Home ownership has long been considered a stepping stone to building wealth. Homeowners’ net worth outpaces that of renters – by building wealth through the equity in their home while enjoying tax benefits. What’s more is that real estate, particularly in high-demand areas like San Diego, is only going to appreciate in value over time. Here’s what you can do to become a homeowner and start building wealth:
Develop a savings plan
In order to buy a home, you’ll need to build up your savings. Make sure you have enough for the down payment, relocation costs, and post-purchase expenses such as emergency home repairs. Keep in mind that your monthly payments will be lower if you put down a larger amount for the down payment.
Reduce your credit card debt and avoid big ticket purchases to strengthen your capacity to buy a home. Lowering debt can increase your credit score, as well as your chances of securing a low-interest loan.
Secure the right financing
The ideal mortgage is one that is carefully underwritten and has responsible terms. This is the kind of mortgage that has low upfront costs and interest rates. It gives buyers an increased sense of financial security and independence.
Talk to at least three lenders, including the primary financial institution you work with. This will help you find the least expensive, best value mortgage that you qualify for. Be wary of unsolicited loans you receive on the mail or over the phone.
Purchase the right home
When you qualify for a loan, the lender will let you know how much home you can afford, and it’s crucial that you use this amount as a guide when house hunting. However, price shouldn’t be your only consideration. Look for the kind of home that suits your long-term plans. The longer you stay in the home, the greater the chances of you recouping the closing costs of the purchase.
Make mortgage payments on time
Making timely payments will help you avoid penalty fees and build wealth. If you miss payments, you could lose your home to foreclosure. To keep this from happening, make sure you have an emergency fund that will cover unplanned expenses.
To build an emergency fund, consider asking your bank to transfer funds automatically from your checking account to your savings account.
Seek help in times of difficulty
Don’t wait to miss your mortgage payments before asking for assistance. Ask for help as soon as you become aware that you might have difficulty paying. Keep in mind that any reputable lender wants homeowners to succeed, so contact yours and ask for professional guidance. The lender will appreciate you calling and will be more inclined to try to work out any problems.
You can also try contacting the agency that gave you counseling prior to the home purchase. Agencies usually have post-purchase programs that assist homeowners. A non-profit consumer counseling agency can also help.
Borrow home equity with caution
Keep in mind that home equity is wealth, and that taking out equity on the home or a secondary mortgage is akin to spending wealth. Use it wisely—equity is best used for personal emergencies, such as a staggering medical bill or school fees and home improvements.
Think twice about taking out equity on the home for unnecessary luxuries, such as an expensive car model. It’s generally unadvisable to use home equity loans to cover basic, day-to-day expenses unless you’re in between jobs.
Are you ready to become a homeowner and start building your personal wealth? Let me help you reach your real estate goals. Connect with me today or call/text me at 760 622 5087.