Financing and buying a home can help improve your financial situations, especially if you have a bad credit history. Adding a mortgage payment to your monthly expenses seems like a mistake if you are having financial difficulties, but in the long run a mortgage can save you money on your living expenses.
Raise Your Credit Score
Regular payments made on a loan-term loan, such as a mortgage, are weighted more heavily by financial institutions that regular credit card payments. Within three years of regular payments, you can raise your poor credit rating to good and qualify for lower interest rates on all your loans.
So while you will probably have to finance your mortgage with a sub prime lender if you have poor credit, you can expect to refinance your loan for better rates in about three years.
Investment For The Future
Paying rent is simply making someone else richer. For the same amount you are paying on rent, you can be making a house payment and investing in your future. You will be building equity through your monthly payments and rising real estate prices.
Your home's equity is a financial safety net that you can tap into for future emergencies. With its interest written off on your taxes, this line of credit is better than using a credit card. You can also use the equity as part of a retirement plan by down-sizing your home in the future.
Reduce Future Living Expenses
Unlike rent, your mortgage payment won't fluctuate, unless you opt for an
adjustable rate mortgage. So while your paycheck will increase with each pay raise, your mortgage payment will be taking a smaller chunk of your paycheck. And once your mortgage is paid off, then you will really see a reduction in your living expenses.
Create Wealth
If you are really ambitious, you can also create wealth through purchasing and renovating a house. Often times a little bit of sweat-equity can have big payoffs. You can then sell the house and purchase another house to renovate. This hard-work process is best for those willing to put a lot of time and effort into a project.
About the Author
Carrie Reeder is the owner of
http://www.abcloanguide.com, an informational website about various types of loans. To view our list of recommended bad credit mortgage lenders online, visit this
page:
http://www.abcloanguide.com/lessthanperfectcredit.shtml
