Given the extraordinary scope of the economic crisis with the collapse of the housing bubble one incentive that is being given to stimulate the housing industry is being pitched to the potential first time buyer. It is an extension and expansion, of the first-time home buyer tax credit up to $8000.00.
Most people starting out on their own don't have the experience or knowledge on how to manage money. The majority of parents have not taught their children how to save and budget. Our society in the past has made establishing credit and borrowing money too easy.
This was done to lure people in to make purchases that they would not have made or could not really afford.
If the possibility of receiving that $8,000 tax credit is causing you to have house fever you need to stop take a deep breath. Once the mortgage is signed you are committed. You will learn real fast what a huge commitment you have made. There are steps you can take to prepare yourself for home ownership.
First of all do not go into home ownership owing debt. Set up an emergency fund with at least 3 to 6 months of living expenses. It is not if, it is when something like a job loss or car repair comes along, you will be able to weather the storm with out using credit cards. Expect the unexpected. Save at least 20% of the value of the home you are looking to purchase to avoid paying private mortgage insurance. In order to enjoy life after home ownership, make sure your payments are a quarter of your take home pay on a 15 year fix rate loan.
Now is a wonderful time to purchase with home prices down and great interest rates, if you have taken the right steps to prepare. Don't let the lure of the first-time buyer tax credit become an $8,000 dollar tax credit curse.
If you avoid debt, plan and save for your future, you will remove a lot of potential stress and be able to enjoy your wonderful first home.
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