Homeownership has always been the standard for the American Dream, but in today’s economy people are finding it more difficult than ever to buy (and keep) a home. If you are working to pay off credit debts and dreaming of owning your own house, you are not alone. Here are some basics behind saving for a home.
The Biggest Purchase Ever
A house is the single biggest purchase you will likely ever make and should be treated like the big deal it is. At CreditGUARD we stress financial education, and of course that extends to the largest of purchases. Take the time to get educated on the costs of owning a home in your area.
There will be many additional expenses, such as yearly property taxes and year-round maintenance to keep everything running smoothly. Don’t wait to learn about these costs from real-estate agents and bankers. That will never work in your favor.
Down Payments are No Joke
Just like a home is the largest purchase you will make, the down payment you will need is likely the largest sum you will ever consider putting together. Traditionally it has been said you should aim for somewhere between 20-30%, and depending on the area you are in, this could turn out to be quite a considerable sum.
The housing market has gotten more and more competitive and expensive, with even the most modest of homes going for upwards of $100,000 in many areas. 20% of $100,000 is $20,000, and it will take strategic planning to save that much money. But by saving 20% you can qualify for a lower interest rate as well as a shorter mortgage term.
However, these days there are mortgage loans for first time home buyers that accept down payments as low as 3%, but you will need to speak to a mortgage loan officer to determine if you qualify. You will also likely have to pay for mortgage insurance (PMI) if you put down such a small percentage.
How Long Does it Take?
So how long does it take to buy a home? The short answer is nearly forever: the average mortgage is 30 years. Many homes are resold long before they are paid off, sometimes at an enormous loss. That length of time can be cut in half if you meet the 20% down payment threshold, as this can open you up for a 15-year mortgage. But let’s look at the shorter term, how long should you expect to save for that down payment?
Again, this will vary widely depending on the location and style of home.
While a number like $20,000 sounds overwhelming to many people, you don’t have to come up with it all at once. Saving is a progression, and whether you are saving to buy a television or a home to put it in, the steps are the same. Put aside a set amount of money each month and throw in any extra funds that come your way.
What About Current Debts?
It is crucial you pay off all current debt before buying your home. It is entirely possible to lose everything you have worked for if you are unable to meet your monthly mortgage payment. Paying off all other debts will ensure that you aren’t left picking and choosing which bills are most important. They must all be paid, and if they start to pile up you may find yourself in over your head with the threat of foreclosure looming.
Get Back on Track with CreditGUARD
Here at CreditGUARD, we know how difficult it can be to get back on the right path when you’re facing insurmountable debt. Our trained credit professionals are here to speak with you today and get you back on course. If you are hoping to own a home, but struggling with overwhelming credit debt, call CreditGUARD today!