Okay America now that things are getting bad with the house buying my husband and I are going to lay down some simple steps to not getting caught in the lies lenders give! We have always wanted to do this before things got bad we just never had a place to do it...now that we have this blog we can. We pray this helps you!
#1 Never ever trust a lender. They will tell you "with your income you can afford a $100,000.00 home" all the while they did not figure in your electric bill, car payment, water,food, etc. When we first bought our home they told us we could afford a $75,000.00 loan. My husband did the math and laughed he said "sure if I don't want to eat or have heat in my home"
Of course these lenders do consider these things however they leave NO ROOM for any extra money. Meaning no money for movie night, no emergency funds, etc. Do the math make sure you leave loads of room for extras! It's a must! A few years back we had our air conditioner go kuput and we had to shell our $4000.00 for a new one! Think if we had bought a $75,000.000 home we never would have had that in savings! And guess what because we bought a home at less than the lender said (and my husband got a few bonuses, raises, and higher positions) we had a small amount left in savings after that big purchase. sweet~
#2 take the smaller (lesser value) home to pay it off faster. Sure it stinks to not get the big home with the perfect kitchen but get this. My husband and I got a 2 bedroom 1.5 bath home and as we got more income we used it to add on. Now we have a 3 bedroom, 1 office, 2.5 bathroom, with a formal dining room, mudroom, and soon we will have an entry way, car port/garage new driveway and extras. And we have upgrades done and left to do. And all the while we have paid more than double the house payment towards the house payment. Meaning our house payment at the moment is $400ish and we pay an extra $500ish towards the principle. So in one year our house will be paid for 21 years early!!!!!!!! Plus the cars will be paid off then...so do ya see the $$ that we will have in one year. I think we will have well over $1600 to play with every month!!!!! Okay I am not trying to brag I really want you to see how nice it is to save for a few years to have no debt and a nice income each month. Now before you go and buy a smaller home do consider add on potential. Some places don't allow many things so check into it...and don't trust the first person who says oh sure they allow add ons only to find out after you bought it that the county you live in does not. Trust facts like a going to city hall our the county office and seeing there building codes.
#3 Understand your loan...and then really pray about it! Okay so many people get these wonderful "arm" loans. Where the interest fluctuates but the loan officer makes it sound like its never that much at one time. And yes one month it can only go up so much...but after a year or two of going up up up you start to feel the crunch! Don't fall for these, yes they have a nice sweet low interest to start off with but if you cant afford the current interest then your buying over your head! Always get the fixed interest its just so worth it in the long haul!
#4 Make sure you leave enough to save. I think they say to have at least 6 months worth of income in savings...is that right? Well I think you should! Even if it's divided up into savings, 401K, stocks, and other extra monies you would have should you lose your job or have an emergency. Of course the savings needs to have the bulk of this money. So before you buy that dream home spend a year or two in a small cheap apartment (or with the parents=) saving and saving! It's really worth it. Emergency's are not cheap! My husband got sick recently (as you may have read in older posts) and having little in savings sure did make things get tight around here. So be sure and save. We are lucky and can afford to shell out payments each month...but it's rare you can do this so save!
#5 Know your income and expenses. Add + all that you make subtract - all that you spend (everything includes movies, trips to Come and Go, that daily latte, groceries, bills, lotto tickets) plus subtract - all you invest in (savings, 401K, investments). The see what is left = is what is left enough to cover a house payment, taxes, and insurance with room for extra? The extra is what I like to call unforeseen expenses like a higher electric bill, or other expenses related to the purchase of a new home! My husband and I tell everyone take one month or two and keep all your receipts ALL OF THEM even the ones to get a slurpy! Then take your income and subtract those receipts and your bills. Then subtract investments and savings. This will give you an idea of what you will have left each month. A bit of advise on remembering to keep all of the receipts is where you keep your money/credit card/checks keep an old receipt there and when you go to grab the mulla you will see it then remember to add the new receipt to it. I usually don't have any trouble remembering this...I have trouble writing down debit card payments as I always think of them as credit card payments, duh! I probably need to wrap a note around that darn card!
#6 please give it all to the Lord. Really look to the Lord for how to best do everything. Make sure he approves any home you look buy. We did and we are so happy we did. God is such a blessing in our lives! Not because of the home (it's just a material thing of no value to the kingdom of God) but because of how we have grown in the Lord from this experience. Always remember that when doing anything...it really takes the pressure off!
Love, Latte
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