How do we begin?
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  1. #1
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    Default How do we begin?

    My husband and myself need to begin again, (again). We are in a situation where we have one year or so to get our stuff together and try to buy a home. We have very few bills right now and are trying to up the income as soon as possible. There is no savings, we have three grown children, all doing well, so that is not a problem. We want a house, we have always been renters, because we were terrible at being responsible.we don't have terrible credit, not good credit, so we will need to re-establish or build our credit. What is the best way to do this and the fastest? We also don't have debt so that is good/bad. Any advice or ideas? Thanks
    jettylady

  2. #2
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    Default Many different ideas

    Hi Jettylady-

    Not sure what your situation is, but here are some ideas:

    1. Figure our what you can afford for a house. Figure out what the payment will be, INCLUDING taxes, insurance and repairs (yes, even if you buy a brand new house, you will want window blinds, maybe appliances etc.)

    2. Live on that amount for as long as possible. For example, if your rent is $500, and the above payment works out to be $1000, pay your rent, then put the additional $500 in a savings account. No excuse, just do it.

    3. Keep this up for 6+ months. If it is working (not shorting the savings account, using credit cards etc), then you are a good candidate for a house. Remember that you will need close to a 20% down payment for a conventional loan, 3+% for a FHA loan. It is extremely difficult to get a house without this type of down payment. There will also be several thousands of dollars of closing costs you will need to pay, or convince your seller to pay.

    4. Remember that renting is not really bad. You (as the tenant) are not responsible for repair and maintenance.

    5. Many people get really wrapped up in the tax issue (I get a mortgage deduction etc). Last year, you would need more than
    $11,400 worth of deductions in order for it to be of any benefit to you. That includes all possible itemized deductions

    6. Other considerations include your debit to income ratio (how much do you owe to ANYONE else (credit cards, student loans, car loans, furniture payments, etc)

    7. The best things you can do: pay off all consumer debt, save money, pay EVERY bill on time. In the current economic climate, late pays, charge offs, foreclosures, big debt to income ratios are killers on your credit report

    I am not a financial planner, but have been in the tax industry for 24 years, moved 15 times and bought 4 houses in 4 different States. Also have a considerable experience in personal finance.

  3. #3
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    I have always dreamed of owning my own place. But for me it just hasn't happened and I am still renting.

    It does sound like you are really in a good position to save and get an even better credit score. Just keep in mind how much you can realistically spend. I think that the economy has really been an eye opener concerning over spending.

    Hope it all works out for. Can't wait to see you post that you bought your house.

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  5. #4
    Registered User Imarachne's Avatar
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    you have a worthwhile challenge ahead--good luck !!

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    You said you have no savings? No saving toward a house or no savings at all? You need at least a $1000. Emergency fund to start to fight off unexpected little emergencies that happen to everyone. You then should start accumulating 3-6 months savings as a cushion. I would work w/ a realtor to get a feel for what you can affords. And pull credit reports to see exactly what marks you have on it. Sounds like your not exactly sure and you need to be. Also 25% of take home is a fair measure of house payment w/ interest and taxes. Learn as much as you can about mortgages and the real cost of houses. (taxes,repairs,furnishing). When you do this,then take your time to buy. It's important to pick what you want and can afford. In this market-once you buy it's so difficult to sell again.

  7. #6
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    It sounds like you are under some time pressure. So, in addition to the excellent advice above, I would add that you should plan to pay off your mortgage faster than the normal time by making extra payments. You need to plan for this before you buy the house.

    Decide ahead of time how much you can afford per month for principal, interest, and taxes (and insurance, repair fund, etc.). Then, don't buy the biggest, fanciest house you can afford for that money. Instead, buy the cheapest, most modest house you can stand to live in. It should cost less than what you budgeted for. Save the difference and, at every opportunity that the mortgage company allows, use the savings to pay down the principal.

    It is important to do this right from the beginning. Extra payment dollars are worth much more at the beginning of the mortgage than they are towards the end. Depending on your actual numbers, each extra dollar you put into it might take $10 or more off your total payments, and reduce the lifetime of the mortgage significantly, provided that you do it early. Later in the life of the mortgage, each extra dollar might only be worth $1.05.

    I used this technique to pay off a 25 year mortgage in 11 years.

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    Default thanks

    Thanks everyone for the great advice..I am pretty confident of our ability to get back on track and save for the house. We are pretty simple people and are not looking for a big fancy situation, just something small that we can manage, have a garden, chickens etc. I am very adamant about the savings and EF first, before houses even get looked at. I really am curious what the best way to raise a credit score, without taking on debt, which we have none of at the present. We live in central texas and for now the housing market and the economy is better condition than most, and you can get alot of house for the money if you create the perfect conditions. Thanks again, I am lurking all over these forums, what a wealth of info!!
    jettylady

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    Registered User KeithBC's Avatar
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    Quote Originally Posted by jettylady View Post
    I really am curious what the best way to raise a credit score, without taking on debt, which we have none of at the present.
    The best way to build a good credit rating is to use credit responsibly. If you have a bad history with credit cards, this is dangerous.

    However, if you are sure that you can stay within your budget, use a credit card for routine in-budget purchases, and pay the entire balance off every month. If you always pay it off in full, this is no different from using cash, except that it raises your credit rating. A good credit rating is just a record that you have a history of using credit responsibly.

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    Please think that I am crazy here but this is my idea. We have all grown children and we have our own house but we hate having to worry about the taxes, repairs,mowing,shoveling,every thing else that comes with owning a home. We often said we would rent and let it be somebody elses headache. I would put away money and repair my credit and enjoy life. We like to travel and it would be nice to walk out the door and not worry about a thing while we are gone. But I wish you all of the luck in reaching for your dreams and goals.

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