Tips for Would-Be Homebuyers Struggling with Money Issues

TIPS FOR WOULD-BE HOMEBUYERS STRUGGLING WITH MONEY ISSUES

It's no secret that high gas prices are taking a bigger bite out of consumers' wallets, as are expenses tied to health care and education. But that doesn't lessen the zeal many renters have for the idea of owning a home.
"No matter how challenged people are financially, owning a home remains one of the basics -- a first building block in the American dream," says Sid Davis, author of "The Survival Guide for Buying a Home.



" He says the sacrifices to buy a home can be daunting, but the rewards are substantial.

Although would-be homebuyers have greater access to low or no down payment mortgages than ever, many must first slash the debt they've accumulated to qualify for a home loan on a typical starter property.

"We have an epidemic of credit card debt in this country, especially among 25- to 35-year-olds. So giving up the use of credit cards is one of the most effective sacrifices many people can make to contain their spending and work toward homeownership," Davis says.

Here are several suggestions for people struggling to buy their first property:


Search for a mortgage lender who will get you started. Those in the residential mortgage business are often willing to go to surprising lengths to nurture a relationship with a prospective client. And some of the best lenders derive personal satisfaction from tutoring novice buyers. But finding a suitable mortgage lender can be challenging.
"If you were to parachute into a city in search of the best mortgage people, you'd be smart to ask the attorneys and other people who do the closings for lots of local deals. They work with lenders on a daily basis. From these folks, you'll soon be hearing the same lenders' names repeated over and over," Davis says.

Conscientious lenders will, of course, pore over your financial information and tell you how expensive a home you can afford. But their services can expand well beyond this core function, says Leo Berard, charter president of the National Association of Exclusive Buyer Agents (www.naeba.org).

"Strong lenders are plugged in and can give you the latest details of local, state and federal programs for first-time buyers. They can also tell you about special home-buying opportunities for teachers, police officers, veterans or other groups," Berard says.

What if you determine that your credit load is so heavy that a home purchase is currently impossible for you? A devoted lender will help you formulate and follow a strategic plan to attack your debt load and improve your credit standing.


Consider using personal finance software to reign in your spending. Berard, an engineer who started an independent realty company in 1989, says a lot of would-be homebuyers are oblivious to spending patterns that keep them in financial trouble and block their home purchase plans.
For such buyers, Berard says that using a personal finance software program could be a wise course. Those who faithfully record expenditures can tell precisely where their money goes and where cuts could be made. Among the better programs are Quicken and Microsoft Money, according to Berard.


Keep spending in check by relying solely on a debit card. Anyone with frequent exposure to mainstream television knows that commercials promoting credit card use are ubiquitous. And there are perks associated with credit card use, such as "frequent flier" miles. But some who succumb to credit card come-ons become mired in debt, their home-buying dreams sabotaged.
How can you improve your balance sheet? Personal finance specialists emphasize the importance of hacking away at your credit card balances. But they warn against closing credit accounts in the months prior to a home purchase. Shutting down accounts can damage your credit score. This consequence may seem implausible, but that's the way the system works.

While paying down debt, you should lock up your credit cards and vow not to use them, says Davis, the real estate author. Until you meet your goal, he advocates using only one type of plastic: a debit card. Because it draws directly off a checking or savings account, it limits you to funds you already have.


Get friends and family members to support your home-buying goal. Davis says there are some people you won't want to recruit to cheerlead you along the path to homeownership.
"Avoid discussions about your goal with friends or relatives who haven't managed to buy a property. They could be real downers about your chances of getting a house, voicing pessimism you don't need to hear," he says.

On the other hand, friends who've reached the goalpost can be extremely helpful in encouraging you to do the same and in giving you pointers.

If you're fortunate enough to have parents with means, they could help you cover the cash needs of a purchase, including moving charges and fix-up expenses for the home you buy, Berard says.

No matter how much they tighten their belts, some young people -- including those with heavy student loan obligations -- simply cannot make a first property purchase without gifts from parents or other family members.

"If you think your relatives could help, don't hesitate to tip your hand to them about your plans," Berard says.

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To contact Ellen James Martin, e-mail her at ellenjamesmartin@gmail.com.
COPYRIGHT 2005 ELLEN JAMES MARTIN
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