10 Power Steps to Reach Homeownership

January 27, 2014
By Amy Robey, MORe Now Contributor

Have you ever thought about the steps necessary to reaching homeownership? Chris Prod, Housing Counselor and Financial Fitness Manager at DuPage Homeownership Center, shares his thoughts on the subject.

1. Develop a Personal Spending Plan.  Want to be a homeowner?  Get yourself on a budget and begin saving money for a down payment. Take account of where your money is going with each pay check. Develop a worksheet to identify what your income will be for the next month and itemize what you anticipate your expenses will be. Track your expenses at the end of the month. Look for ways to automate your personal finance program through an online expense tracker such as Mint.com, Moneywise or Youneedabudget.com. Tracking can help you realize where each dollar goes and will help you mentally to stay on target to help you save more to reach your financial freedom goals. Get control of your life and your money!

2. Paying Off Debt. Look for opportunities in 2015 to get out of the debt hole and pay off debts. Look for additional ways to cut your expenses to free up additional funds to pay off credit cards earlier. Begin to set goals on debts you want to pay off. Learn more about creating a personalized, self directed debt elimination plan at PowerPay.

3. Evaluate Your Credit Report and Credit Score. By going to annualcreditreport.com, you can request a free credit report from all three credit reporting bureaus. You should review your credit report at least once a year. If you are going to be making a major purchase, you need to know your credit score. Receive your free credit score online at www.creditkarma.com. You need to also be monitoring your credit report to watch for identity theft. It's a lot easier to maintain good credit than it is to rebuild poor credit.

4. Saving for a down payment. You have to save for a down payment to show in earnest to a lender that you can afford the house you are wanting to purchase. The amount of money you need depends on the size of the home you are purchasing and loan requirements. But having reserves for a down payment is necessary depending on loan requirements.

5. Research down payment assistance programs. Learn about down payment assistance programs available in your area. Check out the Illinois Housing Development Authority SmartMove program and the DuPage Homestead Program through the DuPage Homeownership Center. By working with a member of the Mainstreet Organization of REALTORS®, you can access down payment resources that may be available to you through Down Payment Resource, a service through the Midwest Real Estate Service LLC (MREDLLC) specific to individual properties.

6. Consult with a lender on the pre-approval process. Meet with a lender to determine what you can afford by undergoing the pre-approval process. The lender will pull your credit history, verify income and expenses and will give you a letter that, based on the information provided, will determine the amount of mortgage you may qualify for. Your lender can also explain types of mortgages you may eligible for. You will want to purchase a home you feel you can truly afford, evaluating price options and lifestyle to determine how much you feel comfortable spending on a house payment each month. Don't go over budget.

7. Research and learn more about loan products. There are a variety of mortgage programs with advantages and disadvantages of each. Understand and find the right mortgage product that fits your needs. Be aware there are closing costs with mortgages and you need to plan for those.

8. Plan for the unexpected. When you become a home owner, you are responsible for upkeep and repair of your new property. Everybody should have a cushion of 3-6 months of living expenses. You now own a house and you can't call the landlord to get repairs done. For some low and moderate income borrowers, it may be a good idea to get a home warranty.

9. Select a REALTOR®. Talk with family, friends and co-workers to obtain a referral to a REALTOR® in your area. The Mainstreet Organization of REALTORS® has more than 15,000 members covering DuPage County, Lake County and portions of Cook County. You can use MORe's Find a REALTOR® tool to search for a roster of REALTORS® by name, city and foreign language spoken. Interview 2-3 agents that you would like to represent you in your home search and select someone you would be comfortable working with. Ask them to explain the home buying process and how they will work to represent you and what contracts and agreements are in order including what the seller needs to disclose to you. Explain your time strategy, price limits, needs and neighborhoods you are most interested in searching for properties.

10. Put Your Wish List Together. Congratulations!  You are on your way to being a new home owner. Now you can settle down to determine what features you are most interested in having in your new home! Look at properties online at www.realtor.com. Begin your search to find the right home for you! Working with an experienced REALTOR® can help you narrow down your choices as you begin to look at homes for sale.

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