I was reminiscing today about how easy it seemed to buy a home just a few short years ago. Just eight years ago I was a loan officer and I remember when the guidelines began to loosen up and how people just a few months prior would have never qualified for a mortgage with their financial situation, but did. It was an easiness that was just too easy. An easiness that should never have happened.
Although the current economic situation is certainly not helping the housing market these days, I think things have reached a point necessary to put things right again in the financial world. Do I dare say this, but I am going to...things should be a little more strict.
Now I am not saying that I am a Saint by any means. I fell into the trap of easy lending myself, but had I followed what I believed when this economic meltdown began, I probably wouldn't be in the middle of my own financial crisis.
Here are a few guidelines I suggest you follow when buying a home:
- Do not buy a home until you have an emergency fund in place and are debt free aside from your new mortgage.
- It is best to only have a 15 year mortgage.
- Put down 20 percent to avoid the cost of PMI (Private Mortgage Insurance).
- Your mortgage payment should never exceed 25 percent of your take home pay. Lenders will generally go up to 31 percent, but I say go a little lower. It is the best way to stay out of trouble.
Even if your able to take advantage of the current low interest rates don't push your finances to the limit. Having a buffer is best. You'll thank me later for it.
If you are newly married there really is no reason for jumping into purchasing a home either. My first wife and I bought I home shortly after we were engaged and moved in the home before we were married. My second wife and got engaged the night we moved in our first home together. I guarantee it is worth the wait. Spend a year or so together first building equity with each other before you try and build equity in a home.
If you think buying a home with your boyfriend or girlfriend is any better think again. Don't buy a home with someone you are not married to. If the relationship goes South it can ruin you financially, legally, and spiritually. You would be better off buying the home on your own.
[This post is written and copyrighted by Financial Elite (http://financialelite.blogspot.com/ ).]
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