alt="droppedImage.png"/>
If you apply the principles in this guide, believe in yourself, and refuse to give up, I am certain that your dream of home ownership can turn into a reality much sooner and much smoother than you think!
Are you ready? Let’s go!
Chapter 1
Preparing Yourself and Your Finances
What’s your credit score?
Before you begin the process of looking for your first home, you really need to know what your credit score is. Your “credit score” is like your life’s report card. It tells people how dependable that you are when it comes to managing money and paying back loans or lines of credit.
A credit score anywhere above 650 is not too bad. Anything lower than that needs some work. If you’re score is 760 or above, it’s smooth sailing for you! You will see, in Chapter 3 on Financing, when you approach a lender and ask them to let you borrow money they will want to check your credit score first.
Depending on that score, along with other criteria, they will decide how much money they are going to lend you, what your interest rate will be, or if they are going to lend you money at all.
There are many ways to find out your credit score, if you don’t already know it. You can utilize online services, if you’d like. You can also contact the credit reporting agencies directly.
The three main credit reporting agencies are:
•Experian: www.experian.com
•Equifax: www.equifax.com
•TransUnion: www.transunion.com
These are companies that monitor credit. Anytime you open new debt like a charge card, or a car loan it gets reported to those three credit bureaus. It also gets reported to them when you make late payments.
SIDE NOTE: You get one free credit report per year. Check with one of the credit reporting agencies listed above to find out how.
I think the best way to check your credit score is through the lender you ultimately choose to work with and that doesn’t count as your one free yearly report. I will talk about this more in Chapter 3.
What is your net worth?
Do you know what your net worth is? Your net worth is simply the difference between your assets and your liabilities. You assets being anything that is worth money or anything that makes you money. Your liabilities are basically anything that you costs you money or that you owe money on.
You can figure out your net worth by subtracting the sum of all of your liabilities from the sum of all of your assets.
An example of an asset would be a rental property, that you own, that costs you $400 per month to maintain but rents for $900 per month there for putting $500 per month in your pocket. Its money you earn, not money you owe.
An example of a liability would be a car loan that you owe $15000 on but the car is only worth $13000 or a credit card that you owe $1000 on. You are obligated to make monthly payments on these items and they don’t pay you anything in return. Its money you owe, not money you earn.
A car that you own outright, or owe less on than the car is worth could be an asset too. Assets are as simple as things that are worth more money than you owe on them. Don’t get stressed thinking you have to own a rental property before you can buy your first home. That is not the case. The point of this guide is to help you get into that first property.
You always want to try to have more assets than liabilities. It’s good for your wallet and looks really good to lenders.
What is your price range?
What price range are you trying to buy in? How much money do you want to spend on your new home? How much can you afford? You can get an idea by taking a look at your current monthly bills, adding your potential mortgage payment on an average priced home, and taking into consideration any new bills that may come with that purchase, i.e... home owners insurance, alarm system, FPL bill, utilities bills, cable bill, etc.
You can figure out possible mortgage payment easily by using one of hundreds of free online mortgage calculators. Just go to www.google.com (or whichever search engine you like) and type in “free online mortgage calculators”. I’m sure you’ll have plenty of choices.
You just plug in numbers like home price, interest rate, and the length of the loan (a typical mortgage loan is 30 years), and it pops out your estimated monthly payment. I used to look at these a lot and plug in different numbers. It was actually fun and motivational!
Remember, that’s just an estimate. When you get further a long and find a lender, they will be able to give you a better picture of what your payments will actually be.
SIDE NOTE: If you are buying a condo, townhouse, or some single family homes you may have to pay a monthly association fee to an HOA (Home Owner’s Association), on top of your mortgage, depending on where the home is located.
Why should you set a goal?
You should set a goal because when you set a goal it’s like taking aim at a target. If you have a target to aim at you are much more likely to hit the bull’s eye. Right? If you’re aiming at nothing, that’s probably what you’re going to end up with. Always have a goal.
To start out with it may be an amount of money that you want to save each month towards the down payment on your first home. Maybe you have some credit card debt you want to pay down. Maybe you want to pay off that car loan. Maybe you want to lose 25 pounds, gain 25 pounds, or finally start exercising. Whatever goal you set, just remember to write it down and keep it in reach. You will want to refer back to it often to keep yourself focused.
The reason for this is because during this process of saving, finding, and purchasing your first home, you will get discouraged. It’s going to happen. Don’t freak out and don’t give up. Don’t let that feeling last longer than a millisecond. When it happens, just take a look at the goals you have written down and remember why you started doing this in the first place. Your goals will give you renewed energy, focus, and they will help to keep driving you forward.
How do you organize a plan?
A plan is best organized when
