Ready To Buy a House? 3 Questions To Ask Yourself.

Ready To Buy a House? 3 Questions To Ask Yourself.The “American Dream” that we are all encouraged to chase includes the purchase of your own home.

With mortgage interests rates still reasonably low, it seems like a great opportunity and you might be thinking that this is the right time for you to buy a house.

Of course, I believe that everyone should strive to reach the goal of home ownership.

As you consider this major decision here are a 3 questions to ask yourself to determine if the time to buy a house for you is now.

1. Are you on firm financial ground?

  • Are you completely debt free (credit cards, medical bills, student loans, car loans, etc.)?
  • Do you have an emergency fund of 3-6 months of expenses (preferably 6 months)?
  • Are you saving for retirement (15% of your annual household income) and for college expenses?

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2. Can you really afford to purchase a home?

  • Could you make the home purchase with a 15 year mortgage at a fixed interest rate?
    • Avoid mortgage loans with adjustable interest rates and balloon payments.
    • Remember, there is a large difference in interest paid between a 15 year loan and a 30 year loan over the life cycle of the mortgage.
  • Have you saved up for a down payment of between 15% and 20%? With a 20% down payment you will avoid paying for Private Mortgage Insurance (PMI) which protects the lender in case of default on the mortgage.
  • Will your monthly mortgage payment (taxes and insurance included) be equal or less than 25% (or 1/4) of your monthly take home pay? A mortgage payment that takes too much of your monthly take home pay will put a lot of strain on your budget.
  • If you want additional guidance on the process of getting a mortgage, this article from The Simple Dollar is a great resource.

3. What are your purchasing goals?

  • Have you made your list of “must have” elements vs. those which are “nice to have”? For example:
    • Do you need 4 bedrooms or could you be all right with 3?
    • What about bathrooms: is it 2 or 2.5?
    • What is more important to you: size or location?
    • What about the quality of the school district?
    • Make a list and evaluate the potential houses against that list.
  • Do you have to buy the first one you see?
    • Take your time when looking and guard against “house fever”.
    • For my first home purchase in 1996, I looked at around 25 houses.
    • For our second home purchase, my wife and I looked at 20 different homes.
    • There is no need to rush the decision on this investment which will be one of our largest purchases of your life.
  • Who is helping you?
    • It is a very big decision so you should seek professional help.
    • Secure the services of a good realtor that knows the area and has sold many houses and helped many buyers.
    • Interview 2 or 3 before you make the selection.

“Prepare your work outside; get everything ready for yourself in the field, and after that build your house.”
Proverbs 24:27 (ESV)

Marriage and Money: Agreeing on Large Purchases

Marriage and Money: Agreeing on Large PurchasesAs you get your budget under control, get out of debt, and build an emergency reserve, you will have increased cash flow.

With more money coming in, you will have the opportunity to make large purchases.

Question is, how do you decide on what to purchase first?

Let’s assume of course that you will save the money for the expense and will not use debt.

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How then do we agree with our spouse on a priority order on the purchases?

Invariably, you will have different ideas on what to buy.

One of you may want to save the money for a nice vacation while the other person wants to beef up the emergency reserve a little more.

Or one of you wants to do a home remodeling project that has been put off for a while, and the other person wants to buy a full entertainment system.

Here is an approach my wife and I use to come to an agreement about large purchases.

As you look at shared goals for this year, this might help you as well:

  • Make a list of all the potential expenses. Some examples include: vacation, car replacement, kitchen remodel, new couch, big screen TV.
  • Assign an estimated cost to each item.
  • Each person then goes down the list and assigns a priority (1 to 10) to each item.
  • Compare your priorities. Share with each other why each item is important.
  • Come up with a combined priority list.
    • Here is where the art of compromise comes in.
    • You are building a life together, so surely you can build a priority list together.
  • Total the amount required for all items. Based on your financial picture you might not get to all of them this coming year.
    • But you will get to the items that are important to both of you.
    • Now you know where to target your savings and you have a common set of goals.

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When you are married, the only way to win with your money is to work together with your spouse.

Healthy finances lead to healthy marriages.

If you are not working with each other you are working against each other.

Try this method and let me know how it goes!

5 Ways to Avoid Christmas Overspending

5 Ways to Avoid Christmas OverspendingAre you ready for Thanksgiving? I am looking forward to a welcome break and to spending time with the family.

But just thinking ahead a little bit, I wanted to get you some advice for what happens after Thanksgiving: the Christmas shopping season begins.

So whether you will join the crowds on Black Friday or whether you will take advantage of Cyber Monday, here are 5 ways to avoid Christmas overspending:

1. Establish a Budget.

You should have a list of people that will receive presents from you.

Determine how much you want to spend on each person and add the amounts to come up with a total figure.

That’s your Christmas gifts budget, meaning you can’t go over that overall amount.

You may also want to establish a budget for items such as Christmas decorations or entertainment (Nutcracker tickets anyone?).

2. Use Cash.

As we have discussed before, cash is king.

Using cash will keep you from overspending, which is easier to do than when you use plastic (either a debit card or credit card).

When your cash is gone, your shopping should stop.

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3. Take your Time.

Don’t just wait until Christmas Eve to do all your shopping.

Don’t try to just buy something just to get it done. Give yourself the opportunity to do some comparison shopping and find the good deals that are out there.

Plan ahead.

4. Leverage Technology.

In these Internet days, search online for the best deals and compare prices. You can also save time if you order items online and avoid the battles for parking and long lines at the mall (provided you give yourself enough time).

Also, take advantage of your smart phone, and look for the best Apps to help you shop during this holiday season.

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5. Plan for Next Year’s Christmas.

Ideally, you will be starting your Christmas sinking fund now so you have the cash ready for next year’s expenses.

These few steps will save you a lot of money, a lot of time, and they will reduce your stress levels. Focus on spending good quality time with friends and family.

Don’t let the disease of “more” rob you of having a great Christmas season.

Finally, remember what this season is really all about. It is about celebrating how God reached out to provide for mankind’s greatest need.

God knew we needed a Savior and and He gave us His Son Jesus. If you have not had the opportunity to meet Him, there is no better time than today.

He is the indescribable gift, the Prince of Peace, God with us.

He is all that you will ever need in this life and the next. Let me be one of the first people to say to you: Merry Christmas.

“She will bear a Son; and you shall call His name Jesus, for He will save His people from their sins.”
Matthew 1:21 (NASB)