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    How to Prepare for Homeownership

    While homeownership can be a great tool for building wealth, it can have unexpected expenses. This list can help you keep track of what you have done and what you need to do to prepare yourself for homeownership.

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    BUDGETING

    A budget helps you track your expenses and spending. Write down everything you buy in one month, and add it up in categories. You may be surprised at how your “small” expenses become bigger budget items over time.

    Qualifying for a mortgage is different than being able to afford it. This budget form can help you determine what you can actually afford.

    CREDIT

    Request a free credit report every 12 months from each of the three credit reporting companies. Credit reports show financial history, like bill payments, debt, loans, and whether you’ve been sued, arrested, or filed for bankruptcy.

    Check for discrepancies and verify that all accounts listed are yours. (If you think your identity has been stolen, the Federal Trade Commission can help.)

    Your credit score, or FICO score, rates your credit risk. It helps lenders determine if they will lend to you and what interest rates to offer. A higher score increases your chance of getting loans, renting, or lowering your insurance rate. Your score is determined using five factors:

    • Payment history (whether or not you pay your bills on time)
    • Amounts owed (the number of credit accounts you have)
    • Length of credit history (how long you’ve been using credit)
    • New credit (how often you apply for and qualify for new credit)
    • Types of credit used (a mix of your types of debt)

    Beware of scams that promise to fix your credit for a fee. The only way to fix damaged credit is to pay bills on time.

    CREDIT CARDS

    Credit cards offer many conveniences. However, there are a few things you should be aware of:

    • Even if you make your payments on time, the bank can raise your interest rate if you are late on payments elsewhere. Called “universal default,” this is often a standard clause in credit card agreements. 
    • By making minimum payments, it could take years to pay off credit card debt, which means you pay far more than the cost of the items originally purchased. Payment calculators can help you determine how long it would take to pay off balances.

    PLANNING FOR THE FUTURE

    Once you know how you spend your money, you can adjust your spending habits. Building a financial safety net is critical preparation for the unexpected. When buying a home, consider other costs like maintenance and repairs.

    As you begin your home search, ask yourself:

    • Do you have a reliable source of income and a two-year employment history?
    • Have you established a credit history? Do you pay bills on time?
    • Would you be able to manage a mortgage payment in addition to your current expenses?

    We hope that this list helps you make your dream of homeownership a reality. When you’re ready to get started, contact an OHFA-approved lender!

    This article is presented with paid support by the Ohio Housing Finance Agency.

    The Ohio Housing Finance Agency is the state’s affordable housing leader. The Agency provides opportunities for Ohioans to locate affordable housing and offers a variety of programs to help first-time homebuyers, renters, and others find quality affordable housing that meets their needs. The Agency also works with developers and property managers of affordable housing throughout the state. Discover how OHFA’s programs can help you. For more information, visit myohiohome.org.

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    Ohio Housing Finance Agency
    Ohio Housing Finance Agency
    The Ohio Housing Finance Agency works to provide safe, decent and affordable housing options to renters and prospective homebuyers in Ohio. OHFA has helped nearly 170,000 Ohioans purchase a home using its popular down payment assistance, career-related discount mortgage rate and other programs.
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