Budget Your Way to Home Ownership

Despite the current credit crisis, now is a good time to be a first time homebuyer if you are mortgage ready and a good money manager. There is a glut of houses for sale across the nation and sellers are very motivated. An article on CNNMoney.com recently stated that “For the first time in years, entry-level homes are affordable.”

The first step to owning your own home is to attend a Free First Time Homebuyer Seminar sponsored by your local Housing Authority or Coalition. Becoming educated on how the home buying process works is very important. You can also find a Housing Counseling agency by visiting the U.S. Department of Housing and Urban Development.

This information is to help the potential home buyer understand what credit is and how important budgeting can be when you want to get approved for a home loan. Becoming “mortgage ready” may require a little bit of time and effort but it will be easier than you think once you understand how credit and budgeting work.

Budget:

If you want to buy a house, start by estimating what you can afford and make a budget. Be thorough with your budget. Buy a notebook or make yourself daily tracking sheets and at the end of each day record what you spent and what you spent it on. Do this faithfully for one month. Check over your tracking sheets and make a list of NEEDS vs. WANTS. By eliminating some or all of the wants you can start saving for your down payment. Carefully put together a monthly budget. List your income: include wages and salaries and any additional pay. List your expenses with the help of your daily tracking sheets. Don’t forget to include an amount to cover unexpected expenses such as car repairs. The amount left once you deduct your expenses from your income is your disposable income. Open a Home-Buying Savings Account and put as much disposable income as you can away each month to help you achieve your goal.

Credit Card Debt:

• If you have a lot of credit card debt, first of all stop using the cards. Freeze your credit cards in a container of water. This will give you time to think before you make a purchase. Did you know that people will generally pay 30-40% more for something if they are using a credit card!
• Pay more than the minimum payment every month in order to pay them off over a short period of time. Pay the most to the card with the highest interest rate first.
• Always make your payments on time, electronically if possible. Being late by even one day will result in a hefty late fee and the chance that your interest rates will be raised on that card and potentially on other cards when they check your credit report and find out you have been late. This can also negatively affect your credit report and credit score.
• There is no such thing as a fixed rate if you are late making payments!
• 0% interest stops as soon as you are late!
• If your interest rates are high and you cannot see a way out of your unsecured debt, contact a non-profit credit counseling agency. They can make arrangements with your creditors to reduce your interest rates so that you can pay off your debt in a much shorter period of time, generally 3-5 years.

Credit Reports:

Every person in the U.S. has access to one free credit report per year from each of the three major credit reporting agencies, Equifax, Experian and TransUnion. You can access your free credit report via our website.

Negative reporting on your credit report will affect your credit score, affect your ability to qualify for a mortgage and affect the interest rate you are offered. To resolve negative issues follow these steps:

• Bring any delinquent payments back into a current standing
• If you have any collections on your report, pay them off. They will remain on your report but will show as paid in full.
• If there are things on your report that are not yours or that you have paid off but do not show up as paid, file a dispute with the Credit Bureau. Send copies of any documentation you have to support the dispute.
• If you believe you are a victim of Identity Theft, contact the police immediately and then contact all three credit reporting agencies and file a Fraud Report. Contact your local State Identity Theft Unit if you have one.

A credit counselor can assist you if you need help reading your credit report.

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