Valdosta Daily Times

April 14, 2013

Home is where the majority of your income is going

Brittany D. McClure
The Valdosta Daily Times

VALDOSTA — I come to you this week as a changed woman. I am no longer poor and unemployed! In just two weeks, I managed to lock down a job which has my parents celebrating far more than I considering me, my husband and our three animals have completely taken over their home. Come Monday, I will be the Social Media Coordinator and Writer for Armstrong Atlantic State University. Woo hoo!

As I start this new journey as a salaried adult with an office (I know, I have to keep pinching myself), it’s time that I make the rest of my life fall in line. I feel all my budgeteer budgeting has been preparing me for the moment where I can finally buy my own home and thankfully, that moment has finally arrived.

Two years ago, me and the hubs sat down with a mortgage broker and honestly, it was pitiful. We could “afford” a home by the skin of our teeth and unfortunately, I wasn’t prepared to be on an all Ramen Noodle diet to do so. We sat down and went through the advice from our broker and had to make some big changes. We budgeted, we saved, I stopped shopping, I cried, but now, it looks like it’s all paying off.

Buying your first home or a home period is overwhelming. It’s important to solicit the advice of an expert and do your research and trust me, I’m up to my eyeballs in research. You would think I used to be a journalist in another life or something. Anyway, I have learned a lot and of course all I want to do is share my wealth of knowledge with a few hundred of my closest budgeteers (I’m being generous; the number is probably around like 88).

1. Get professional help! No, not a therapist (that’s another column for another day) I mean a mortgage broker. While my first experience with a mortgage broker was depressing, it did teach me a lot. I learned how much I needed to save, how much of a down payment I needed, what I could afford, etc. Even though the news may be hard to cope with, it’s a great reality check and honestly, it’s so much easier to work towards a goal when you have all of them nicely defined on a paper for you.

Another benefit to a mortgage broker is that they will be able to find special programs you qualify for that you probably had no idea that existed. For example, the prospect of a house seemed a lot more realistic when I learned I qualified for an FHA and a USDA loan. If you’ve been poking around in the housing market, you’ve probably heard of these, but here are the basics of what they are:

 • Federal Housing Administration (FHA) loans are backed mortgage loans that have historically allowed lower income Americans to borrow money for the purchase of a home that they would otherwise not be able to afford. There are smaller down payments required (usually 3.5 percent down which is like $3,500 for a $100,000) and competitive interest rates.

The FHA even just rolled out a new program for those who have recently gone through a foreclosure. You still have to have 3.5 percent down but your credit score only needs to be in the 600’s.

• A USDA loan (also called a Rural Development Loan) is a government insured home loan that allows you to purchase a home with no money down and at a lower monthly payment than other loans. It finances 100 percent to qualified buyers, meaning all closing costs can either be paid for by the seller or financed into the loan. The only downside is the loan does dictate where you live because you have to live in an approved rural area.

Those are some really common and popular loan programs but there are so much more. Like a Veteran’s Administration loan (VA loan) for those in the military. Its biggest draw is no down payment but there are several other benefits.

 2. Get your debt in check. Just because you can qualify for a home loan doesn’t mean you can afford a home. Add up all your monthly bills including student loan and credit card debt. See how much you have left over and be sure that there is wiggle room so if your fridge breaks or you suddenly had a $700 water bill because of a leaky pipe (yes, both of these happened to my brother in just one month) then you will be able to afford to fix it. While getting out of rentals and owning your own home sounds nice, it’s a big responsibility and you can no longer call on your property management to fix stuff.

3. Really know the cost of a home. It’s not as easy as a home costing $200,000 and then you get a loan for $200,000 and pay for it. It’s also not just a mortgage payment you’ll have to make every month. There are several other things you will have to factor in:

- Closing costs: Though the housing market is on the rise, it is still a buyer’s market. So in these economic times, buyers can typically get the seller to cover the cost of closing. However, that is not always the case. Closing costs include points, application fees, credit check, attorney’s fee, lender’s attorney fee, title search, title insurance, appraisal fees, inspections, local fees, and document preparation.

• Escrow: This is an allotment you will pay to the lender every month in order to guarantee availability of funds for taxes and home insurance.

• Additional Home Insurance: In Georgia, while not having flood insurance is stupid, it’s not required. It’s an additional policy you can take out through the federal government and the federal government is the only place you can get it.

 4. When looking for a home, keep it all business. That’s really hard to do when you’re sinking your life’s savings into something, but if you fall in love with a home, you’re going to end up over paying and under satisfied. After you look at a home, sleep on it and think about it for a few days. Run the numbers to figure out what your absolute maximum offer can be. Falling in love and fighting in bidding wars is exactly how so many Americans get in over their heads with house payments they can no longer afford. Overall, keep the big picture in mind. While a home is a great investment, it’s also a great way to completely drain your budget.

While there is so much more to consider when buying a home, these are the big things you need to keep in mind. It can be overwhelming, but you have to keep a level head and an open mind. For those looking for a home like me, happy house hunting!

Be sure to like me on Facebook at www.facebook.com/BrittanyDenneyMcClure to keep tabs on my new job. I’m also on Twitter @VDT_Brittany.

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