Understanding your Finances

5 Jan

woman-managing-financesWhen you decide to buy a home, you need to manage your finances in a way that makes it possible. You can’t go into the process with a rickety financial situation. Your employment has to be stable. Your credit rating needs to be at a level where if you were to apply for a home loan, you would get a solid interest rate. Without a stable source of income, it’s a risky prospect to even consider the idea of home ownership. If you were to buy a home on short sale in Las Vegas, you would get a great deal on the property, but you would have no way to pay for it over the long term. Owning a home is all about staying in good terms with your lender. They have to have confidence that you will pay your mortgage on time and in full every single month. You wouldn’t want this confidence to breakdown and lead to a foreclosure situation somewhere down the road. This also applies to homes that are outside of your price range. It’s the responsibility of your lender to prevent prospective homebuyers from buying residences out of their price range, but this doesn’t happen every time.

Managing your finances is important, especially when you are working towards buying a home. It’s tempting to want to buy everything under the sun, even if your current income makes it impossible for you to afford it. Government officials encourage us to spend more and more because that’s what’s needed to grow the economy. We sign up for all types of credit cards in the hopes of getting that high priced item we want. The fact that it’s so easy to get a credit card should not serve as encouragement for you to sign up for it. The interest rates associated with most of these cards make using them far from worth it. If you have to use a credit card, you need to pay off the balance in full before you decide to use it again. As the balance goes up, it becomes much harder to pay off for those of us who are only able to pay the minimum each month. As we add more bills to our monthly expenses, the overall amount we have to pay each month becomes too much. After a while, the amount becomes too large and we start to fall behind on our other bills.

The most important thing about becoming a home owner is that you need to buy a home that’s within your price range. Choosing a home that costs more than what you can afford is as bad as adding more credit card balances to your monthly total. You have to have a mortgage payment you could pay for even if your income slipped a little bit. The last thing you would want to do is have a mortgage that hinges upon your income staying at the exact same level it is right now. Sometimes we lose chunks of what we make each month for reasons that are out of our control.