First Time Home Buyers

Although it's improbable that you are visiting a foreclosure blog yet you haven't bought your first home, I do hope you can appreciate these helpful hints.

We have a responsibility to teach those around us to avoid our mistakes and shortcomings. Second Corinthians is clear that we should, "Comfort those in any trouble with the comfort we ourselves have received from God." (II Corinthians 1:4). My version is this "When we go through struggles (and we all will) we can either shake our fist at God or we can learn and help others down the road."

So, if you have a family member or friend who is considering buying their first home, share these suggestions with them so they never have to endure a foreclosure.

Live on a Budget: Everyone needs a budget...everyone. If you have two pennies to your name, put them in a budget! Write down your monthly income and your anticipated expenses. Pray. Find a solution to make it all fit. Cut here...trim there. Discipline yourself. Budgets work.

Build a Emergency Fund: Put some money back in a contingency fund to cover emergencies. This won't happen overnight but start a savings account and nickel-and-dime yourself into a lump large enough to support your family for 3 months. This will prepare you for emergencies in the future should you lose your job or experience illness. You won't face foreclosure with an Emergency Fund!

Start Saving for Your Down Payment: In the good ol' days you were expected to provide 20% down on your new home or lenders wouldn't be interested in talking to you. Things have changed. Lenders offer "nothing-down" loans or "interest-only" mortgages which sound great but set you up for failure. Do not consider anything but a traditional mortgage with a sizable down payment. Remember to add in closing costs which could be 3-6% of the value of the loan. Set your goals high. Build an attractive nest-egg for your first home.

Have a Dependable Job and Income: Buying a home is a long-term commitment and requires a reliable income. If you're not absolutely sure you ready to settle down in your town or your job seems unstable, don't buy a home. If you're still in school or foresee any income problems, wait. Don't rush into the biggest purchase of your life without lots of foresight.

Readjust Your Budget: You've been doing great on your new budget and you've been putting money away in your contingency fund and also you've been building your nest-egg for a great down payment. Now get ready for a change in your budget. Sit down and imagine what your next expenses will be in your "imaginary" new home. Add in home-owners insurance, utility bills, property taxes, home association fees, maintenance fees and all the other expenses that come with owning your own home. Start living on that new budget, storing away these "imaginary" payments in your emergency/contingency fund. Practice living on this new budget and find out if if works for you.

Become Debt-Free: We all dream about it but it's the rare person who actually accomplishes it. We all "assume" we'll have credit card debt or outstanding student loans since everyone else does. Don't buy a home with huge debts. Lenders will examine your budget and require that all your debts, including your new mortgage, do not exceed 38% of your income each month. Get your revolving debt under control. Make it your goal to totally remove these items from your budget by the time you're ready to buy your first home.

Double-Check your Credit Report: Our local radio station runs an ad for someone who can "fix" your credit report if you're not approved for a home loan. You cannot change items that are true but you can correct items that were reported incorrectly. Use the internet to find a free copy of your credit report and study it for errors.

Five Years: Commit to staying in your first home for at least 5 years. That's how long it will take for you to recoup the costs of buying a new home. If you have to move or sell your home before that time, you may lose money.

The Price of Ownership: Owning your own home brings great pride and joy. The independence from the rental-rat-race is a breath of fresh air...until something breaks! Now who do you call?? Start thinking like a homeowner now. Buying a home won't make you instantly Mr. Handyman unless you start watching and studying now. Take care of your rental property and study what it takes to do simple home repairs yourself. Find out simple maintenance routines that will keep repairs at a minimum. Watch and learn....watch and learn!

Education...Education...Education: You're never too young or too old to learn. Become financially responsible. Visit your library or search the internet for valuable resources. Your church may have groups like Crown Ministries to help you use your income wisely. Find a mentor to guide you.

Congratulations! If you can do all these things, you're ready for your first home.

Please contact us or leave a comment if you would like some more information on this topic.