Rent or buy? It’s a question you might be facing right now. While renting has a few benefits, buying a home also has its advantages, namely in the form of tax benefits and the opportunity to build wealth through equity. But, buying a home can also be risky, especially if you leap in without doing any research or getting help. Credit counseling for home buying can be helpful to a variety of buyers, even those who have a good handle on their finances. Before you start looking at properties, take a minute to decide if credit counseling is the right option for you.
You are Unsure What You Can Afford
One instance in which credit counseling for home buying might help you is if you aren’t sure what your budget is for buying a house. There’s much more than meets the eye when it comes to the actual cost of owning a home; the price of the house or the offer amount the seller accepts is just one part of the cost. There’s also the cost of the mortgage interest, taxes, and maintaining the home to keep in mind. Usually, you’ll have to make a down payment before buying a home, the amount of which can also alter what you can afford, since down payments of less than 20 percent of the home’s value usually mean you have to make private mortgage insurance payments. During pre-purchase counseling, a credit counselor will review your income, the amount of debt you currently have and how much you have set aside to help you determine the price you can afford.
You’ve Struggled with Debt in the Past
Credit counseling before buying a home is also a good idea if you’ve had trouble paying your debts in the past or if you are just beginning to put your financial life in order. A credit counselor can help you see where the cost of a home will fit into your budget or can help you make a plan to pay down your current debts before you start the process of applying for a mortgage and looking for a home.
You are Seeking Unconventional Financing
Some types of mortgages actually require credit counseling before you can apply for or receive them. For example, the My Community Mortgage (MCM) option, available from Fannie Mae, has a pre-purchase counseling requirement. The MCM option lets buyers receive a home loan with a down payment as low as 3 percent. Counseling is required if the down payment on the mortgage is between 3 and 5 percent, if all the buyers are first time home buyers, or if the people obtaining the mortgage are using nontraditional credit. After you complete the required pre-purchase counseling, you’ll need to get documentation from the counseling agency, such as a certificate, to give to the lender as proof.
One of the biggest financial decisions you’ll ever make is deciding to buy a home. Even if you think you have things under control, talking to a credit counselor before you start the home buying process can be a good idea. Counseling will give you the assurance that you are making the right decision, or help you figure out if a home purchase is something that’s best put off for the time being.
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