American Dream – Homeowners Insurance Tips and News Fri, 28 Jun 2013 15:01:02 +0000 en-US hourly 1 Before You Buy Wed, 21 Jul 2010 17:49:57 +0000 For most Americans, owning your own home is part of the American Dream. Underneath all of the arguments about whether or not buying a house is a good investment, and all of the bickering about Fannie May, Freddie Mac and all of the other housing lenders and programs, most Americans really do want a corner of this globe to call their own. And most of us are willing to pay the homeowners insurance, utilities, property taxes, and other related expenses that go with having a house of our own and a mortgage.

But before you buy that first home, take a moment to consider the fact that you could be putting yourself in a really bad situation if you go into the process with poor credit. We know that you can get a mortgage. But should you? The sector of the mortgage industry that caters to those with credit problems is quickly gaining a bad reputation for putting people into bad situations with little regard to what’s actually good for them.

Consider this: if your credit is poor, you’re going to pay a higher interest rate. While that may not seem like a big deal, a few points on your interest rate adds up to a whole lot of dollars over the course of a thirty year mortgage. In most cases, whether you want to hear it or not, you’d be better off spending a year or two really focusing on paying off your other debts and building some positive credit history than jumping into a mortgage knowing that your credit is poor.

Also, start saving before you buy a house. Ideally, you should have at least 20% of the total price of the house as a down payment. We know, this has gone the way of the dinosaur. We know most people, even with bad credit, can get a house with nothing down. And we also know that most realtors will encourage you to buy more home if you have that much to put as a down payment.

When it comes to buying a house, though, you need to realize that the only person who’s going to really look out for your best interests is you. The realtor is looking out for a commission, and 3% of more is more. The same holds true of lenders. Show some discipline when it comes to this, and save up for the down payment, then buy a home that you can afford to put 20% down on.

Waiting until your credit is good and you actually can afford to buy a home will not only save you a lot of money, but will also make it much less likely that you will lose your home to foreclosure. So, slow down. Buy a house, but wait for the right time and opportunity.

Photo via juhansonin

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Home Ownership: Did our Grandparents Have the Right Idea? Fri, 25 Jun 2010 15:11:31 +0000 Most of us who find ourselves considering buying a home for the first time have grandparents who bought their first homes and lived their American Dreams somewhere in that idyllic period between World War II and the Viet Nam War. You know the times we’re talking about. The Golden Age, as many refer to it. Days when owning a home and taking out homeowners insurance were as American as baseball and backyard grilling.

Back then, owning a home was considered by most to be an integral part of the American Dream. An affordable housing market crossed paths with a generally good economy, and home ownership rates rose to heights unseen since the Homestead Acts that followed the Civil War.

So, were our grandparents right? Should we all strive to own a home? That’s largely a personal decision, but in many ways home ownership still makes a lot of sense, even in turbulent economic times. Maybe it makes sense especially because of the turbulent economic times. But, our grandparents had some other concepts about home ownership that we would do well to consider, too.

  1. You should have 20% down on a home, preferably in liquid cash. This is a concept that just a few years ago seemed to be totally eradicated from our national consciousness, but it makes good sense. If you can’t afford a significant down payment on a home, you’re probably not going to be able to roll with life’s changes well enough to keep up mortgage payments on one, either. Save first, then buy.

  1. You should only buy as much house as you can pay for. Buying a home with an interest only mortgage isn’t any better than renting. In fact, it’s worse, as it adds considerable liability. Buy a home that is within your budget, generally 25% or less of your gross income.
  1. Buy a home to live in. Too many people in recent years have looked at a house as an investment. Many received a rude shock when they discovered that property values, like any other investment, can go down. While it’s a good idea to look at the potential increase in value, don’t buy a home solely based on that. Buy one you want to live in. If the market tanks, you may have to be there a while.
  1. Don’t forget to take cost of living into consideration. Your mortgage is only one part of your living expenses. Consider also the costs of taxes, utilities, homeowners insurance, and upkeep.

Maybe home ownership is still an integral part of the American Dream. And maybe it always should be. But, let’s follow the wisdom of our forebears when it comes to how we approach home ownership.

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