How Can I Prepare Myself for Homeownership?
You may find that your present income does not offer you the affordability at this time to buy a home that fits your needs. If you have been working for less than two years, the solution is simply to stay on the job until your income is ‘stable’ according to lenders standards.
In some cases, you may need to postpone homeownership until your income increases. For example, is it possible to put in extra hours on your job to build your income? Or do you or your spouse expect a raise in the near future? If so, you may want to wait a bit to buy a home so that you can qualify for a higher mortgage amount.
Many people have made good use of credit to buy the items that they need and want. However, credit cards and other debts can limit the amount of a mortgage for which a person can qualify. Budgeting to reduce consumer debt is a commonly needed financial action plan for prospective homebuyers.
If you wish to pursue the dream of homeownership, it is very important to stop incurring additional debt.
If you find that your past credit record is not clean as you might wish, there are ways to take corrective action to clear up a bad credit report.
Any collections or past due accounts will have to be satisfied, as well as, any judgments paid in full.
Sometimes debts will appear as ‘charge offs’ meaning that the creditor has stopped trying to collect the debt and has ‘charged it off’ as a bad debt. However, ‘charges offs’ are regarded by most lenders as debts which are still owed, and they will usually have to be paid in full.
If you have a history of late payments the lender will want to discuss why. Remember, the lender only has your past history to use as the judge of whether you will pay back a mortgage loan. If you have poor credit the lender will want to know that it was caused by situations that are not likely to occur again and that you have re-established good credit.
Unfortunately, it sometimes happens that credit reports are inaccurate or give a misleading picture of past credit problems that have since been resolved. If you dispute the information in your credit report, you must contact the credit bureau and explain the dispute. The credit bureau must investigate your claim within a reasonable amount of time, unless it believes the dispute is frivolous or irrelevant. If the investigation does not resolve your depute, the Fair Credit Reporting Act permits you to file a statement of up to 100 words with the credit bureau explaining your side of the story. The credit bureau must include this explanation in your report each time it is sent out.
Homeownership involves both advantages and obligation. That is why it is important to take a realistic look at whether homeownership is right for you. By analyzing your current expenses and comparing them to the cost of a home purchase, you can determine whether you can afford to buy a house at the present time.
Am I Ready For Homeownership?
The decision to buy a home is not to be made lightly because owning a home requires a significant investment of time, energy, and money.
There are many good reasons for buying a home providing you are ready for the increased responsibilities that come with homeownership.
To help decide whether you are in a good position to buy a house you might ask yourself the following questions:
- Are you sure you want to buy a house?
- Do you have steady income and stable employment?
- Do you anticipate remaining in the same geographic location for the next couple of years?
- Have you created a budget so that you know how much more you can realistically afford to pay for housing?
- Do you have an established credit record, or can you build a nontraditional credit history with records of payments to previous landlords, utility companies, cable television companies and insurance companies? IF so, is your credit profile favorable? Do you pay your bills on time?
- If required, do you have enough money saved for a down payment and closing costs?
- Have you been prequalified by a lender so you know how much you can borrow based on your income and existing debt?
- Is your existing debt low enough that it will not limit your ability to qualify for a mortgage? If not, can you reduce your debt before you attempt to qualify for a house?
If you can answer yes to all of these questions, you may be well on your way to owning your own home.
If not, with time and effort you can prepare yourself for future homeownership.
