Question for the Money Doctors
Question submitted on Apr 23, 2014.
QuestionMy husband and I experienced a foreclosure last Jan. So we've been renting since. We desperately want to buy our own home again, what will it take to do this? Our goal is to save for a down payment....it is difficult right now bc he is a stay at home dad, limiting his income as a home repairman. But I figure it saves us in daycare expenses. What should our priorities be at this time?
Sorry to hear about your misfortune. In a foreclosure, the bank now owns your home. My recommendation would be to prioritize other things right now over the repurchase of your home. I would like to see you have an emergency fund (liquid cash) equal to about 6 months of your committed expenses - this will help you get through situations like another downturn in the economy, job lay-off and sudden, unexpected expenses. Then I believe you should start a fund for retirement - it doesn't have to be a lot of money but starting something and contributing monthly to this will really help in the future.
After you get these things established, then you can reconsider a home purchase. However, if your financial situation has not changed since your foreclosure, then you may find yourself back in the same situation at some point in the future. Before purchasing a home, make sure you are financially sound enough to make the monthly payments - not only interest and principal but also taxes and home repairs and maintenance. Don't just rely on the bank, do your own number crunching, that is the only way you'll really know if another home is affordable.
For additional information visit http://www.360financialliteracy.org/