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8 Steps to Getting Your Finances in Order

1.  Develop a Family Budget. Instead of budgeting what you’d like to spend, use receipts to create a budget for what you actually spent over the last six months. One advantage of this approach is that it factors in unexpected expenses, such as car repairs, illnesses, etc., as well as predictable costs such as rent.
2.  Reduce Your Debt. Generally speaking, lenders look for a total debt load of no more than 36 percent of income. Since this figure includes your mortgage, which typically ranges between 25 percent and 28 percent of income, you need to get the rest of installment debt—car loans, student loans, revolving balances on credit cards—down to between 8 percent and 10 percent of your total income.
3.  Get a Handle On Expenses. You probably know how much you spend on rent and utilities, but little expenses add up. Try writing down everything you spend for one month. You’ll probably see some great ways to save.
4.  Increase your income. It may be necessary to take on a second, part-time job to get your income at a high-enough level to qualify for the home you want.
5.  Save for a down payment. Although it’s possible to get a mortgage with only 5 percent down—or even less in some cases—you can usually get a better rate and a lower overall cost if you put down more. Shoot for saving a 20 percent down payment.
6.  Create a house fund. Don’t just plan on saving whatever’s left toward a down payment. Instead decide on a certain amount a month you want to save, then put it away as you pay your monthly bills.
7.  Keep your job. While you don’t need to be in the same job forever to qualify, having a job for less than two years may mean you have to pay a higher interest rate.  8.  Establish a good credit history. Get a credit card and make payments by the due date. Do the same for all your other bills. Pay off the entire balance promptly.
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7 Reasons to Own Your Own Home

1. Tax breaks. The U.S. Tax Code lets you deduct the interest you pay on your mortgage, property taxes you pay, and some of the costs involved in buying your home.
Gains.
2. Equity. Money paid for rent is money that you’ll never see again, but mortgage payments let you build equity ownership interest in your home.
3. Savings. Building equity in your home is a ready-made savings plan. And when you sell, you can generally take up to $250,000 ($500,000 for a married couple) as gain without owing any federal income tax.
4. Predictability. Unlike rent, your mortgage payments don’t go up over the years so your housing costs may actually decline as you own the home longer. However, keep in mind that property taxes and insurance costs will rise.
5. Freedom. The home is yours. You can decorate any way you want and be able to benefit from your investment for as long as you own the home.
Stability. Remaining in one neighborhood for several years gives you a chance to participate in community activities, lets you and your family establish lasting friendships, and offers your children the benefit of educational continuity.

To calculate whether renting or buying is the best financial option for you, use this calculator courtesy of Ginnie Mae: http://www.ginniemae.gov/rent_vs_buy/rent_vs_buy_calc.asp?Section=YPTH
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10 Steps to Prepare for Homeownership

  1. Decide how much home you can afford. Generally, you can afford a home equal in value to between two and three times your gross income.
  2. Develop a wish list of what you’d like your home to have. Then prioritize the features on your list.
  3. Select three or four neighborhoods you’d like to live in. Consider items such as schools, recreational facilities, area expansion plans, and safety.
  4. Determine if you have enough saved to cover your down payment and closing costs. Closing costs, including taxes, attorney’s fee, and transfer fees average between 2 percent and 7 percent of the home price.
  5. Get your credit in order. Obtain a copy of your credit report.
  6. Determine how large a mortgage you can qualify for. Also explore different loans options and decide what’s best for you.
  7. Organize all the documentation a lender will need to pre-approve you for a loan.
  8. Do research to determine if you qualify for any special mortgage or down payment assistance programs.
  9. Calculate the costs of homeownership, including property taxes, insurance, maintenance, and association fees, if applicable.
  10. Find an experienced, full-time REALTOR® who can help you through the process.
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How To Avoid The Most Common Mistakes Made When Buying A Home

Buying a home is one of the most important and significant financial decisions that most people ever make. And because of the large sums of money that are involved, there are definite pitfalls and problems that you want to do your best to avoid as you make your decision.

One of the most common mistakes that many home buyers make is not getting pre-approved or pre-qualified for their mortgage loan in advance of starting their home shopping. As a result, if they put in an offer on a home at the same time that another prospective buyer makes an offer, and that buyer has been pre-qualified, the other buyer will almost always get the house because of having their financial arrangements already in order. So avoid this mistake by arranging for your mortgage loan in advance.

Another common mistake that is made is not enlisting the help of a qualified realtor in the home buying process. Buying a home these days is becoming more and more complex and involved. So having your own realtor who is looking out for your best interests and is knowledgeable about all the real estate requirements for your area can save a lot of headache and hassle.

Sometimes home buyers also rush into buying a home too soon. So its very important to take your time in the buying process, and not allow yourself to feel as if you are under pressure to buy a particular home quickly. New homes go on the market all the time, so be patient and you’ll be able to find a home you want, at the price you want, soon enough.

The opposite of that scenario can also be a big mistake. There are some home buyers who have such stringent requirements for their dream home, that they often pass up excellent homes that are very good bargains simply because their demands are unreasonably high. In a rising market, this can often cost them very dearly in the process. So although you may have very definite ideas about a home you would like to purchase, try to realize that some small compromises are usually necessary when buying a new home.

Sometimes home buyers get carried away emotionally and become attached to a home that is actually out of their price range too, and then saddle themselves with a huge debt that is difficult for them to pay. Most often financial institutions will help try to prevent such a situation, but buying restraint needs to start with the home buyer first. A good practice is never to even look at a home that falls outside of your affordable price range to begin with.

Whenever you are seriously looking at any home, be sure to inspect it thoroughly before you agree to the sale and sign the papers. It’s usually best to hire a quality home inspector on your own to go through the property and give you an unbiased assessment of its condition. If major problems are found, it can save you a lot of money by making this small investment.

One other common mistake that you want to avoid is not being aware of all restrictions that may be placed on your property by local zoning laws or homeowners associations. You may have specific plans for improving your property after the purchase, but you need to make sure that there are no restrictions on the plans that you have in mind before you buy.

These are some of the more common mistakes that homebuyers have made in the past that you can learn from. So before you buy your next home, review this list of tips and ideas to help make your home buying experience a successful one.