Your Financial Status

If you have read the "Why You Should Be A Homeowner" section,   it must be obvious that being a homeowner is a wonderful thing, and in the current Real Estate Market, this is absolutely the best time to buy a home.

BUT, Nothing in life is really free, so we need to look at
whether you can you afford to buy a home

8 signs you're ready to buy your first home

With a Government stimulus of $8000 for you, and home prices and interest rates down, is now the time to buy? Are you financially able to purchase your first home? You should make your decision independent of timing the market. You should buy your first home because it makes sense for you. You buy when you're ready. How do you know when your finances are ready?

This list is a checklist of eight things first-time home buyers should have squared away before they consider a purchase.

NUMBERS 1 & 2 are the ability to meet the two types of home owner costs:

#1 The ongoing costs - You need to have a budget - and know how to use it. 

There are expenses other than the mortgage. You need household budget right now, start one. Start with your mortgage, then factor in extra costs: higher utility bills, homeowner's insurance, property taxes, homeowners association fees, and maintenance and upkeep costs.  If you simply cannot afford the increased expenses that come with a house, it's never a good time to buy - no matter what's happening in the Las Cruces real estate market.

#2: You have savings toward a down payment and the other up-front costs that go along with buying a home.

Upfront cost include not only the down payment plus you need to factor in closing costs, property taxes, initial repairs, moving expenses and decorating costs.

FOR A COMPLETE DISCUSSION OF ALL THE EXPENSES IN THESE TWO CATEGORIES AND A CHANCE FOR YOU TO DETERMINE WHETHER YOU CAN MEET THESE EXPENSES JUST CLICK HERE.

No. 3: You have a reliable source of income

Buying a home is a long-term financial commitment, so you'll need consistent cash flow to cover those monthly payments. If you are in school, have a less-than-reliable job, or plan to start a family, you need to take a good look at your future cash-flow abilities. Will you be able to make your mortgage payment six months or 6-years from now? You may be able to afford the house when you are 2-wage earners. But there are many reasons that one wage earner is no longer working. Be aware - Be sure.

No. 4: You have an emergency savings fund
If you have enough cash on hand to cover three to six months of your living expenses just in case something disrupts your steady income. If you do, you are unlikely to be unhappy about a home purchase.

No. 5: You have your debts under control

Getting a mortgage and being able to pay all the ongoing costs of homeownership as in number #1.  Your debt-to-income ratio is very important. Generally speaking, banks want to be sure that your monthly housing costs - including principal, interest, taxes and insurance - will consume no more than 28-33% of your monthly gross income; and that your total debt payments, including your mortgage, credit cards, student loans and auto loans, will remain below 38% of your total pay. In order to be sure you can afford to be a homeowner, you should be sure you can make payment that will actually pay off  your outstanding debts.  You also need to be sure you can live a satisfying life while avoiding taking on any substantial  new debt until old debts are paid off. If you don't have your debts under control you will have trouble meeting the costs of homeownership.

No. 6: Your credit report is in good shape

You will get a lower interest rate on your mortgage, and a lower monthly payment if you have a good credit history. You should check your credit history and then keep up with your credit history to make sure there are no errors. Even if there are late payments or other  defects on your credit report, there are many ways you can boost your credit report and  score.

No. 7: You can make a long-term commitment Are you ready to stay put for at least three to five years?  The reason we ask is because in order to recoup your buying and selling costs it will take that long for appreciation and equity build up to the breakeven point. If you sell before then, you may lose money on the deal.

The other reason is that one of the biggest benefits of homeownership is the creation of wealth through appreciation and equity build up. Another benefit that comes with longevity is the tax free profit that you get when you sell.

No. 8: You are prepared to become your own landlord
Even if you can afford homeownership, make sure you're ready to live the lifestyle. Owning a place comes with a fair share of new responsibilities, headaches and costs, if it's broke, you fix it -responsible for upkeep, maintain the property? How about the money for all those little extras, such as buying your own lawn mower and hiring the occasional plumber? Make sure you know what you're getting into.

The costs of buying a home

There are two types of main costs involved in buying a home. 

• Upfront costs (the down payment and closing costs)

• Ongoing costs (monthly mortgage payment, homeownership expenses). 

Upfront costs

THERE ARE 3- MAJOR UPFRONT COSTS 1) down payment, 2) closing (or "settlement") costs and 3) the costs of moving and settling into your new home.

1. Down payment.  Most first time homebuyers depend on a mortgage from a financial institution to buy a home. Nearly all mortgage programs require that you give some part of your own funds (the down payment) included in the deal.  If you have some of your own money involved, Mortgage lenders are  more secure  that you won't walk away from it if your finances go down.

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  • Lenders would like the buyers to make a down payment of at least 20 percent of the buying price of the house. 
    
    • At present, buyers have the $8,000 Tax Credit that they can apply toward their down payment and other closing costs.
      
    • Also there are a number of legitimate state and federal loan programs available which will allow the buyer to pay as little as 0 to 5% down.
      
    • Using these lower down payment programs add an additional charge for private mortgage insurance (PMI), which helps protect the lender in case the borrower fails to pay off the loan.

Below are some links to websites that offer mortgage loan programs requiring little or no down payment.

• FHA Loans

• VA Loans


• In New Mexico MFA (Mortgage finanance Authority) is and excellent source of low down payment and low interest rate loans that are available to many different qualified groups. A visit to their website is well worthwhile
  

• CalPERS Loans

• Other mortgage loan programs

2.  Closing costs. 

Homebuyers must be ready to pay several additional upfront costs incurred in purchasing a house, along with the down payment.  Called "closing costs", these expenses generally range from 3-6% of the mortgage amount.  If you were to buy a $175,000 house with a 5% down payment ($8,750), you could expect to pay between $4,987 to $9,975 for your $166,250 mortgage.

Closing costs for various will vary from mortgage loan program to mortgage loan program.  Learn more about the various closing cost of each type of mortgage loan below.

• FHA Loan closing costs

• VA Loan closing costs

• MFA closing costs 

3. Settling-in costs. 

There will also be cost involved in moving and settling into your new home.  The house may need major repairs, or you might want to purchase new appliances. Just remember these costs so you don't spend all your funds on the buying a home.

Ongoing costs of buying a home. 

A renter's only ongoing cost is a monthly rent payment.  For homeowners, ongoing cost consist of a monthly mortgage payment, property taxes, homeowner's insurance, mortgage insurance  (if required by the mortgage lender), and utilities and maintenance.

1. Monthly mortgage payment.  Every mortgage payment contains both the repayment of a portion of the principal and the interest.  Mortgage lenders refer to payments of principal and interest as "P&I."

• Your total monthly payment relies on the amount you borrow, the interest rate, the repayment period (or "term"), and whether you have a fixed-rate or an adjustable-rate mortgage.

For example: 

2. Taxes and insurance.  In most cases, a homebuyer's monthly mortgage payment contains the amount required to repay a part of the principal and accrued interest (P&I), and an extra amount for property taxes, homeowner's insurance and private mortgage insurance.  The mortgage lender holds these additional amounts in an individual "escrow" account and then pays the tax and insurance bills when they come due.  

The mortgage lender ensures that these  annual expenses will be paid on time.  If taxes and insurance are not escrowed each month, the homeowner should be prepared to pay off these bills when they come due.

3. Other costs of homeownership. 

Other ongoing costs of owning a home consist of utilities (gas, water and electricity) and maintenance costs. 

First-time homebuyers aren't prepared for how expensive basic upkeep is.  The cost of utilities may differ greatly (increasing during the summer, dropping in winter), Unexpected repairs also add to the cost making it necessary that homeowners always have available cash on hand.

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