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San
Diego, CA.
"For
most individuals, buying their first home is one of the most important
financial decisions they may ever participate in because it is likely
the most expensive object the average consumer purchases and with
the longest loan commitment," says the nonprofit Institute
of Consumer Financial Education (ICFE), a San Diego based consumer
organization. "Too many first time home buyers base their decisions
on emotions, instead of financial reality, and cost is always the
biggest shock of reality," according to the ICFE.
Planning your finances
for the purchase and the big move means more than just figuring
the mortgage payment into a spending-plan, a/k/a budget. Importantly,
preparation for your first meeting with a real estate agent should
include knowing what your financial needs are and this is done by
determining exactly what you can afford each month. This is even
true when renting an apartment, so take the time beforehand to figure
this out.
Prepare mentally for
that meeting with a real estate agent, by reminding yourself you
are entering into a business decision and negotiation process. Falling
'in love' with the house you are looking at is bringing your emotions
into the decision and emotions are the last thing you want to get
involved. Typically people must be reminded, that as much as they
may love a particular house, it isn't the only nice property available
for sale. Once you are into the buying process, do not exceed what
you figured out to be your maximum monthly payment and don't compromise
financial needs just to buy it. To do otherwise, you may find you
are unable to pay all the monthly expenses.
Keeping your business
mind about you when buying a home requires you to approach the transaction,
much like a wealthy person would, by being knowledgeable and cautious,
in addition to separating your emotions from business transactions.
Other home buying strategies
you can use are:
1) Hire a lawyer. Real
estate agents are trained to sell homes, loan officers are trained
to sell loans, lawyers are trained to practice law, and for a few
hundred dollars you should be able to find a lawyer who will review
your purchase contract and make certain it keeps your best interests
in mind.
2) Hire your own inspectors. Most every real estate transaction
requires a basic inspection of the premises, often, by the lender
to insure their interests are protected. These inspections are not
always the most detailed. By hiring your own independent home inspector,
you will ensure your interests are also protected. Hidden problems
uncovered by your own inspector, such as toxic mold or a termite
infestation, could save you thousands of dollars in repairs after
the fact.
3) Consider different
types of financing and loans. Many first time home buyers jump head
first into a 30 year, fixed rate of interest mortgage. This may
be an emotional reaction by those buyers who fear that their house
payment will go too high with an adjustable rate mortgage (ARM).
Depending on interest rates, however, an ARM may just be the right
decision, especially if you are only planning on keeping the house
for five to seven years. Another advantage of an ARM, is that you
usually don't need as much income to qualify as opposed to a 30
year, fixed rate loan. Additionally, if you can afford a higher
payment, then consider a 15 or 20 year mortgage. The interest rate
may be lower and in the long run, you will pay less for the home.
Check out first time
home buyers programs, sponsored by the U.S. Department of Housing
and Urban Development (HUD) Visit: www.hud.gov/buying/index.cfm.
Most communities served by the nonprofit Consumer Credit Counseling
Service (CCCS) have Homeowner Counseling and Education programs.
Visit: www.nfcc.org or www.debtadvice.org. Another good resource
is Freddie Mac, a corporation formed by Congress in 1970 to create
funds to mortgage lenders in support of homeownership and rental
housing. Visit: www.freddiemac.com
For more information
on getting yourself financially ready to purchase your first home,
visit the ICFE's Web site at www.icfe.info.
For readers without Internet access, you may receive the same information
by sending $1 and a self-addressed, 60 cent stamped envelope to:
ICFE Spending Plans, PO Box 34070, San Diego, CA 92163-4070
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About the ICFE:
The Institute of Consumer Financial Education (ICFE) was founded in 1982 by the late Loren Dunton (creator of the Certified Financial Planner (CFP) designation). The ICFE is dedicated to helping consumers of all ages to improve their spending, increase savings and use credit more wisely.
The ICFE is an award winning, nonprofit, consumer education organization that has helped millions of people through its education programs and resources. It publishes the Do-It-Yourself Credit File correction Guide, which is updated annually. The ICFE has distributed over one million Credit/Debit Card Warning Labels and Credit/Debit Card Sleeves world wide.
The ICFE became an official partner with the Department of Defense/Financial Readiness Campaign in June of 2004.The ICFE was an active partner in the California Student Debt Resource Awareness Project (CASDRAP) which resulted in a new web site: (studentdebthelp.org). CASDRAP disbanded in 2010, shortly after the web site project was completed. In 2011 the ICFE assumed the single sponsorship of the (studentdebthelp.org) web site and is now responsible for its content and operation.
The ICFE is also an on-line help for consumers who spend too much. ICFE's spending help was featured in PARADE Magazine in the Intelligence Report section. The money helps and tips are from the ICFE's Money Instruction Book, our course in personal finance.
Visit the ICFE's other web sites at: www.icfe.info and studentdebthelp.org. Both sites helps consumers and students with mending spending, learning about the proper use of credit, budget and expense guidelines, how to set up and implement a spending-plan and also how to access financial education courses and how to teach children about money. Other ICFE services include: Ask Mr. G, a free eNews, and an online resource center for students, parents and educators, plus financial education learning tools and a book store.
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