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Getting Your Financial House in Order

Getting Your Financial House in Order

(NAPS)-If you're thinking-or just dreaming-about becoming a homeowner, before even setting foot on potential properties, it's critical to make sure your financial house is in order.
Here are tips that can help:
* Ensure that you can truly afford your home. Take into account your entire financial picture. A number of online tools can help you estimate the price of a home you can afford based on your income, debts and other obligations. For example, there's Front Door's affordability calculator at There are also mortgage calculators that can show you how a larger down payment can lower your monthly mortgage payment.
* Consider the positives-and the negatives-of homeownership. Homeowners can reap considerable benefits including tax breaks, home appreciation and the opportunity to build personal wealth. Today, home equity-the value of the house minus the balance owed-represents a large portion of a typical family's wealth.
However, it's important to remember that owning a home comes with a number of financial obligations. Having to replace a roof, an appliance or something larger can cause considerable hardship if not properly planned for.
* Start building equity from day one. If you have a down payment of less than 20 percent, mortgage insurance is often necessary. This is typically obtained through either the government-backed Federal Housing Administration (FHA) or a private mortgage insurer. Private mortgage insurance is commonly used when putting at least 5 percent down, while FHA loans can require as little as 3.5 percent. While many first-time borrowers believe 3.5 percent is the better option, the added costs layered on top of the mortgage-in addition to recently increased FHA insurance premiums-are significantly more expensive than with a 5 percent down payment on a privately insured loan. By putting the 5 percent down, you can enter a home with more equity and build equity faster.
* Remember the additional costs of homeownership. These can include closing costs; homeowner's insurance; city and county property taxes; utilities; and, if you buy in a planned subdivision or a condominium, homeowner's association fees.
Before you buy a home, it's important to understand the full cost of ownership. When you do, you can have a home you love and the peace of mind that comes with knowing you're prepared.
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