When you’re getting your finances prepared to go for the biggest purchase of your life, you may ask yourself, are you ready?
With prices dropping a little bit in San Diego County in February, it could be an easier time to negotiate a deal for a home in Encinitas. Finances shouldn’t be the main motive of buying right at this moment, because it could be one of the biggest step of your life.
“Time means nothing,” said CPA and Financial-Planning Specialist in West LA Michael Eisenberg to MSN.com. “You can’t predict what will happen to home prices in your neighborhood in the next few month, let alone the next few years.
“But if you’re looking to make the long-term commitment of homeownership, it helps to approach the decision like you would any business decision. You don’t want to buy on emotion, or because everyone else is doing it. Buy when you’re ready.”
So what makes you ready? According to MSN Real Estate, here are the eight reasons when you know you’re ready to purchase your home in Encinitas.
Step 1: Get your Budget in Place
Money management skills are what you need to have because when you own your own place, you will obtain many more expenses compared to when you were renting. A household budget should be implemented, i.e. know your financial status, know the whereabouts of your funding as well as what it gets dedicated to each month and exactly how much you could afford.
You will now have on your plate: commuting costs, maintenance, upkeep costs, homeowner’s association fees, property taxes, homeowners insurance and higher utility bills.
Step 2: Pay a good portion on the down payment
Most down payments begin at a worth of 20 percent of your home price. So say you home is $250,000, you will need at least $50,000 when you first buy the home in Encinitas. Zero or low down loans are methods to avoid paying such a high down payment, but you may have to dig deeper into your funds because the interest rates may be higher.
“In the early years, you aren’t building any equity with the mortgage payment,” said Eisenberg to MSN. “If the market changes or your personal circumstances change and you’re forced to sell, you could lose money.”
Step 3: You income must be reliable:
A constant cash flow will be needed because buying Encinitas real estate is a long-term financial commitment. Homeownership has fees of its own as well. What are you planning to use your funds on in the next six months: Start a family, go back to school or something else expenses? After that – calculate what the next six years will be like.
Step 4: Emergency account
If you have finances for a rainy day fund for between three to six months, you should look to put money aside. You never know what could happen: Unexpected emergency, hospital bills, a layoff or even a natural disaster could be detrimental to your situation.
Step 5: Settle Debts
With a lender, they make sure that you have the ability to make monthly payments before they even offer you a mortgage. Before applying for a mortgage, it’s probably in your best interest to pay of your debt because lenders make sure that no more than 33 percent of your income including your principal, interest, taxes and insurance – the mortgage will remain below 38 percent of the total pay.
Step 6: Keep your credit score favorable
You don’t need the best credit to be a homeowner, however if you want your interest rates to be lower, you must have a decent history. Check your credit history at least once or twice a year – just in case there are any mistakes.
Step 7: Do you have the ability to commit long-term?
Can you stay in your Encinitas real estate for five years – because that’s usually how long it takes to recoup your buying and selling costs? Especially if want to get a profit in return you should at least live the house for two years. You could always rent your house as well if you get to the point that you want to turn the profit.
Step 8: You’re your own landlord
You have to be ready to take that responsibility that your landlord did. You have to be ready for upkeep as well as having the handiness to fix something and other maintenance issues like mowing the lawn or hiring a plumber. Take these steps into consideration when making that big step for your home in Encinitas and good luck!