Wondering If Now Is the Right Time to Buy a Home?

Rates are at low levels. Some say it's a buyer's market. But is the time right for you? Ask yourself some questions.

Does buying a home fit in with my larger plans?
Prioritized homeownership among any other financial goals you may have. Ask yourself:
-Would buying a home mean stretching to my financial limits? If so, where can I make changes in my budget to keep it more balanced?
-Will I still have enough for other opportunities or for unexpected emergencies?

What can I comfortably afford?
Which is better than asking, "How much could I burrow?" Rather than focusing on your lender's limits, focus on the home loan that provides you with the best opportunity for success. Keep in mind how much you can afford to spend on a home without putting the rest of your financial plans on hold.

What will lenders consider when I apply for a loan?
There are three main areas lenders review when prequalifying you for a loan: income and expenses, credit score, and down payment and closing costs.

What will my credit score need to be?
This number is generated by the credit reporting agencies and represents your overall credit health; a higher score increases a lender's confidence in your ability to pay back a loan and make payments on time. Find your credit score by viewing www.annualcreditreport.com, a site sponsored by the three credit reporting agencies, Equifax (r), TransUnion (r), and Experian (r). As a general guideline, if your score is below 620, you may want to hold off on buying a home until you can improve your credit - or talk to a loan professional about your specific situation.

What percentage will be required for a down payment?
Having at least 10% to 20% to put toward a down payment on a home tells lenders that you're prepared to make a financial commitment to the home, and increases their confidence in your ability to pay the loan. It also puts you in a strong position financially, as you won't have to burrow as much from your lender. In most cases, a down payment of less than 20% requires that you carry private mortgage insurance (PMI) at an extra cost.

Are there other options if I don't meet these lender requirements?
There are affordable loan programs to help qualified low-to-moderate-income borrowers become homewoners. Certain home loan programs require potential borrowers to receive home buyer educaion. The benefit is that you may qualify for a loan program that can help you make a minimum down payment or qualify for varying forms of assistance, depending on your financial situation or the location of the home. In many areas, home buyers can receive assistance with down payment and/or closing costs from local community agencies. Check with a loan expert at your bank to find out if you qualify for these programs.

If I can't buy a home right now, what should I do to prepare myself?
It's never too soon to begin saving for a down payment, even if buying a house is far off in the distance. Consider setting up a separate savings account for your down payment fund and depositing money regularly into it.

What are the financial benefits of homeownership?
Tax advantages are one of the biggest financial benefits of homeownership. As a general rule, most homeowners can deduct most or all of their interest payments on their home loan, property taxes, and loan points, but check with your tax advisor to be sure.

(Information from Bank of America. For more information visit www.bankofamerica.com/homeloans)