Option 1st Financial Blog

With the unemployment rate at 6.7 percent, the highest that it has been in over 15 years and announcements of new layoffs every week, many Americans who do not own a home are hesitant to buy given the instability of the economy, which by the way is a natural reaction! 

In uncertain economic times, people tend to buy less big ticket items such as homes and cars. Therefore, it may not seem like a good time to buy a home but it really is because of two factors:

• Historic low interest rates; and
• The large inventory of homes on the market, from foreclosures, to short sales (an agreement between the lender and home owner that allows the home owner to sell the house for less than what is owed to the lender) and routine home sales. 

These two factors make a perfect combination for affordable homes for first time home buyers and any one who has always wanted to buy a home but thought that purchasing was unaffordable. 

Of course, the impact of the sub-prime market has made buying a home more challenging than 2 years ago because lender's guidelines for loan qualification are more stringent. Nevertheless, homeownership is attainable and here are my recommendations for positioning yourself to own:

• Pay your bills on time. This is the single biggest factor that impacts  your credit score. In fact, 35% of your score is determined based on payment history. 
• Pay down your credit cards and do not close any accounts, even those that you pay off. Your balances in relation to your limits is the second biggest factor in calculating your credit score. 
• Do not make any major purchases, such as a new car, new furniture etc. SAVE YOUR MONEY!!! 
• Save 3.5 percent of the cost of the home for which you qualify. Effective, January 1, 2009, FHA loans will require a 3.5 percent down payment towards the purchase of a home. If you are a veteran, you should qualify for 100 percent financing so this recommendation does not apply to you. Alternatively, you can borrow the down payment from your retirement account, if you have one.
• Save at least one month (ideally three months) of your net income for emergencies and expenses that will stem from owning a home that may not be covered by your home warranty. 

Having an emergency fund may be the single most important factor in reducing your risk of getting behind on your payments and foreclosing on your home. As a mortgage professional and financial educator, it is my experience that not having a "rainy day fund" is a major factor that contributes to foreclosures. 

This is what typically happens: an emergency occurs, the homeowner gets paid and takes care of the emergency but when the mortgage payment is due a few weeks later, the homeowner is short of the full payment. Once you are behind on your mortgage, it is almost impossible to get caught up! 

There are so many bargains in the market right now and my advice is to do your diligence; do not rush into buying a home; instead, take the next several months or so, make some financial sacrifices (do not eat out as much, take lunch to work, go to the movies less, buy less Starbucks, shop less in general), and you will be surprised how much money you can save. 

Establish an automatic deposit from your pay check into your savings account as most people struggle with saving money on their own. If you save money based on what's left at the end of the month, you typically save zero. If you have a set amount deducted from your pay check, you will adjust your spending habits accordingly. So, these are my tips! 

We at Option 1st Financial hope that you find this information helpful and encourage you to send us an email with feedback on this blog; questions on additional tips to save; to help you develop a budget; prequalify you etc.

We pride ourselves in being a full service mortgage broker that is committed to facilitating the purchasing of your home but more importantly, making sure that you keep your home by following best practices in each step of the loan process.

We understand that home ownership for working and middle class Americans is the key to building wealth and our goal is to help you build wealth so that you can enjoy your golden years!