subject: Financing Your New Home [print this page] What is finance? And how can you manage your money?
It is the science of money management. There are three main areas and these are; business, personal, and public.
Even though these are pretty straight forward, managing your money can be very confusing. This is why people hire professionals to take care of their personal accounts and do their taxes for them.
This field incorporates concepts like time, money (how it is spent, budgeted, and saved), and risk. There are several terms associated with this field and include; deposit, bank, interest, consumption, investment, loans, credit, funds, assets, bonds, equity, and many more.
The most basic principal that you can learn is that you need to spend less money than you save. For example, you have many different expenses each month that include groceries, rent, entertainment and transportation.
These expenses might cost you about one thousand two hundred dollars a month. If you make two thousand dollars a month, you can end up saving about eight hundred dollars.
You have to be careful that you do not spend more than two thousand dollars every month because that will get you into debt very fast. Keep your money in a bank and check on your account weekly to help you watch your spending and saving habits.
The more money you save, the more you can put into a down payment on a house when the time comes. The larger the down payment, then the smaller the mortgage will be.
You will also save money because you will not have to pay as much interest on your home loan. When you buy a house, most people do not have enough saved up to purchase it outright.
So they need to take out a loan from a bank in order to buy it. First you have to qualify for a loan.
The bank will look at your credit history and see if you are in debt at all or have any other kinds of loans out already. They can check your history to see if you make your payments in full and on time.
If you have a good history, then you have a better chance of qualifying. Next, they look at how much you have in your bank account to see if you can afford a down payment.
They also look at how much you make annually to see if you can afford a monthly mortgage. Any dependents that you might have will also factor into the process of qualifying because they will cost you other kinds of expenses as well.
When you take out a loan from a bank, they will charge you interest on the amount that they lend. Banks are willing to help people finance their houses because they end up making a lot more money after the entire mortgage is paid off.
It is important to remember that how much money you earn every year will dictate how much you can afford to spend. Your mortgage payment should not exceed about one third on your monthly income so you have enough money to buy food, take care of your family, have transportation, and then be able to save some money on the side.
Depending on how much you make every year, you may or may not be able to afford certain homes. You can talk to a real estate agent about what price range you can afford so that you do not put yourself into debt.
It might be a smart thing to take some sort of finance class that teaches the basics of money management so that you understand how to save and budget your money. If you learn how to invest and save now, then you will be able to afford a nice home later.
Start saving by getting into good habits now such as; using coupons when you go shopping, not spending so much on clothes or other things that are unnecessary, finding the best deals at the supermarkets that you by food at, and spending less on entertainment. This will help you save your money and stay out of debt.
