Financial To Do List
by Carla Hill
Thursday, June 07, 2012
Additionally, owning a home is a way to build long-term wealth. Renting is a one-way road for your money. It goes out, but never comes back. When you own, though, you are paying towards an asset. You build equity over time and are also in line for some great tax credits, deductions, and rebates.
In order to get into the game, however, you must have all your financial ducks in a row. Homeownership is a large financial responsibility that isn't about risk taking. It's about saving money and changing your lifestyle in a way that will be positive before and after you purchase your home. Spending habits may need to change! If nothing else, you need to keep close tabs on purchases.
There are some incredible deals to be had on the market today. Interest rates are still near historic lows and should linger there for some time in the future. Home prices have adjusted back down to pre-boom pricing in many areas. So, in order to get your finances in order and join the ranks of homeowners, consider following this to do list.
Fix that Credit Report/Score: You've been amassing a credit report for years now, ever since you started being a consumer. Your credit report is like a lender report card. It tells a lender what your spending habits have been (do you have lots of credit cards, how long do you keep loans open), what you owe, and if you pay things on time.
All of these factors come together to make a credit score. This number ranges from 300 to 850 and the higher the score the more likely you'll be approved for a loan and at a lower rate.
You should be sure to check out your credit report for errors and also as an honest look at what your spending really looks like. Changing spending habits now can translate to a higher score down the road.
Audit your Expenses: You may think that you keep your spending in check, but until you track one month's spending you won't know the complete story. Keep track of all your spending for four weeks and evaluate this list at the end of the tracking period. Do you overspend on clothes, shopping, or dining out? Where do you have room for improvement?
Create a Budget: Saving for a home and running a home are about keeping your expenses in check. By creating a budget, you give yourself a game plan that all members of the household can refer to. Allot money for food, monthly bills, gas, dining out, and the other categories you think are important.
Make Saving a Priority: When you're creating that budget, you should be keeping savings in the back of your head. You should strive to save at least 10 percent of each paycheck, if not more. This money will later be used for #5 on this list.
Consider Downpayments and Closing Costs: You'll need to put down at least 20% of the purchase price of a home as a downpayment. How much this will be depends entirely on the total cost of your home. You'll also need money for closing costs, such as inspections, PMI, and land surveys.
Getting finances in order for a home purchase means taking an honest look at your spending and then revising your habits in order to save more and spend less. If you owe money or have blotches on your credit report, now is the time to make corrections. You can do it! Buying a home is a wonderful experience and sure to go well if your finances are healthy and ready for the purchase.
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