Are you Ready for Home Loan?

     Before you decide to become a home owner, take a look at your financial situation. No one can it for you. No one else will be able to understand or even care how the purchase of a home will affect your particular financial situation and well being.

            What is Your Spending Pattern?

Majority of people have a a unique spending habits. The income earned each month are either spend completely, portion of it, or in some of the extreme cases maybe even more then they are earning. As per latest poll survey, an average American saves less then 4% of their monthly income. This is by far less then the average developed country. If you are planning to buy a home, even if it is not in a very near future, it is best to be the type of person who on average saves more than 5% of their monthly income.

     First order of business, you need to save money for a down payment. It will help a lot if your currently have enough savings to finance 20% of your house purchase on your own.

     Unless you are putting down at least 20%, (most lenders will require that you have at least 5% to 10% of your own money into the purchase), you will be forced to pay (PMI) - Private Mortgage Insurance, - Insurance which covers the portion of a mortgage loan above 80% thereby reducing the lenders risk to principal loss in the event of a borrowers default. The insurance coverage allows lenders to make higher loan-to-value ratios (95% LTV)

    After home purchase, there will be added expenses each month. If you have a developed a pattern of putting aside extra money to go into savings, it will be easier to come up with the extra saved money needed for these additional monthly expenses.

            Gathering Monthly Expenses

Review your bills for at least a 3-month period. Consider what are your payments in an average month on housing, clothing, and other various expenses. Once you’ve collected your expenses information, take into account what new costs will occur after you purchase the house, such as transportation, heating and cooling costs and others.