Home Purchasing

Buying a home is an important part of the American dream. Home ownership provides security, a sense of satisfaction, and a pride of ownership. Also, a home purchase can be a sound financial investment. Over the past 40 years, home prices have appreciated at an average of 6 percent per year.

For most Americans, the cost of paying for their home averages nearly $17,000/year. This is the largest category in the average American’s budget. A purchase of housing that is outside of a person’s budget range is one of the most frequent causes of bankruptcy. Professor Marsh recommends that individuals follow a simply formula to ensure that they don’t spend too much of their budget on housing costs. This formula takes the monthly income of the primary breadwinner for the family and subtracts from this number all obligations. The resulting number is then multiplied by 35% to determine the maximum monthly payment that should be paid. The average mortgage payment is currently over $1500 dollars (30 year fixed loan with an APR of about 5%) for a $240,000 home loan. With a median household that barely exceeds $50,000, and monthly debt payments of $2300 on average, it is obvious that most Americans are probably spending too much on their housing. Imagine that a 25 year old couple made decisions that would allow them to save only $2000/year versus the national average housing costs. This decision could be worth over $1.5 million to them at retirement. Use the following tools and articles to see how to save money on a housing purchase. If you are already in a home, see the “mortgage” category under Credit Management Million Dollar Choice Opportunities to see how you too can save.

  1. http://www.hud.gov/homes/index.cfm provides access to the listing of HUD foreclosures available for purchase. Often, you can get a much better deal on these types of homes than on typical homes.
  2. http://www.biggerpockets.com/bank-reo.html contains a great, free listing of REOs. REOs are properties that have been foreclosed on by the bank. Often, these can be purchased at firehouse sale prices.
  3. www.zillow.com is an amazing resource that allows you to look and see how much houses in a neighborhood cost on average. This is a great way to see if you are getting a good deal on a home purchase.
  4. http://www.nachi.org/ is a site that any prospective home buyer needs to carefully look at. Hiring a home inspector certified by The National Association of Certified Home Inspectors will ensure that you don’t purchase a house that has significant problems. Find out what is wrong before buying.
  5. http://www.usa.gov/Citizen/Topics/Family/Homeowners.shtml#vgn-buying-and-financing-vgn provides the Federal Government’s guide for buying a home. Learn many great tips for saving money on your home purchase right here.