|
Answer these 10 questions to learn if you are ready to
buy a home.
Are you sure you want to buy a home? Yes = 1 point.
Do you anticipate any large expenses in the next two years, such as
buying a car or having kids? No = 1 point.
Do you expect to stay in your current job for the next two to three
years? Yes = 1 point.
Do you expect your job to stay in the same location for the next three
to five years? Yes = 1 point. (Is your employer thinking of relocating?
How do you know until you ask?)
Do you know how much you can realistically afford to pay for housing?
Yes = 1 point.
Do you have a favorable credit record? Yes = 1 point.
Do you have enough money for the down payment and closing costs? Yes = 1
point.
Have you been pre-qualified for a mortgage so you know how much you can
borrow? Yes = 1 point.
Will your existing debt reduce your ability to qualify for a mortgage?
No = 1 point.
Is the amount you can borrow sufficient to enable you to buy a home you
can truly enjoy? Yes = 1 point. (Don't settle for something you don't
love, for you could well live in your home a very long time.)
If you scored 8 points or more, you're ready to buy a home.
As I've said many times, The Rules of Money Have Changed, and this is
perhaps more true in the area of home ownership than in any other aspect
of personal finance. Therefore, be careful when seeking advice about
buying a home, for asking the wrong people can cost you a ton of money.
For example, do not ask your parents for an opinion if the last time
they bought a home was decades ago. The reason: The rules of yesterday
do not apply today, meaning their advice could be 30 years out of date!
One thing, though, hasn't changed: Buying a home is difficult --
perhaps even more so than ever before -- and if you're not careful, your
dream of owning a home can become a nightmare. Indeed, it is very easy
to become house-rich and cash-poor.
The biggest difference between owning a home generations ago and
owning one today is that homes no longer are the key to financial
success. Owning a home was once the fulfillment of the American dream:
If you had a home, a pension, and Social Security, you were set for
life. But that's not true today. Still, owning a home does offer
important benefits. To understand them, let's consider the alternative,
which is to rent.
Compared to renting, owning a home has many advantages, including:
the homeowner's monthly payment does not change, while renters face
annual rent increases; a large portion of the homeowner's monthly
payment is tax-deductible, but rent payments are not; the homeowner's
monthly payments eventually stop (when the loan is paid off); Renters
pay rent as long as they live; homeowners keep a piece of each monthly
payment, while renters never get back any of their rent payments; any
increase in the home's value belongs to the homeowner; Renters keep none
of that profit; and homeowners can design and decorate their homes
virtually any way they want, while renters suffer major restrictions.
For all these reasons, owning a home is an appropriate goal for most
Americans. Let's show you how to do it right.
written 1996 updated 06.11.02 |
