Posted on: 20th Jun, 2009 12:59 am
I am 26 years old, and currently in a credit counseling program. I desperately want to purchase a home. I currently pay $657/month in rent. This is driving me nuts knowin I am wasting so much money. How can I prepare myself to purchase a home? My financial advisor told me I will have to wait until 5 years after my debt is paid offto get a good rate on a loan. Is that true?
in the early years of any mortgage, the vast majority of the payment goes to interest, so you waste almost as much in interest as you do to rent. many people think that they are flushing their money paying rent, but that magically somehow when they pay their mortgage it is not going down the drain. that is a myth. the one important difference is that the mortgage interest is tax deductible... also, there is a chance that your home could create equity and value over time.
it is really the intangible aspects of home ownership that you are missing -the security and freedom that goes with owning any equity in the property-and no landlord! still, you are correct in that you have to start sometime building that equity. to my knowledge you should not have to wait nearly so long as your advisor said to get a decent deal on a mortgage. your credit score (usually, fico) at the time of your mortgage application will be an important determinant of the points (up front interest payments), interest rate, rate variability, and other terms of the mortgage note. if your score is 750 or above you should get the most favorable terms available on the mortgage finance market at that time. remember, that is a very general statement since much depends on the market direction and other variables that lenders must consider.
even if your loan is somewhat high you will build your credit and be able to refinance on better terms within usually 2 years depending on market trends. just dont be in a big hurry since refinancing could potentially be pretty expensive in front-loaded costs (up-front) and it takes several years to recoup that money. you would resist another refi until the costs of the prior are recouped. wait until you have a good offer on the table, and one that you can reasonably afford, before you take the dive into home ownership.
it is really the intangible aspects of home ownership that you are missing -the security and freedom that goes with owning any equity in the property-and no landlord! still, you are correct in that you have to start sometime building that equity. to my knowledge you should not have to wait nearly so long as your advisor said to get a decent deal on a mortgage. your credit score (usually, fico) at the time of your mortgage application will be an important determinant of the points (up front interest payments), interest rate, rate variability, and other terms of the mortgage note. if your score is 750 or above you should get the most favorable terms available on the mortgage finance market at that time. remember, that is a very general statement since much depends on the market direction and other variables that lenders must consider.
even if your loan is somewhat high you will build your credit and be able to refinance on better terms within usually 2 years depending on market trends. just dont be in a big hurry since refinancing could potentially be pretty expensive in front-loaded costs (up-front) and it takes several years to recoup that money. you would resist another refi until the costs of the prior are recouped. wait until you have a good offer on the table, and one that you can reasonably afford, before you take the dive into home ownership.
Justina,
It is not necessarily true that you will have to wait 5 yrs before your credit improves. In addition, you should not feel frustrated that you are paying $657 in rent right now. In fact, this is probably a good thing considering your current situation. That payment is low and it allows you to pay down some other debt that is negatively impacting your credit scores.
If you owned a home right now, your total monthly expenses would be much higher and would leave you with limited ability to pay down your other debt.
It is not necessarily true that you will have to wait 5 yrs before your credit improves. In addition, you should not feel frustrated that you are paying $657 in rent right now. In fact, this is probably a good thing considering your current situation. That payment is low and it allows you to pay down some other debt that is negatively impacting your credit scores.
If you owned a home right now, your total monthly expenses would be much higher and would leave you with limited ability to pay down your other debt.
I Can Help With Your Mortgage!
I would love to assist you. Email me back, and let's discuss!
MSmith@PrecisionFundingUSA.com
M
I am on line now!
I would love to assist you. Email me back, and let's discuss!
MSmith@PrecisionFundingUSA.com
M
I am on line now!