How To Buy A Home Like You Wash Your Clothes

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So you want to buy a home but you don’t know where to begin or end? As you have already gathered, buying a home is not simple, easy, or quick. In fact, it will take a few posts before I can really break down the essentials of home buying but for today I will try to simplify it to a comparison of your Saturday morning wash day. Maybe it would look something like this…

Step 1: Gather all your dirty clothes. Or in the case of home buying; gather your facts, Research & Budget. Determine how much you can afford, how much do you want to pay per month, how and what amount should you save for the deposit, and what will the mortgage lender require from you. (Hint: lenders usually require proof of recent tax returns, proof of employment, verification of liquid assets, good credit score, good debt to income ratio, etc.) Identify the cities or towns you prefer to live in. The most important decision in home buying is location---your distance to work, family, fun, school, and safety. Budgeting will help you set guidelines for your spending and savings.

Step 2: Sort the clothes by colors. Now, you will sort your facts, Prioritize & Plan. Ask yourself what will take first. I recommend doing the most difficult task first—for me it’s lowering my debt but maybe for you its saving, credit building for the first time, or credit repair. Attacking things piece by piece will keep the process less complicated and less overwhelming. Planning for those priorities will help guide you to your goal.

Step 3: Pretreat the heavy stains. Let’s Repair & Protect our credit. Review your credit report for negative marks and take the biggest marks (that are not due to fall off before your home purchase) under repair—pay down your credit limits to a usage of 33% or less, pay your creditors, remove false claims on your report, ask for a pay to remove debt plan with your creditors. Protect your credit by continuing to make on time payments with your current accounts, limiting the usage of your credit cards, avoiding requests for new credit accounts or loans, and monitor your credit report for suspicious activity.

Pic courtesy of bridalguide.com

Step 4: Find the right washer. Do we need a big machine or small one…is it a big home or small one. Time to Find your Home Style & Preferences. In short, what do you require versus what can you live without in a home. What’s your house style---to name a few there’s Victorian, Cape Cod, rancher, colonial.  Do you want a condo or a single family home? How many bathrooms, bedrooms, and closet/storage space? What appliances or amenities are needed---washer/dryers, pools, fireplaces, basement, wood floors, or private parking?

Step 5: Load the clothes and wash. Time to load the bank. Meet with a lender to Get Preapproved. Getting preapproved lets you know the amount the lender will pay after the home is appraised and the title is presented. Now things are getting started, you have leverage over others who may bid for the home you select and may only have prequalification for the loan or unstable financing.

Step 6: Rinse cycle. Time to rinse out the professionals and Find your Realtor. Maybe you can get someone to recommend a good realtor to you. This person should be knowledgeable in the community you are seeking, well suited for the position based on years of residential selling experience, and available during your schedule to provide services. Find out what is the cancellation policy for open houses or suspending your home search all together. And most importantly what is their commission rate?

Step 7: Final Spin Cycle and remove the clothes. Finally, we found our home; we will perform a home inspection, and Make an Offer. Don’t buy blindly, consider a general home inspection, mold inspection, and flood zone check. If the offer you make to the seller is accepted, we have to close the deal. The closing process involves the completion of legal forms, the official title search, and payment for the title transfer occurs.

You’re probably thinking wow that’s so much information and honestly it is. But keep with us as I break down each step and show you ways to complete each step. And as your knowledge increases things will begin to become clearer to you what the best choices to make are. Feel free to comment or share. We are also on Instagram and Twitter as @practicalwallet!

W.W.Y.D.: RENT OR BUY?

Are you on the fence about whether to rent or to buy? You just need a wee bit of emotional readiness to choose a home with your style in a location that meets your lifestyle needs. For home buyers, the challenge is building a good credit history and saving for the deposit. For renters, the challenge is in paying monthly payments to something you will not own in the end. So below are three questions to help you decide if you want to buy.

courtesy of www,dreamstime.com                                     

 What is driving you to want to buy?

•  The cost of renting is growing more and more expensive.

•  Need more independence and space from parents or roommates.

•  Looking for a wealth building tool to pass down to your family.

•  Want to customize a home to your personal preferences and lifestyle.

       How does your finances measure up?

• Utilities and parking are not always included with home owner association fees and therefore it becomes an additional expense. But renters can find most times that the utilities are included with the rent payments. Other expenses for home owners are hazard insurance, co-op/home owner association fees, property taxes, and sometimes private mortgage insurance.

• Most mortgage lenders require your loan to carry a monthly payment lesser or equal to 36% of your net monthly income. Use calculators like ones on Bank Rate to determine how much you can afford. 

• Just like rent applications require a security deposit, home purchases require 3.5 to 20% of the total purchase price in earnest money to show how serious the buyer is for the investment.

 How much freedom do you require?

• If you own the home, you are given more freedom to build, reconstruct, and redesign but there are some home owner associations that restrict renovations.
• There is a return on the investment in the form of equity as the home appreciates for home buyers.
• If you buy your home, you may be able to receive a more direct benefit from renting the entire home or a room as an additional source of income.
• Buying a home is a long term commitment since most mortgages are 15-35 years for a payoff. Also, if you choose to sell the home it can take months or years depending the property and its location.

	BUY	RENT
Credit history plays a major role in payments	X
Receive a return on the investment	X
Consequences for 3 missed payments	X	X
Freedom to renovate freely	X
Home maintenance and upkeep needed	X	X
Avoid scammers that seek vulnerable people	X	X
Requires emotional readiness	X
Long term commitment	X
Pay property taxes	X
Property insurance encouraged	X	X
Tax benefits are available	X
Require a form of earnest money or deposit	X	X

Home is where you make it so there is no right or wrong answer, just a search for the best answer for you. If you still need to decide, take your time and keep researching sites like realtor.com. If you made your decision keep following us for ways to grow financially to continue to be at peace with that decision. Catch our next blog on February 30th about the steps in the home buying process! Feel free to leave comments on this post or social media on instagram @practicalwallet,, twitter @practicalwallet,  and pinterest @practicalwallet.

  

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Please Don't Wake Me Up!!!

Oh hey, did we have the same dream? You know the one I'm talking about. The dream of when you reach under your seat to find an envelope taped to your chair. And inside of the envelope is a silver key. Then you look up from the key, into her big brown eyes and its Oprah grinning hard...YES I SAID OPRAH...she screams and points to you and the other audience members “YOU GET A HOME, YOU GET A HOME, EVERYONE GETS A HOME?"

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Okay okay, now maybe that was just my dream but please don't wake me up! Maybe I dream too hard or maybe I don’t dream hard enough. Only time will tell. What is real is my debt which is double my income and like most people I don’t qualify for any type of assistance so I just pray and plan. But like Les Brown says if “you fall, fall on your back. If you can look up, you can get up!”

 Sometimes it can feel like the our problems are the worst but things could and can get worst. Bottom line is our problems shouldn't handicap us, we have to imagine our problems on an obstacle course-we can go over, around or through but don’t just give up. Some of you may think as you read that I am an expert, financial wizard, or at least a previous home owner or maybe at least a child of a home owner.

The answer is no to all of the above instead the truth is I have been gathering resources and information and keeping notes everywhere, screen-shooting anything that I can use or benefit from, and everything is scattered. I started transferring my notes to my computer and realized that I can help more than just my family and friends. I can reach a lot of people in similar circumstances or people who just don’t know where to start; I can guide them based on what real experts are doing and share their success stories and paths.

Now I named this blog a very weird name and I realize it’s hard to put on a t-shirt and sell it but I’m not selling anything (in this moment) other than inspiration. If you were shopping in Macy’s for a “practical wallet” you would want a wallet that has lots of sleeves to put credit cards and IDs in and maybe some family pictures and then a convenient place for cash. This wallet would be nice on the eyes, maybe leather, if mines it would be pink and the right size.

Well this practical wallet is going to create enough sleeves to direct you in a practical path of home ownership, retiring financially secure, and building financial security for yourself and family. Like I said earlier, this is a platform to inspire people and help you recognize the tools to protect yourself and invest in yourself in the areas of home ownership, retirement, and personal finance. 

There is so much to take in so check back often and read my posts on the 5^th, 15^th, and 30^th of every month, use the information in your plan as you see fit, leave feedback, share my posts, and subscribe to stay in the loop. My next blog post will dive into a benefit comparison of home ownership versus renting on February 15th, 2016.

Feel free to leave comments on this post or social media on instagram @practicalwallet, twitter @practicalwallet and pinterest @practicalwallet