When they say "A home is the biggest investment of your life..!" They weren't kidding. It is! As you can see now what is ocuring in our economy today...it should never be taken or treated lightly as people were doing. A sudden illness, job loss can turn your world upside down. I recently heard of a friend speaking of a couple that just recently lost their home. Both the husband and wife lost their high paying jobs. They had no reserves. They lived in such a "Big home, drove a big car, and lived a big lifestyle!" At first glance, you would believe they were very well off, but it was a mirage. It was all done on credit.
Sometimes you sit back and are overwhelmed when you hear stories like this, but I no longer do. I am not cynical, a better word is that I am 'numbed to it!' I really think that too many persons lived way beyond their means and needs and what we are witnessing in our society to day is the price many are paying for the financial distress. As a parent would tell a child with too much food on the plate, "Your eyes were bigger than your stomach!" So too is the predicament that many home buyers placed themselves in. They placed themselves and their future in harms way. This is really a pretty common place story in America today. They did not anticipate income, their real financial obligations in life, increases in mortgage payments, taxes, utilities and even increases in the cost of gasoline. It was a true recipe for disaster of epic proportions.
Compulsive gamblers get a thrill by pushing the envelope a litter further than they should, and get a rush when they beat the odds. The difference is that many compulsive gamblers take calculated risks. They make their moves based upon certain known facts and odds. Unlike many homeowners that may be foreclosed on...many of them moved into deals that could never work out for them in their favor.
A budget could have laid out everything for them even before they went in on the home. A home should never be purchased on impulse or whim. The ability to buy a home, does not mean you should move forward. Down payments, monthly payments are only part of the big picture. There are many other monthly expenses that have to be allotted for in a budget. The math never lies. Before a person buys a home is the time to look at the math, once you are in the home it is pretty much too late. Many persons are finding this out the hard way that you cannot flip an expensive home in a six months or a year if every one of your neighbors are trying to do the same thing too.
This is especially true for first time home-buyers in a shaky economy and high unemployment.. Before you buy a home have a plan! make sure it is your plan...one that you are comfortable with and do not feel you are pressured into it.
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Start with the right mortgage that you can afford. A mortgage payment is one thing, but the reason a 30 year fixed rate became so popular after the last great depression is that it is a budgeted mortgage. It provides a fixed rate payment for the term of the loan. Principal, Interest, Taxes and Insurance are all provided for. If you know that your payments are for the next 30 years, you can plan around it. The secret is you pay it down, and NEVER borrow against the equity! Don't have enough money for a down payment? Get a second job! Try to put down the most possible, again...pay it down.
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Assess Your Finances. Once you know what your monthly payment is now you can look at all the other items in your life. Income, taxes and expenses. Some expenses may be fixed, and others will fluctuate. It is the monthly expenses that are most important. Sometime they are not constant. In summertime the air conditioning usage will be higher, and so will your electric bill. In the winter Your electric bills may go down, but your gas or oil bill will rise due to heating. Water usage may rise. There are many fees that are necessary and others that are not.
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Know Your Financial Obligations:Home insurance, electric, gas, sanitation, water and sewer will fall into this category. Cable tv is optional. Then there are expenses of home maintenance, auto payments, car insurance, hospitalization, the cost of maintaining a cars(s), fuel, car insurance, registration, parking tolls, food, medical, personal care, taxes and more. On top of this is you should have a good nest egg or an emergency fund. I would suggest at least 6 months in the bank!
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Hi Jim...loads of good old Common sense.
Great post :O))