Setting Yourself Up for Success

Homeownership is a big step and sometimes the adjustment from renter to homeowner can be big as well. The following are some tips to make the transition easier.

• Be realistic. Don't fall in love with a home you can't afford. You may convince yourself that if you scrimp and tighten your belt, you can afford it. But you are putting yourself at risk. Buy the home you can afford and if you're able, you can "trade up" when you can afford more house.

• Give yourself a little wiggle room. If you are a first-time homebuyer, don't buy at the very top of the price range you qualify for. Homeownership expenses don't stop with the mortgage – don't max-out your budget on the price of the home. Give yourself some extra money in your monthly budget for costs you didn't anticipate.

• Don't plan other big purchases in the first 24 months of owning your home. Give yourself time to get used to the costs and responsibilities of homeownership before taking on more debt. That means no new car or other big ticket item unless absolutely necessary. However if you need to purchase appliances for your new home, be sure to factor those costs into your budget.

• Build an "emergency fund" into your budget. Put a little away each month for the unexpected. That way when the car needs a new transmission or the house needs a new roof you won't be tempted to reallocate funds from existing financial responsibilities. Ideally you want 3 months of savings as a cushion in case of unexpected events like the loss of a job.

• Have a Back-up Plan. No one wants to plan for an unpleasant event but if you take the time before a crisis to figure out your plan, you’ll be in much better shape in the event one actually happens. If something happens that may impact your ability to make your mortgage payments, like losing your job or a health crisis, develop go to your Back-up Plan immediately. Don't wait until you're in a financial predicament before assessing your options, including calling your mortgage lender right away to discuss alternatives.

• Recognize the warning signs. Oftentimes when homeowners are in financial trouble, they do not want to admit it. But, if you recognize that you are struggling and do something about it during the early stages, you will be in a better position to get yourself back up on your feet. Not being honest with yourself will only make things worse in the long run, and could ultimately force you to foreclose on your home.

• Answer the phone and read your mail. When things begin to get financially out of control, people often avoid their creditors. Don't. Talk to them. Many creditors and your mortgage lender will work with you. Also consider meeting with a reputable housing counselor.

• Be wary of unsolicited "deals." If you want to refinance do your research but don’t refinance just because a charming person at your front door convinced you it is a good idea. Predatory lenders are successful because they are often charming. Don’t fall for it. Talk to your lender instead.