June 20th, 2011
In the article “3 Money Tips from President Obama,” Editor of InvestorPlace.com Jeff Reeves discusses how he attended the White House’s first Personal Finance Online Summit last week. He said the President primarily discussed the financial situation of our country, but several tips he offered can be applied to individual financial planning.
These tips are also applicable for those with a mortgage, or who are looking to purchase one.
1. Don’t spend all your money. According to Reeves, Obama said his number one financial tip is “don’t spend all your money.” This is very important for potential homebuyers to keep in mind.
Being able to afford a home and being able to comfortably afford a home are two very different things. You should always plan for unexpected expenses, because as a homebuyer, you’re bound to face then. If you’re monthly mortgage payment is going to leave you with very little to spare, maybe it isn’t the best option for your financial situation. You always want to have a little cushioning to fall back on.
2. Investing is different from spending. Reeves says,
The president went on to explain that watching spending doesn’t mean you pinch pennies. He cited how he and First Lady Michelle Obama plunked down $125,000 for their educations, including Harvard law school. But that was money well spent. He also mentioned a responsible mortgage for his family’s home in Chicago.
The President said it, we’ve said it, and we’ll say it again. Purchasing a home is an investment. A home is an asset. It has value, and not just literally, but in purchasing power, too. It tells banks and creditors that you are a financially responsible and stable person, and that says a lot. Investing is different from spending, as buying is different from renting.
3. Get all the facts before making a financial decision. This is very, very important for potential homebuyers.
Quite often first-time homebuyers find a home and fall in love with it, and then the excitement is so overwhelming that they want to rush right into closing. It’s important to take the time to meticulously look over all the details of the agreement with the help of a professional to ensure that you know what you’re getting yourself into.
This also happens when the potential homebuyers know that the sellers have received numerous offers. Don’t make rash decisions in fear of losing the house. If it doesn’t work out, it wasn’t meant to be, and there are plenty of other homes out there.
Getting pre-approved or speaking to a loan officer before starting the home search can help to alleviate this sense of hurry.
First, it will give you and the lender the chance to sit down and look at your budget and loan options to determine how much you can afford. Second, sellers love buyers who are pre-approved. The loan process can take weeks, and the seller doesn’t want to wait to find out you haven’t been approved for the loan. If you’re already approved, sellers tend to be more patient because they know you’re a serious buyer, and they’ll give you more time to really think it over.