Four Steps to Sustainable Homeownership

Purchasing a home is an exciting step in anyone’s life, but there is more to the process than just getting approved for a loan. In fact, it is even more important to make certain you are ready to keep your home for the long term. To that end, here is a look at 4 things you can do to make your homeownership sustainable.

Step #1: Increase Your Knowledge

The first step you need to take is to learn as much about your mortgage loan options as possible. This way, you can be certain to apply for the best type of loan to meet your personal needs. In addition to learning about the pros and cons of various loan options, you need to learn more about how credit scores, discount points and other factors affect the overall cost of a loan. As part of this process, you should contact your local HUD housing counselors to learn more about special buyer programs that might be available in your area.

Step #2: Get Your Finances Under Control

Before you can purchase a home, you need to be certain you will qualify to buy it. If your credit score is below 620, you will be better off taking some time to bring up your score before you make a purchase. This way, you can keep your interest rates down, which will help keep your mortgage payments down and will make it easier for you to keep up with your monthly payments. Of course, by getting your finances under control before you buy, you will also be more likely to be able to stay on top of your bills after you make a purchase.

Step #3: Create a Budget

In order to remain safely within your means, your mortgage payments should never be more than 28 to 33 percent of your total monthly gross income. If you have other debts, such as car payments, student loans, credit cards or child support payments, the total cost of these debts and your mortgage payment should not exceed 36 to 40 percent of your monthly gross income. Therefore, before you make a purchase, carefully analyze your debts and create a budget that will ensure your monthly payments remain below this figure while also leaving enough money available to put toward a savings plan.

Step #4: Get to Saving

Before you start looking for a home, you should have plenty of money saved up to apply toward the purchase of your home. In most cases, Earnest money, which is a deposit provided to the seller, will be required when making an offer. Earnest money requirements can range anywhere from $500 to two percent of the purchase price. In addition, depending upon the type of loan you get, you might need to make a substantial down payment or closing costs. In addition, by establishing good saving habits now, you will be better prepared to handle your finances effectively in the future.