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Should I Rent or Buy?
When you are begining to think about purchasing a home ask yourself would it be less expensive than your current rent? Are you ready to handle the maintenance associated with home ownership like lawn and yard work, plumbing or electrical failures, occasional repairs and maintenance that you will no longer be able to call upon a landlord to perform? Are you looking for more space or planning a family and want to root yourself in a community? Take time to assess your needs and desires. It's also just as important to make sure you are financially ready. If you are not certain about your employment you may want to wait until you have some sense of job security. Buying a home at the onset of a major lay off period may not be a wise decision.
How much home can I afford?
The last thing you want is to be house poor. There are several websites out there with affordability calculators to help you calculate how much house you should look forward to purchasing such as "usbank.com" .This preparation will help avoid wasting time looking at houses out of your current budget range. Hopefully you have been saving money for your down payment unless you are able to get 100% financing having a sizeable down payment usually 20% will help you in the long run to avoid additional fees. If your down payment is a gift either have a letter from the person providing it or make sure it has been in your bank account at least three months so that it can easily be declared as your own money. If your current rent is $900.00 a month and you're expecting to pay $1300.00 per month for a mortgage, try putting that extra $400.00 aside for s few months to see how it feels and actually get used to paying that amount (you can add that money to your closing costs).
Identify Your Financial Goals and Stick to Them
- Establish a few short- and long-term goals. Seeing a "light" at the end of your financial tunnel may make it easier to stick to your budget. Do you want to save for vacation? Purchase a home? Buy a car? Knowing why you are budgeting your money can really help you stay on track and not get discouraged.
- Create a budget that includes your monthly and yearly expenses like rent, car payments, etc. Don't forget to include annual expenses like insurance premiums and taxes. Getting it all down on paper is the first step towards establishing a budget that is realistic and viable for the long haul.
- Once you've established your budget, don't open new credit cards or apply for other loans unless they "fit" with your overall budget plan. Remember that numbers don't lie, so if your monthly budget is $3,000, and your expenses are using up all of your disposable income, taking on another loan will definitely not help you reach your overall financial goals. Live within your means, not beyond them.
- Use your credit cards only for things you can truly afford, and make sure you pay your bills on time, every month. Try not to "max out" your cards. A good rule of thumb is not to let your credit card balances exceed 20 percent of your annual income (or 10 percent of your monthly income). Try to resist impulse buying.
Is your credit in order?
You'll want to make sure your credit is in order. Order your credit report so that you are aware of and are in a position to correct any errors. Online sites like "freecreditreport.com" is a good place to start. Contact a mortgage broker to get pre-approved this will give you an edge when bargaining with sellers.
Why is it important to have a good credit rating?
Having access to credit is important simply because you don't always have the cash at hand to get what you need and want. A good credit rating can open many financial doors for you - like helping you secure a home mortgage loan, car loan, etc. A poor credit rating does just the opposite. With derogatory credit, your requests for credit cards or loans can be denied. Even if you want to rent an apartment or apply for a job, prospective landlords and employers may consider your credit rating to make a determination.
What is a credit risk score?
A credit risk score is a statistical summary tool used by lenders in the credit decision process. This score is calculated by assigning numerical values to various pieces of information from your credit report. This allows lenders to objectively view an applicant's creditworthiness.
For example, if you own a home and have lived there for several years, held a job for a long time and have a good payment history, all of these help you achieve a higher risk score. A high-risk score means you’re more likely to get the credit you want.
As your credit history changes, so will your risk score. The most commonly used risk score is a "FICO" score.
Prioritize your debt
You might have some debt left over from when you were younger. Whether it is a credit card balance or a car loan, you will need to pay this debt down so you and your family can achieve other financial goals. Prioritize paying off your debts with the highest interest rates first. Regardless of how much debt you have or what life stage you are in, it is essential that you pay your bills on time. If you can’t pay off your balances every month, you should make your minimum payment at the very least. That is one of the best ways to be in control of your credit score and your financial future
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