While mortgage lenders are advertising bargain-basement mortgage rates, it's important to remember that low rates aren't the only consideration when it comes to buying a house. Here's what you need before you shop for a home or mortgage:
- Reduced consumer debt: Credit card debt is costly and can ruin your chances of qualifying for a home loan. Paying off credit card balances and car loans before buying a home can help you qualify for a lower mortgage rate. Reducing your credit card debt before buying your home can prevent the need for debt solutions later.
- A down payment: FHA loans only require 3 percent down, but declining home prices can lead to owing more on your home than it's worth. This makes refinancing or selling your home difficult if not impossible. Most mortgage lenders offering conventional mortgage financing require 20 percent down; otherwise, you'll likely pay a higher interest rate or additional lender fees at closing.
- Stable employment record: Mortgage lenders require proof of employment for the two years immediately prior to applying for a mortgage, and prefer to see that you've held the same job or can verify owning a business for the preceding two years.
- Closing costs: These costs are paid when your mortgage loan documents are recorded and title to your new home transfers to your name. Closing costs include title costs, recording fees, a closing attorney's fee or escrow company fee, appraisal fees, home inspections and warranties, pro-rated property taxes and hazard insurance. Plan on spending about 3 to 5 percent of your home's purchase price on closing costs.
- Savings for home maintenance and repairs: Maintaining your home protects your investment. Establish dedicated savings for home repair and maintenance. Owning a home also requires paying for water, trash collection, lawn care and equipment, and utilities.
Attending a first-time home buyer seminar is also great preparation for owning a home and may provide eligibility for state and local financing programs for first-time buyers.
DIY debt consolidation: 3 secrets for success
You're sinking fast in credit card debt, and there's not a life preserver in sight. Loans and balance transfer offers involve applying for more credit. Follow these tips for rescuing yourself from the dangers of excess debt.
Reducing debt or building savings?Even if you are following a debt reduction plan, it is important to try and build emergency savings.
When debt help is not enough: 3 reasons for filing bankruptcySituations can arise that make paying your bills impossible, or that render you ineligible for participating in debt relief efforts such as credit counseling. When you're enduring any of these circumstances, consulting a bankruptcy attorney can provide information about your rights and the consequences of filing bankruptcy.
Personal spending rises as income slipsPersonal income declined in August, but personal consumption expenditures rose, according to the Bureau of Economic Analysis.
3 reasons for consolidating credit card debtAre you paying more than one credit card bill each month? Have you overlooked a bill and incurred penalty interest rates or late charges? Consider credit card debt consolidation for simplifying debt management chores.
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