Homeownership has many benefits but also many responsibilities. Make sure you are ready for the responsibilities before you buy.
Make sure you don’t overspend. Your housing budget should be no more than 28% of your gross income.
Become familiar with your credit report and credit scores.
Fix any errors on your credit report immediately! Contact both the credit reporting company and the creditor that provided incorrect information. Both are responsible under the law for correcting errors.
Establish and protect your good credit – credit will affect the terms of your loans.
Now that you’ve completed the Preparing for Homeownership section, test your knowledge.
Your debt-to-income ratio (the total debt you have including things like alimony, car loans and child care) should be what percentage of your monthly gross income?
A. 30 – 40%
B. 45 – 55%
C. No more than 62%
D. It doesn’t matter as long as you are able to pay your bills
That's correct.
That's incorrect. Mortgage lenders prefer your debt-to-income ratio is no more than 40%.
It is okay to buy a little more house than you can afford if:
A. The market is hot and your house will increase in value
B. You anticipate you will earn more soon
C. It's never okay to buy more house than you can afford
That's correct. Protect your home, your credit and yourself by being responsible and purchasing a home that fits into your current financial budget.
That's incorrect. Markets change. You should NEVER buy more house than your budget allows.
That's incorrect. That's incorrect. Never base what you can afford on future income - it may or may not happen. Only consider what your current financial picture looks like and make sure you have adequate savings in case the future isn't so rosy.
True or False: You won’t be able to get a mortgage if you’ve changed jobs a number of times in the last couple of years.
True
False
That's correct. Lenders are more concerned that you've had a stable income than how many jobs you've had.
That's incorrect. Lenders are more concerned that you've had a stable income than how many jobs you've had.
Which of the following will positively affect your credit?
A. Not paying your bills on time
B. Paying off your credit card balance every month
C. Maxing out your credit cards
D. Applying for lots of credit cards
That's correct. It is great if you can pay off your credit card balance every month.
That's incorrect. Late payments can hurt your credit.
That's incorrect. You should not max out your cards; in fact keeping your credit card balances low is an important part of good credit.
That's incorrect. While applying for one credit card will not hurt your credit, applying for several at the same time might.
True or False: A credit report is the same as a credit score.
True
False
That's correct. A credit report represents your actual credit history. A credit score is a number that is an interpretation of your credit history and how likely you are to repay your debt.
That's incorrect. A credit report represents your actual credit history. A credit score is a number that is an interpretation of your credit history and how likely you are to repay your debt.
Which of the following is a good reason to see a credit counselor?
A. You are using your credit card for purchases you used to make with cash
B. You are having trouble paying your bills
C. You are borrowing money to make loan payments
D. All of the above
That's correct. If you are having financial trouble for any reason, a credit counselor may be able to help.
That's correct, but the other answers are also signs that a credit counselor may be able to help you.
That's correct, but the other answers are also signs that a credit counselor may be able to help you.
That's correct, but the other answers are also signs that a credit counselor may be able to help you.
Now that you've learned about Homeownership and Credit, learn All About Mortgages.
