6.19.2002 :: Loans
It's a Home Buyer's Market! Are you Financially Prepared?
by Janee Del Colletti

You've thought about it and decided it is time to buy a new home. But, are you financially prepared? There are many costs associated with buying a home that go beyond the monthly mortgage payments. Establishing your current financial situation will help you determine what kind of house you can afford, what you need for closing costs, and what you need to do to save for those expenses.

There are three main questions that you should look at as a potential homebuyer: How much money do I bring home? Where does my money go? And, how much money do I want to save? Find the answers to these questions and you are one step closer to becoming a homeowner.

How much do you bring home?

This is a simple enough question to answer, however, be sure to take into account taxes and other deductions from your gross income. If you are unsure of your net income, simply look at several months' worth of paychecks and average the net amount on a monthly basis.

Where does my money go?

Ask this question of anyone and many are at a loss to answer it. Gather your bills, credit card receipts, and cancelled checks (or your checkbook registry) for at least several months and categorize your spending into such subjects as rent, utilities, food, etc. Be sure to be very specific and not to lump too much into the miscellaneous category.

Once you determine your average monthly expenses, see how much money (if any) you have left over each month. You will probably fit into one three categories; spend too much, break even, or save a LOT. The amount you need to save depends on your own personal situation. In general, your savings program should allow for three months worth of living expenses, children's college education, retirement, and major purchases. In relation to saving to purchase a home, you need to save:

1. Down Payment - Typically 20% of purchase price of house, however, other mortgage programs are available for 10, 5, and 3 percent, and sometimes even zero down.

2. Closing Costs - Closing costs will vary depending on the sales contract.

3. Moving and/or Relocation Expenses - These expenses will vary depending on the distance of the move and amount of household goods. Call storage and moving company for a free estimate.

Ready to Buy

You are now ready to find that home. Congratulations on taking the steps to becoming a financially prepared homebuyer. Once your finances are in order, contact a mortgage lender about pre-approval and find the right mortgage to fit your budget and financial situation. Your dream home is only a step away.

Janee Del Colletti of Santa Cruz Mortgage can be reached at 831.454.1169 or by email at janee@santacruzmortgage.com.