By Susan Schneider, contributor
Homeownership has always been key to the American Dream.
Since the days of the country's Founding Fathers, pride of ownership has been
a reflection of the value Americans place on freedom and self-reliance.
Ensuring the growth of homeownership has always been a major objective of
American national policy, dating back to the Homestead Act signed by President
Abraham Lincoln in 1862, which provided ways for settlers to claim public
property as their own.
Today, the United States is fortunate to have become a nation composed
primarily of homeowners, with the overall homeownership rate at almost 68
Strong economic growth, low interest rates, and creative mortgage products
have all added to increased homeownership opportunities.
How the Dream Becomes a Reality
You do not need to be a citizen of the United States to purchase a home.
Anyone who is in the country legally, pays taxes and qualifies financially is
Felicity Bennet, a South African nurse who moved to America in January 2000,
bought a home this past October.
"We bought a three-bedroom, two-bath home on 1.2 acres in North Carolina,"
Bennet said. "We love it. It's a wonderful home for our baby girl and someday
soon, a dog."
"We never could have afforded this in South Africa. The interest rates are
double-digit there. The interest rates here made if affordable."
Bennet said they had no problems with getting a loan. She and her husband had
taken out a car loan and obtained credit cards when they first moved to the
States to build a credit history. She says this is important and not hard to do.
Bennet also feels that working with a good real estate agent is key.
"Housing construction is quite different here than in South Africa. At home,
all houses are brick, whereas here there are lots of types of construction to
choose from. Our agent helped us understand all the choices."
"We're use to having six foot security walls around the house, which we don't
need here at all. And the appliances are much nicer than what we could have
afforded in South Africa."
Are you Ready?
To determine if you are ready to buy a home, ask yourself:
- Do I have a steady source of income?
- Can I count on regular, steady employment?
- Are my employment and credit histories good?
- Do I have money saved for a down payment?
- How much can I afford to pay monthly?
- Am I ready and able to take on the responsibility of a monthly mortgage as
well as the inevitable 'surprise' expenses that can pop up periodically?
If you feel confident with your answers to the questions above, get out a
calculator to figure out exactly what you can afford.
Dream Big, but be Realistic.
Before you start driving around looking at homes or perusing the classifieds
every Sunday, do some math. There is no point in falling in love with something
you can't possibly afford. Remember that most first-time buyers are happy just
to get into the market for the first time. Buying, selling and 'moving up' are
part of almost everyone's long term plan.
Also, repeat the term 'house poor.' It is used to describe the unenviable
situation wherein a family has committed so much of their income to their
mortgage that they don't have one cent left for anything else.
According to the Federal Housing Administration, monthly mortgage payments
should be no more than 29 percent of gross income, while the mortgage payment,
combined with non-housing expenses, should total no more than 41 percent of
"Show Me the Money!"
Selecting a mortgage is one of the most important financial decisions you
ever make. A little bit of research can save you thousands of dollars, so shop
around. Loans are available through banks, construction companies, insurance
companies, Internet lenders, independent financial advisers, specialized
mortgage companies and real estate agents. Rates change frequently. Today's best
deal of may not be around next week.
How mortgage lenders check your credit history varies. All will consider your
debt-to-income ratio, which is a comparison of your gross (pre-tax) income to
housing and non-housing expenses. Non-housing expenses include such long-term
debts as car or student loan payments, alimony, or child support.
Lenders also consider the cash you have available for a down payment, closing
costs and your credit history to determine the size of the loan they will give
you. There are other factors, which affects a lender's decisions such as a
valuation or appraisal of the property to make sure it's worth the loan amount.
Each lender provides their criteria for approving a loan.
Your Dream House
It's a good idea to prioritize your list of 'wants' as well as 'needs' before
you start looking for a home to buy. Chances are, you're aren't going to be able
to afford everything you're dreaming about. Some important first considerations
- Commute-to-work time.
- The community's economic stability (is it a thriving area with budgets for
police, roads, etc.).
- Government services
- Schools (even if you don't have children, consider this for resale
- Property taxes.
- Proximity to shopping and services.
- Access to public transportation.
- Recreational and cultural amenities.
- Noise and other environmental factors.
After you've decided on the neighborhoods you like, think about:
- Size (bedrooms, baths, shared living spaces).
- Potential for expansion.
- Lot size/location to neighbors.
- Construction quality.
- Needed upgrades or improvements.
Turn to the Professionals
Once you know what you want and what you can afford, find a good real estate
agent. Ask friends and neighbors for referrals. A good agent can save you time,
money and heartache, by taking you through the myriad inspections and paperwork
required by law. He or she can also help protect you from unscrupulous sellers
A big part of home buying is homework. But the satisfaction that comes from
owning the land under your feet and the roof over your head is sweet indeed.
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