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 www.frontdoor.com. 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.
To learn more, visit www. SmarterMI.com.