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Health & Fitness

HOPING TO BUY A HOME? CCCS SAYS, "START WITH YOUR FINANCES!"

Buying a home is one of the biggest financial decisions most of us will ever make. Considering the investment involved, CCCS recommends that first-time homebuyers begin their search by asking: "How can I become financially prepared?"

Buying a home is a life-changing event!  It often represents increased independence, the space to move around, and a chance to make a place your own.  So it isn’t surprising that many buyers begin by asking themselves, “Where do I want to live?” or “How large of a house do we need?”  But buying a home is also one of the biggest financial decisions most of us will ever make.  Considering the investment involved, a better question might be:  “How can I become financially prepared?”

The home buying process involves a host of money management decisions and transactions.  And the focus on finance doesn’t stop once the purchase is made, because homeowners then face new expenses they may not have had as renters. Local nonprofit Consumer Credit Counseling Service of Maryland and Delaware (CCCS), helps homebuyers recognize the vital role their personal finances play in the purchase process and beyond, so they can prepare and succeed.

Kristen Holloway, who provides pre-purchase housing counseling and education for CCCS, says, “It’s important for homebuyers to take a close look at their personal budgets before they start house hunting.  That’s the only way to determine how much home you can afford to buy and maintain once it’s yours.  Taking a financial inventory is like taking a reality check.  It helps you set reasonable goals and avoid looking at homes that don’t fit into your budget comfort zone.”

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During workshops and counseling sessions, Holloway helps clients assess where they stand financially.  She also recommends that they request and review their credit reports and credit scores and save as much as they can for down payment and other expenses.  “These steps prepare first-time homebuyers for the road ahead.”

 “One of the first things mortgage lenders do is look at your credit report and credit score.  That gives them an idea of how much debt you currently owe and if you pay your bills on time,” Holloway explains.  “Wng sessions documents.

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ts g www.annualcredit ran).  T three major e show clients how to request and understand these documents.”   She recommends that consumers request and review their credit reports and credit scores at least six months before they begin looking for a home.  “That way, if you find unexpected errors on your credit report, you have the time to correct them.” 

The higher your credit score, the better chance you have to qualify for a low interest rate and valuable mortgage options. Holloway concedes, “If you are frequently late paying bills or have a lot of outstanding debt, it may make sense to get your finances in order before you try to buy a home.  We can help you in that process.”  CCCS not only provides housing counseling, they also offer free, confidential budget and credit counseling at its local offices and by phone. 

When homeowners apply for a mortgage, lenders also check their income and employment history.  These factors, combined with their credit history and debt-to-income ratio, help determine the size and type of mortgage for which they qualify.  The amount of money homeowners have available for down payment also affects how much house they can afford to buy.

According to Holloway, “When it comes to the down payment, the more you have saved, the better.  To get the best mortgage loan rates and options, you need to have enough saved to cover a 20 percent down payment.  This also will help you avoid paying PMI.”  “PMI” or “private mortgage insurance” protects lenders if homeowners fail to make their payments and can add significantly to the cost of a home over time. For example:  If you buy a property for $200,000 and put down less than 20 percent, you will probably pay an additional $1,000 a year in PMI.

There is hope for those homebuyers who can’t afford a 20 percent down payment.  Some private and public agencies, such as Freddie Mac, Fannie Mae, the Federal Housing Administration, and the Department of Veterans Affairs, offer low down payment mortgages that make it possible to purchase a home and pay as little as three percent upfront.  State and local agencies may also offer additional incentives to first-time homeowners.  Holloway says, “During pre-purchase counseling and workshops, we review these opportunities and help homebuyers look at the mortgage programs that are available where they live.”

The cost of buying a home doesn’t end with the down payment.  Homebuyers also need to have enough money saved to pay for other costs, such as home inspection, pest inspection, and property appraisal.  Closing, where you sign the mortgage and receive the keys to your home, involves additional fees for processing, underwriting, recording, survey, and title insurance.  Holloways notes, “When you’re a first-time homebuyer, all these charges can seem overwhelming.  We take the time to discuss and demystify them, so clients understand what’s needed and why.”

First-time homebuyers are sometimes surprised by the array of costs that come with owning.  Simply moving in can take a bite out of your wallet, especially if your new residence is a distance from where you presently live.  And once you arrive, you’re responsible for covering utilities, maintenance, property taxes, and homeowner’s insurance.  To avoid budget shock, Holloway recommends that buyers build up a cash reserve and try to gauge the cost of owning a home before they make a purchase.  For example, she suggests, “You can ask the seller’s real estate agent to provide copies of the current homeowner’s utility bills.  This will give you an idea of how much to budget for utilities once you’re there.”

CCCS’s pre-purchase program, which meets HUD’s requirements, costs $125 per person or $150 per couple.  This fee entitles clients to attend a workshop and receive individual counseling.  Agency counselors also provide post-purchase counseling if clients run into questions once they buy a home. To schedule a housing counseling session or workshop, please call 1-866-731-8486 or visit www.cccs-inc.org.

Holloway concludes, “The cost of homeownership is relatively low right now.  Current opportunities may not last forever or even much longer.  Now is the time to take advantage.  Start with a financial plan.”

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Consumer Credit Counseling Service of MD & DE, Inc. (CCCS) is an accredited 501(c)(3) nonprofit agency that helps stabilize communities by creating hope and promoting economic self-sufficiency to individuals and families through financial education and counseling. CCCS MD State License #14-01

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