Covenant Community Capital

Figuring out all of the details about buying a home is a huge task by itself. But it’s critical that you put it in context with your other costs. In general, your home purchasing budget will depend on a few key factors:

• How much you make
  It’s generally recommended that homebuyers not pay more than 30% of their monthly income on a house payment. To connect with opportunities to increase your skills and income, dial the 211 United Way helpline.
• How much you owe
  You don’t have to be completely debt-free, but you should be on your way to reducing outstanding debt. Our crash course in debt reduction should put you on the right track, but it should be implemented in conjunction with a sound spending plan.
• What kind of mortgage you can get
  Some mortgage products cost more than others. We walk you through all of the moving parts of a loan, including interest rates, APR, points, mortgage insurance, and more.
• Other ownership costs
  It’s also important to factor in other ownership costs, such as property tax, insurance, HOA fees, improvement costs, and utilities. Different types of properties have different fees. For example, a condo in a building might have an HOA fee that includes certain utilities, or a single family home might need immediate improvements.

This complicated calculation of monthly costs, loan amounts, hidden fees, and spending habits might seem daunting at first, but our team here to help you figure it all out.

How Much is Your Annual Income?

Your income is the single-most important data point when you’re being evaluated for a mortgage. The reason is simple: if you’re making a steady wage, you’re less likely to default on your loan. While it’s helpful to have a sizeable down payment and great credit, you will not get a mortgage without an income.

We’ll review some key points about how to view your income, such as:

• How to maintain a steady income through good job performance.
• Ways to build your annual income over time.
• Increasing your annual income with side projects.
• Maximizing your take-home pay.

It’s important to set your homebuying expectations early. That’s why we take a realistic look at the kind of loan you’re qualified to get with your current income. From there, we help you develop strategies for getting to your desired income level.

How Much Do You Owe?

Debt can be like quicksand to your financial freedom. Certain kinds of debt, such as credit card debt, come with high interest rates that compound over time. The longer you take to pay, the more it ends up costing you. This kind of debt should be paid down as soon as possible.

But other kinds of debt with low interest rates, like student loans or mortgages, can be manageable. Your cash flow plan should incorporate monthly payments to pay down this debt. Throughout this course, we’ll discuss:

• How to tell the difference between "good" debt and "bad" debt.
• Strategies for paying down "bad" debt as soon as possible.
• Real-life examples of using debt in your cash flow plan.

We will also discuss how different kinds of debt affect your debt-to-income ratio, which is a key factor used to determine whether you qualify for a mortgage.

What Kind of Mortgage Should You Get?

Over the last few years, the finance industry has made a lot of money inventing and selling mortgage products. Before you sign any paperwork, you should be an educated consumer and fully aware of all your obligations. We review some of the most common mortgages and terms, including:

• Fixed-rate vs. ARM mortgages.
• 15 year vs. 30 year mortgages.
• Financing your down payment, or what "no money down" offers really mean.
• Getting a mortgage through a broker or directly from a bank.

When reviewing your monthly obligations to your mortgage, it’s important to factor in key costs, such as homeowner’s insurance and property tax. Some mortgage providers require first-time homebuyers to pay these costs monthly, where they are held in escrow until they are due. This can change your cash flow plan significantly, adding hundreds of dollars of additional costs each month.

What Other Costs Can You Expect?

Houston is a city of neighborhoods. At last count, Houston has approximately 437 civic or homeowner associations, offering a rich variety of urban and suburban living. Your neighborhood choice can be influenced by a variety of factors, including:

• School districts (if you have children).
• Property values
• Lot sizes (which impact yard sizes)
• Deed restrictions
• Active civic associations

We will take a close look at some of the neighborhoods surrounding us, and pinpoint some of the key differences between them. Some of the neighborhoods we discuss include the Fifth Ward, the Third Ward, the Near Northside, and beyond.