Home Sweet Home: Buying Into the American Dream

Homeownership has always been key to the American Dream.

Since the days of the country's Founding Fathers, pride of ownership has been a reflection of the value Americans place on freedom and self-reliance.

Ensuring the growth of homeownership has always been a major objective of American national policy, dating back to the Homestead Act signed by President Abraham Lincoln in 1862, which provided ways for settlers to claim public property as their own.

Today, the United States is fortunate to have become a nation composed primarily of homeowners, with the overall homeownership rate at almost 68 percent.

Strong economic growth, low interest rates, and creative mortgage products have all added to increased homeownership opportunities.

You do not need to be a citizen of the United States to purchase a home. Anyone who is in the country legally, pays taxes and qualifies financially is eligible.

Felicity Bennet, a South African nurse who moved to America in January 2000, bought a home this past October.

"We bought a three-bedroom, two-bath home on 1.2 acres in North Carolina," Bennet said. "We love it. It's a wonderful home for our baby girl and someday soon, a dog."

"We never could have afforded this in South Africa. The interest rates are double-digit there. The interest rates here made if affordable."

Bennet said they had no problems with getting a loan. She and her husband had taken out a car loan and obtained credit cards when they first moved to the States to build a credit history. She says this is important and not hard to do.

Bennet also feels that working with a good real estate agent is key.

"Housing construction is quite different here than in South Africa. At home, all houses are brick, whereas here there are lots of types of construction to choose from. Our agent helped us understand all the choices."

"We're use to having six foot security walls around the house, which we don't need here at all. And the appliances are much nicer than what we could have afforded in South Africa."

To determine if you are ready to buy a home, ask yourself:

• Do I have a steady source of income?
• Can I count on regular, steady employment?
• Are my employment and credit histories good?
• Do I have money saved for a down payment?
• How much can I afford to pay monthly?
• Am I ready and able to take on the responsibility of a monthly mortgage as well as the inevitable 'surprise' expenses that can pop up periodically?

If you feel confident with your answers to the questions above, get out a calculator to figure out exactly what you can afford.

Before you start driving around looking at homes or perusing the classifieds every Sunday, do some math. There is no point in falling in love with something you can't possibly afford. Remember that most first-time buyers are happy just to get into the market for the first time. Buying, selling and 'moving up' are part of almost everyone's long term plan.

Also, repeat the term 'house poor.' It is used to describe the unenviable situation wherein a family has committed so much of their income to their mortgage that they don't have one cent left for anything else.

According to the Federal Housing Administration, monthly mortgage payments should be no more than 29 percent of gross income, while the mortgage payment, combined with non-housing expenses, should total no more than 41 percent of income.

Selecting a mortgage is one of the most important financial decisions you ever make. A little bit of research can save you thousands of dollars, so shop around. Loans are available through banks, construction companies, insurance companies, Internet lenders, independent financial advisers, specialized mortgage companies and real estate agents. Rates change frequently. Today's best deal of may not be around next week.

How mortgage lenders check your credit history varies. All will consider your debt-to-income ratio, which is a comparison of your gross (pre-tax) income to housing and non-housing expenses. Non-housing expenses include such long-term debts as car or student loan payments, alimony, or child support.

Lenders also consider the cash you have available for a down payment, closing costs and your credit history to determine the size of the loan they will give you. There are other factors, which affects a lender's decisions such as a valuation or appraisal of the property to make sure it's worth the loan amount. Each lender provides their criteria for approving a loan.

It's a good idea to prioritize your list of 'wants' as well as 'needs' before you start looking for a home to buy. Chances are, you're aren't going to be able to afford everything you're dreaming about. Some important first considerations should include:

• Location.
• Commute-to-work time.
• The community's economic stability (is it a thriving area with budgets for police, roads, etc.).
• Government services
• Schools (even if you don't have children, consider this for resale purposes).
• Property taxes.
• Proximity to shopping and services.
• Access to public transportation.
• Recreational and cultural amenities.
• Safety.
• Noise and other environmental factors.

After you've decided on the neighborhoods you like, think about:

• Size (bedrooms, baths, shared living spaces).
• Potential for expansion.
• Lot size/location to neighbors.
• Construction quality.
• Needed upgrades or improvements.

Once you know what you want and what you can afford, find a good real estate agent. Ask friends and neighbors for referrals. A good agent can save you time, money and heartache, by taking you through the myriad inspections and paperwork required by law. He or she can also help protect you from unscrupulous sellers and lenders.

A big part of home buying is homework. But the satisfaction that comes from owning the land under your feet and the roof over your head is sweet indeed.

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