Are You Living Beyond Your Means? Are You Thinking of Buying a Home? Five Ways to Assess Your Finances

Ladies...Are you living beyond your means? Now is the time to clean up your act!

All the talk on the news lately focuses on the economic downturn and the soft real estate market. It seems as though these things have become a self-fulfilling prophecy -- the more they're talked about, the more they come true.

Whether or not we are headed for a recession, now is not the time to be living beyond your means. Now is the time to clean up your financial act and tighten your purse strings a bit, if for no other reason than to develop healthy financial discipline!

In an article this morning on Yahoo! Finance, Glenn Curtis discusses "Five Signs That You're Living Beyond Your Means".

1. Your credit score is below 600
2. You're saving less than 5%
3. Your credit card balances are rising
4. More than 28% of your income goes to your house
5. Your bills are spiraling out of control

If your any one or more of the above sounds like you, it may be time to reassess your budget to make sure things don't get worse.

Homeowners: if #4 sounds like you, it may be time to really sit up and pay attention. To figure it out, calculate what percentage of your monthly income goes toward your mortgage, property taxes and insurance. If it's more than 28% of your gross income, then you are likely in over your head.

"Why is 28% the magic number? Historically, conservative lenders have used the 28% threshold because their experience has told them that this is the rate at which the average person can get by, make their mortgage payments and still enjoy a reasonable standard of living. Certainly, some homeowners can get by spending a higher percentage on their homes, particularly if they cut back elsewhere, but it's a dangerous line to walk," according to Curtis.

If you're thinking of buying a home in the near furture and you're not sure what you can afford, discuss your financial situation with your REALTOR® and a reputable lender. While divulging this kind of information can be uncomfortable, it's absolutely vital to make sure that you can afford the house you want to buy and that you can afford the mortgage product you are stepping into. With the help of your homebuying team -- your REALTOR® and your lender -- you can make smart decisions that can make homeownership a reality, even in a tough economic and real estate market!

TAKE HEART: "As a nation, we are digging ourselves ever deeper into debt. To avoid becoming part of the gloomy bankruptcy and foreclosure statistics, it's important to measure your financial health regularly. The five signs presented here are not a death sentence; instead, they should be seen as symptoms that allow you to diagnose a problem before it gets worse."

Getting Help Buying Your First Home

Though it is true that different mortgage lenders and different loan products have varying requirements for loan approval, including differing limits on how much money you can get from outside sources, you can still get help in buying your home...and it can be as easy as asking Mom and Dad.

A recent article on REALTOR® Magazine Online, "How to Help the Kids Buy First Home," highlighted three ways that parents can help their children buy a home in that time-honored tradition of getting them out of the house!


Another great way to find out about ways your parents or other family members can help you purchase your first home is to talk to a reputable lender. There are many options out there for gift money, as well as downpayment assistance and many types of loans that you may not even know exist!

Just click here to read the article - and see if this is an option for you!