How to know if You can Afford to Buy a House

credit card debt

If there is one silver lining in this down turned economy it's that housing prices are the lowest in decades so if you have been thinking of buying a house now MAY be the time. But how do you know if you are ready for a mortgage? Will credit card debt keep you from your dream of owning a home. What sort of credit score do you need these days to give you the best chance at being brand new home owners?

Instructions

1. Knowing your credit score is one of the first steps in the process of even thinking about buying a new home. irresponsible credit card debt can all but close the door on home buying for years to come. Contact one of the big three credit reporting agencies to find out your current credit rating. If it's anything under 700 (720 and above is best) spend a year or more cleaning up your record and making sure that it's ready for the process of buying a home. Sure at one time a lower credit score could still get you a home but those days are gone forever.

2. Now that your credit score is good or you are cleaning it up take the time to start socking away the cash for a sizeable down payment on the house of your dreams. No less than 20% will do and more is better. Yes it's going to take a few years and that is just the cold hard truth. It might even take longer if you are also paying down credit card debt at the same time. If you are not able to save any money given your current lifestyle or income then you are not ready to buy a house. Rent for longer until you are in a position to buy.

3. Ok, so now you have saved what you think is at least 20% of the cost of your dream home. You have paid off any credit card debt and have started to maybe even look at houses. I know it's fun but take some time and jump on line with some mortgage calculators and talk to your banker about what sort of interest rate you are going to be able to get. Now figure out how much the house payment for that dream house is going to be. Let say it's going to be $1,800 and right now you pay $1000 a month in rent. Take at least 6 months to Make a house payment to yourself. Put that extra $800 a month into the bank and extra $250ish dollars a month to cover the extra expenses involved in owning a home. Do this for 6 months, and if for 6 months you can put that extra $1,050 a month in the bank and not touch it and not feel pinched.. THEN my friend you are now as ready as it gets to buy a house. Happy house hunting!

Tips & Warnings

• Get rid of all credit card debt

• Know the REAL cost of owning a home, if it breaks YOU have to fix it.

• Don't get scamed into debt consolidation

• don't go for a zero down mortgage, it's really a first and second mortgage rolled into one.

• don't loose hope, you can do this and not put yourself or your family in jeopardy. What would be worse? not getting a house quite yet or losing one to foreclosure? You Pick!