With 17% of homes running into foreclosure issues over the past five years, you may want to consider following a few guidelines that will help keep you afloat (see this earlier post). I think we can all agree that this need for instant gratification is killing us as a society. So here are some general guidelines:
- Put 20% down on your home.
- Don't get into debt over 3 times your annual salary.
- Don't pay over 200 times the monthly rent for you home.
You can find additional advice from moneyfor20s.about.com. The reason you want to put 20% down is so that you don't have to pay for mortgage insurance. In addition, you will know that you have the discipline to put the money away and that you can truly afford the home. When you avoid getting too deep into debt, you can actually get out of debt within 15 years so that you will have time to save for retirement. Finally, using the 200 factor in Izu's 100-200 Property Valuation Rule, will allow you to build equity even after a market crash. This means that for every $1000/month the property would rent for, you can afford to pay a maximum of $200,000. In a future post, I will cover this rule in more detail.
This post was reposted from http://finlit.biz/debt/3-easy-guidelines-to-purchasing-your-first-home/, originally written on January 21st, 2013.
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