 | | Buy vs. Rent Checklist | | | | To keep yourself on track to healthier personal finances,
start here by setting due dates for your own financial to-dos. Click the button
next to each item to add it to your Yahoo! Calendar or
print out this checklist of to-do's and check off each item as you complete it. Get ready to face your
financial fears today!
For more information on each item, refer back to Suze Orman's article:
"House Rules: How to Decide
If It's Time to Own Rather Than Rent". | |
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| | Before buying, consider all the costs of owning a home beyond the mortgage paymentThe base mortgage is just the beginning of your housing costs. On average you need to add another 40-45 percent to
get a
more realistic total monthly cost. Yes, you read that right: 40 to 45 percent. So if your mortgage payment is $1,079, the
true total cost is about $1,519 per month. Let me show you how the costs pile up. | | | | | |
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| | Calculate what the tax break will really save youFirst, right now our income tax brackets are at 40-year lows. If you are in the 20 percent tax bracket that means you will
only get a 20 percent break on your interest payments. Let's just look at a $1,079 monthly mortgage. The total interest
payments in the first year will be about $10,740. Your tax savings (20 percent of $10,740) is $2,148. Or about $180 a month.
As I showed you earlier in the article, the cost of your property tax, homeowners insurance and private mortgage insurance,
plus your inevitable maintenance costs, is probably going to set you back about $440 a month - about $260 more a month than
your tax savings. | | | | | |
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| Do a trial run - save the amount of your mortgage payment for six monthsStep 1: Figure out how much buying a home in your estimated price range will really cost you monthly, including all the
expenses I
pointed out in the article.
Step 2: Subtract your current monthly rent from the total figure you came up with in Step 1.
Step 3: Set up a new bank account. On the first day of each month-not the second, not the third, but the first day
of each month-you are to deposit whatever the difference is between your current rent and what your projected homeownership
costs would be.
Step 4: You are to do this every month for six
months. If you are late in your payments, or if you feel stressed out trying to make the payments, you should take this as
a sign that you may not be financially ready to become a homeowner. Then take a little of this money and go out and
celebrate. | | | | | |
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| | Check your credit scoreBefore you even think about looking at homes, I want you to make sure your credit report is spanking clean and your FICO
score is as high as possible. Remember, the higher your score, the lower the interest rate you will be offered on the loan. | | | | | |
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| | Factor in the cost of furnitureIf you think the furniture you have in your rental is going to make you happy in your own home, you are doing some
interesting drugs. I can guarantee you that all the old hand-me-down furniture that worked great in your rental isn't going
to psychologically cut it in your new digs. Sure for awhile it may suffice, but over time all those well-placed ads will get
the better of you, and you're going to want to go on a furniture-buying binge. | | | | | |
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