Real Estate Marketing & Beyond
Thinking about buying your first home? Before taking the plunge and putting yourself into debt for the next 30 years, consider going against the tide and buy a home priced well below what you can afford. This advice of course is for individuals who were not born with a silver spoon in their mouth and have been busting their keesters saving up to buy a home.
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Why not go for the gusto and acquire the biggest and best home your income will buy? Unless you’re a rare individual who is either psychic or has a crystal ball, you have no idea what will happen tomorrow, let alone 30 years down the road. People get injured, they die, jobs are lost, wages cut...you name it, something bad can happen to anyone.
The point, obviously, is to be in as little debt as possible when buying a home. One smart way to become a homeowner is to buy a small starter home and work your way up over time into your dream home. This kind of strategy obviously takes time, and with our “instant gratification” based society it is “going against the norm,” but still yet, it is a time proven strategy that does work.
If you buy well below what you can afford, the extra cash can be funneled towards quickly paying off any financing you do obtain so that you can own your home free and clear of any encumbrances. This strategy does, however, take discipline because it’s easy to lose focus of the end game. It’s vital that you keep the end goal in mind so that you can move another step closer to the home you desire most.
Once you find the right home at the right price you don’t want to jeopardize your chances by making some foolish financial decisions, especially before closing day. Keep in mind, lenders want to see stability.
Following are 7 financial choices you DON’T want to make before buying your home:
1. Put as little money down as the bank requires. Go for the gusto, contribute as much money as you can for the down payment. It is equity, after all.
2. Change jobs. This may be an obvious one, but lenders like to see that your income will be fairly stable. If you are laid off, choose a position within the same industry that you were in before, as lenders will look more favorably upon this scenario.
3. Move banks. Again, the idea here is stability.
4. Shop for new credit cards or make new, large purchases such as a new vehicle or furniture on credit as this increases your debt to income ratio.
5. Touch your down payment and closing costs. Let them stay in your bank at least 2 months and/or until needed. This is known as seasoning and lenders love it.
6. Try to hide anything. Be completely honest on your loan application about all of your obligations, otherwise it’s fraud.
7. Co-sign a loan. The debt will go against your debt-to-income ratio, even if you’re not making the payments.
Starting small and working your way up is how you got to where you are in your finances, right? Simply apply the same concept to buying a home, keeping yourself as debt free as possible, and you will surprise yourself at how quickly you reach your goals.
