending on your economic circumstances. Expenses to consider:
- Mortgage payment
- Homeowners insurance
- Real estate taxes
- Utilities
- Maintenance and upkeep
- Home furnishings
- Repairs
In addition to these expenses, you still have to be able to pay your other bills as well. To figure out a budget, remember to include groceries, laundry/dry cleaning, medical bills/prescriptions, credit card bills, child care, and entertainment.
You should chart your current expenses for a month and try to start a savings account for your new house. A variety of expenses will need to be covered, such as:
- Down payment on the house
- Closing costs
- Inspection fees
- Realtor fees/commission
Owning a home is an expensive and never-ending adventure. Go over your finances and weigh the pros and cons before you decide to take the plunge. It is much harder to get out of a house mortgage than a rental agreement.
How’s Your Credit?
If you decide to buy a home, next review your credit score. If you have a good credit history, when you apply for a mortgage you will be eligible for a lower rate of interest. This means big dollar savings. One credit source states that the interest rate offered to a person with a score of 720 is 3.45% lower than the rate offered to a person with a score of 520. That adds up to a lot of money: on a 30-year mortgage for $100,000, the difference works out to more than $85,000 in extra interest!