Homeownership can be more than a dream
By the U of A System Division of Agriculture
- Careful planning, shopping can make homeownership happen
- Timing, budget, credit scores all work into becoming homeowner
LITTLE ROCK -- Homeownership can be so much more than a dream with some careful planning, said Laura Connerly, assistant professor and family financial expert for the University of Arkansas System Division of Agriculture.
“It is the dream of many to own their own four walls and it’s an achievable dream,” she said, adding that it’s important “for each consumer to carefully consider the options. Housing is the largest fixed expense for most consumers.”
Among the factors to consider before buying a home:
Timing - “The rule of thumb is that you’ll need to be in the home three to five years to recoup
the closing costs and fees,” Connerly said. “One of the main reasons to buy versus
rent is that real estate is typically an appreciating asset. If you’re not going to
be there long enough for the property to increase in value, it might not be worth
the hassle of moving.” Another reason to wait is that some consumers prefer to avoid
the cost of borrowing money. “You might want to take time to save enough for a larger
down payment or the full purchase price,” she said.
Budget - Housing costs – including taxes and insurance – should be around 25-30 percent of your income. “That allows enough money in your budget to cover other household and living expenses,” Connerly said. “Be sure not to overextend yourself on a house payment.” Make a list of all of your expenses and include the money you put aside for saving and investing each month. “You may qualify for a loan amount that’s larger than you need,” she said. “Make sure your house payments are manageable and leave plenty of room in your budget for food, transportation, retirement saving, insurance, and everything else you need.” Consumers should also build an emergency fund large enough to cover the cost of the house payments plus other expenses for at least two months.
Shopping – The larger the expense, the more important it is to shop around. “Compare not only houses, but also lenders,” Connerly said. “Look for a home that will be a good investment and look for the lender with the best rates and fees.” Consumers with higher credit scores qualify for the best rates on loans. The best deals are usually on 15-year fixed rate mortgages. Fewer years and lower interest rates will save thousands of dollars over the life of the loan.
To learn more about personal and family finances, contact your county agent or visit www.uaex.uada.edu.
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Media Contact: Mary Hightower
Dir. of Communication Services
U of A Division of Agriculture
Cooperative Extension Service