Three Questions To Ask Yourself Before Considering Homeownership
Whether you’re thinking about becoming a homeowner for the first time or you’re coming back into homeownership following a foreclosure, buying a home is both a financial and emotional decision that requires preparation. The Minnesota Homeownership Center wants you to be successful when you step into homeownership. Here are three questions to ask yourself to see if you are ready for homeownership:
1. Is Your Lifestyle Ready for Homeownership?
Homeownership is a big step and it shouldn’t be taken lightly. Before you think about anything else, the most important question to ask is: Is my lifestyle ready for this long-term commitment? Successful homeownership requires a level of financial stability (stable income) AND the desire to commit to living in the same community for at least five to seven years. You should want to establish roots in a neighborhood and be ready for the responsibilities of homeownership. When you buy, you become your own landlord. Repairs, maintenance and upkeep – and the costs associated with them – are your responsibility.
2. Is Your Job or Career Ready for Homeownership?
It may seem like an odd question to ask, but one of the most important aspects of successful homeownership is having a stable income that will allow you to cover the monthly mortgage payments and the additional expenses of ownership that you might not have had when renting. Some additional expenses may be minor, like replacing a furnace filter or the batteries in a smoke detector, but other expenses can be major, like repairing the roof or replacing a major appliance. Even a brand new home will require maintenance eventually.
Most lenders will require that you show two to three years of stable income either at the same job or at least in the same field before they’ll be willing to offer you a mortgage.
3. Are Your Finances Ready for Homeownership?
In addition to a stable income we talked about in #2, you’ll need to have your expenses under control. Good money-management skills are a must if you’re going to successful at homeownership. Lenders will want to see that you have a financial cushion (savings) and aren’t using every penny you have on the purchase of your home with nothing set aside for future unforeseen events.
Another aspect of good money management is keeping your debts under control. The more outstanding debt you have, the more difficult it will be to qualify for a mortgage – and the more stressful it will be day-to-day making both mortgage and debt payments.
If you’d like additional assistance with money management – or would like a non-biased overview of your financial situation to see if you’re financially ready for homeownership, speak with a Homeownership Advisor.
Even though we’ve already discussed the need to understand your financial situation and have good money-management skills, it’s important to understand how much you’re willing to spend on purchasing your home. A mortgage lender can tell you ‘how much home you can afford’ – or how much they’re willing to lend you, but that is not necessarily the amount that you’re comfortable spending on a home. They may not know that you love to travel, or want to save more to retire early or are planning to reduce your work hours once you start a family.
Once you’ve thought through the lifestyle and financial aspects of buying your first home, make sure you’re following the right path to successful homeownership.
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Center staff member Ed Nelson sharing with buyers the importance of homebuyer education and counseling.
The Minnesota Homeownership is always looking for new and innovative ways to help homebuyers make smart choices and build vibrant communities in Minnesota. To that end, staff from the Center joined with Wells Fargo, Minnesota Housing and other non-profit and community-based housing organizations this past weekend on the Affordable Home Tour – affectionately referred to as the “homebuyer forum on wheels.”
Wells Fargo rented a large tour bus that took prospective buyers on a unique tour of Minneapolis and St. Paul highlighting affordably priced homes. A REALTOR met the tour at each of the homes to share information about the property AND each home also had a representative from a local non-profit who spoke to the buyers about downpayment and entry-cost assistance programs that they may be able to qualify for to purchase the property.
Potential buyers climb on board the ‘Homebuyer Forum on Wheels’
Between stops, representatives from Wells Fargo, Minnesota Housing and the Minnesota Homeownership Center shared important information for first-time buyers. Of course, the Center was there to highlight the importance of homebuyer education and counseling through Home Stretch and Framework.
One of the tour participants, after visiting some of the homes on the tour stated:
“I can’t wait to take a Home Stretch workshop and learn the right way to buy a home. I lost a home to foreclosure several years ago and I didn’t think I’d ever be able to buy again.”
Seeing people excited about homeownership – and being excited about learning how to make smart choices that lead to successful ownership – is what keeps us going here at the Minnesota Homeownership Center. We’re looking forward to other new and innovative ways to share the importance of homebuyer education with potential buyers. Do you have an idea? We’d love to hear from you.
The Minnesota Homeownership Center is pleased to partner with Wells Fargo Home Mortgage to offer a very unique home tour opportunity. Perfect for first-time buyers that are just thinking about buying a home or are unsure of where to start… participants will be able to view a variety of affordable property types from new construction, condo, move-in ready and a fixer-upper.
While on the ‘tour’ you’ll learn about downpayment and entry cost assistance programs, homebuyer how-to information and how to access special resources for first-time buyers.
Ride along with us on the tour bus or explore the homes at your own pace. The tour kicks off at Elsie’s Restaurant in NE Minneapolis on Saturday, November 8th @ 9am.
A few years ago, many people believed that Millennials (ages 18-29) would be “a generation of renters” – – that the economy and changing lifestyle choices would somehow mean that this generation would be the first generation in American history without the desire to own a place of their own.
While the most recent mortgage crisis has taken some of the shine off of the concept of owning,… and an important component of their future success.
Of those surveyed:
» 75% believe homeownership is an important long-term goal
» 73% believe homeownership is an excellent investment
» 24% already own their home and
» An additional 60% plan to buy a home in the future
Importantly, this next generation of buyers understands that buying a home can be complex and are more cautious. The Demand Institute report finds that 44% of Millennials think it would be difficult to qualify for a mortgage.
We have to work together to make sure that this next generation of buyers are fully informed and are making smart choices when entering into homeownership.
We know that homebuyer education and counseling services are a significant deterrent to default and foreclosure. Do you know a Millennial that is thinking about homeownership? Make sure that they are armed with the necessary knowledge to be successful. Make sure that they attend a Home Stretch Workshop or take the online Framework course.
We can build vibrant communities across Minnesota… if we work together to help the next generation of buyers make thoughtful and informed purchases.
June is National Homeownership Month and to celebrate, the Minnesota Homeownership Center and its network of nonprofit partners, the Homeownership Advisors Network, are offering FREE homebuyer education to potential homebuyers. To learn more about the free Home Stretch™ Workshops and Framework® options, visit our June Homeownership Month page here.
At the Homeownership Center, we know secure homeownership is the key to creating vibrant communities and that successful homeownership is possible through smart choices based on solid information. Nothing supports successful homeownership better than education.
The Homeownership Center and our Network are working hard to make sure everyone who wants to own a home has opportunities to learn about the process from professional, experienced and unbiased sources – whether in-person classes, personal sessions or online – so that they can make smart choices about their homeownership options.
This June Homeownership Month you can help us spread the word about FREE homebuyer workshops to empower a new generation of homebuyers to make smart choices. It’s easy! Just visit our Facebook page today and share this post with your friends:
On Tuesday May 13th, the Federal Housing Administration released its “Blueprint for Access” in which the FHA outlines a number of proposed plans to expand access to affordable mortgages for underserved borrowers.
Here at the Homeownership Center, we know that stable homeownership is an enormous benefit both for families and their communities, and that successful homeownership is possible through smart choices based on solid information and applaud the FHA for proposing the pilot program Homeowners Armed with Knowledge, or HAWKfor short, which seeks to integrate housing counseling into the homebuying process for borrowers using an FHA-insured mortgage.
The HAWK program will offer buyers savings on their FHA-insured loans if they complete housing counseling provided by independent nonprofit organizations like the Homeownership Advisors Network here in Minnesota.
Quoting directly from the proposed HAWK plan: “To increase access, we must identify and implement responsible ways for creditworthy borrowers to obtain mortgage credit. This includes encouraging housing counseling. Responsible access can be enhanced by ensuring borrowers are well-educated about the home-buying and mortgage finance process.”
So what does HAWK mean for buyers?
If the proposed plan is enacted, buyers who complete Homebuyer Education and Counseling before signing a purchase agreement, and also complete a pre-closing counseling session, will qualify for a substantial savings on the Mortgage Insurance Premium (MIP) of their FHA-Insured loans. The proposal calls for a reduction of 50 basis points on the cost of the upfront MIP and a 10 basis point reduction in the annual MIP. PLUS, if buyers complete post-closing counseling and maintain their payments, with no delinquencies, for a minimum of two years after closing, they will see an additional 15 basis points reduction in their annual MIP.
According to FHA, the average FHA loan is about $180,000. These reductions could save buyers over $300 per year, and almost $9,800 over the life of the loan.
What happens next?
The entire HAWK program is, at this point in time, just a proposal and will be open to comment as part of the upcoming Federal Register Notice… so many parts of the program, especially the MIP savings, could change.
If the program proceeds past the comment period, which seems likely, FHA will begin to pilot the program in the fall of 2014. The Minnesota Homeownership Center, as a HUD-Approved Intermediary, looks forward to working with FHA on this program to more-fully integrate Housing Counseling into the homebuying process. We’ll keep you up to date as details of the program become available.
If you are interested in learning more about OTHER affordable mortgage options, some with low down-payment options or options for people with less than perfect credit, speak with a Homeownership Advisor today! Counseling is FREE and available to everyone in Minnesota.
This post is a guest post by Laura Grevas, Program Coordinator for the Minnesota Homeownership Center.
Before I began working at the Minnesota Homeownership Center, I knew as much about the home buying process as your average twenty-something.
In other words, I didn’t know much.
I knew that affordable homeownership is the cornerstone of thriving neighborhoods. I didn’t know just how much I didn’t know about buying a home. That’s why homebuyer education is so important. Buying a home is likely the largest purchase any of us will make in our lifetimes, so it pays to be prepared and have at least enough information to advocate for your family’s best interest.
Because the Center oversees a network of agencies that provide Home Stretch (homebuyer education) Workshops across the state, new employees are asked to join a class to get a sense of our flagship program.
The folks at Community Neighborhood Housing Service – one of more than 30 Home Stretch providers– were kind enough to let me sit in on a portion of their Saturday class in St. Paul.
Our facilitator began the afternoon session by talking about real estate basics, before introducing a local Realtor who schooled us in how and why people buy – or want to buy- where they do. Realtors aren’t ethically allowed to steer their clients away from or toward certain neighborhoods, which is something I didn’t know. The workshop format allows plenty of time to ask questions, both of the facilitator and the guest speakers, experts in their field who volunteer their time to teach new homebuyers. My classmates (the ones who were actually, you know, buying a house) swapped stories about their experiences so far, and I think we all learned something new.
My favorite guest speaker was the professional home inspector. With more than 20 years of experience, this inspector had seen some pretty major problems in folks’ prospective dwellings. In addition to teaching us how to find a reliable inspector and make the most of the inspection process, he shared some little-known home safety tips.
The average age of homeownership in Minnesota is 29, so we’ll see if that happens for me. Either way, I’m glad I observed this class – it definitely provides lots of valuable information that could prevent headaches down the road!