Common Pitfalls

It is very important to be sure you have an acceptable credit report before looking for a home. Your credit score will impact the kind of loan, if any, for which you qualify. The better your credit score, the less expensive and easier it will be for you to buy a home.

Because it can take well over a year to clean up problems in your credit history, it is critical to address your credit condition before you start looking for a home. There are several ways to get help to improve your credit. Home-purchase Individual Development Account (IDA) programs will offer credit repair information. Nonprofit credit repair organizations can also offer help and your realtor may be able to point you toward local credit repair options.

Don’t forget that your mortgage payment is only part of the costs that come with homeownership. Sometimes it is easy to forget that property taxes and homeowner insurance are costs that you will have to pay on a regular basis and that you have to prepare for. Generally, a new homeowner should figure that approximately 1.5% of the purchase price of the home will be required to cover insurance and property tax payments each year. Many banks offer the option of an impound account, which is an account where the bank collects the amounts for taxes and insurance in your monthly mortgage payments, thus spreading out the expense over a 12-month period. This is a great solution for many people who find it easier to pay little-by-little and not have to worry about semi-annual tax or insurance bills.

As a homeowner, you are responsible for the upkeep and repair of your home. Most professionals suggest that homebuyers set up a home maintenance savings account with monthly contributions to cover the costs of any unexpected but necessary repairs. These savings are critical for a homeowner, so that they have a financial safety net when something inevitably goes wrong with the home.

During the home-buying process, you will have the opportunity to inspect the home. These inspections should point out any critical issues with the property when you buy it. But over time, roofs need repairs, heating and cooling systems must be serviced or replaced, and things just break. Having a financial safety net to pay for these items is a smart move for a homebuyer.

If you qualify for it, the Section 8 Homeownership Program is a great way to buy a home, because it means that you will only have to pay part of the mortgage. When the mortgage has been fully repaid, you will be the owner of the home, even though the government paid for most of it! It’s a great opportunity to buy a home, but there are several factors about the Section 8 Homeownership Program that you should keep in mind:

• You must already be a Section 8 voucher holder to participate in it.
• To apply for Section 8, you have to get on a waiting list that is open. Many waiting lists are closed and it can take several years just to get on the waiting list.
• It is not offered by many public housing authorities (PHAs). Check with Arizona public housing authorities to see if they offer it.
• If you have a Section 8 voucher, but your PHA does not offer the Section 8 Homeownership Program, you would need to “port” (transfer) your voucher to a PHA that does offer it.
• If you are buying a home in a place where there are lots of buyers and few people selling homes (a “seller’s market”), then it may take many attempts to get an offer accepted.