House Fever

Have you experienced house fever? House fever occurs when you cannot wait to buy a house. You might be newly married or a young single professional. You have friends and parents urging you to buy a house. They say things such as, “Why are you paying someone else’s mortgage? You are throwing your money away by renting.” Or a myriad of other things. As their words hit you, you become thinking as they do. You start catching house fever. You are anxious about getting into your first home.

A word of caution if you are in the throes of house fever, “DON”T DO IT!” Yes, I just shouted that to you because before you sign on the dotted line, I want you to stop and see if you can afford to buy your home. Here are a few questions you need to ask yourself, No, strike that instead, here are a few questions you must ask yourself and have the correct responses to them:

  1. Are you completely out-of-debt? If you still have credit card debt, car loans, student loans, or any other debt, do not buy a home. You cannot afford it.
  2. Do you have 20% saved for a down payment? Having 20% helps you qualify for  the best loan terms. It avoids Private Mortgage Insurance (PMI), which will save you a ton of money in the long run. It will also help you have a lower monthly payment.
  3. Are you going to be staying in your home for five years or more? If not, don’t bother buying a home. You’ll end-up paying a large amount when you decide or have to sell before five years. You are going to have to pay around 10% of the sales price in selling costs, e.g. agent’s commission (6%), staging, closing costs, moving expenses, etc. Your home will not appreciate enough (go up in value) to keep up with the cost of inflation.
  4. Do you have your emergency fund fully-funded? This means eight to twelve months of living expenses saved up to cover you in case of a job loss or other unexpected event. If you don’t, don’t encumber yourself with a home. Remember, when you buy a home, you are responsible for its upkeep, repairs, and the replacement costs of appliances, roofs, air conditioning, hot water heaters, etc.
  5. Do you have a FICO score or VantageScore above 700? When you have a score lower than 700, you will be turned down for a mortgage loan or will be offered loans with a very high interest rate. Make sure you have paid-off your consumer debt, have kept out-of-debt, and managed credit wisely in order to increase your score.

 

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