Many childcare providers run their business out of their home, and rent with the dream of eventually buying.  Homeownership is one of the best ways to start building wealth, financial stability and gives you the peace of mind in running your in-home child care business by not having to get permission from a landlord. It’s a goal many have, but not everyone can attain. Before buying, everyone should look closely at their financial situation and stability of income.  One way to remember what’s important is the 5 C’s: Credit, Capacity, Conditions, Character and Collateral. 

Credit: Having your credit history in good order is vital. If you have too many high balance loans or credit cards, maybe now isn’t the time to add another loan to the list. If there are outstanding collections or judgments hanging over you, finding a way to settle them will make your credit history look stronger to a financial institution. There are many credit counseling agencies that offer assistance to help raise your credit score and pay off debt at the same time. These organizations can help you find the right credit agency to help. National Foundation for Credit Counseling (NFCC) or Financial Counseling Association of America (FCAA)

Capacity: The general rule of thumb is a person shouldn’t spend more than 28% of their monthly income on their mortgage payment. Having extra money after the mortgage is vital for continuing to afford your other expenses and being able to save money for the future. A financial institution will look closely at your ability to afford the home you want to buy.  Your Oregon Child Care Alliance business coach can help you track your monthly income and expenses so you can figure out if you earn enough to make the mortgage payments on a property.  Contact the Oregon Child Care Alliance to learn more.

Conditions: Be sure to understand the type of loan that best suits your situation. With interest rates raising month over month, obtaining an adjustable-rate mortgage might not be the way to go. A fixed rate will ensure your payment doesn’t change over time which helps with budgeting. Also, many states offer down payment assistance programs that can help provide a down payment for your home. In some instances, the money doesn’t even need to be paid back. Do your research or ask a Loan Officer what Oregon might offer.  Don’t have a Loan Officer?  A good place to start is to contact your local bank or credit union and tell them you want to learn more about down payment assistance programs.

Character: A mortgage lender will make a determination of your likelihood of paying the mortgage back on time. They will determine your character based on previous credit history, employment history and overall savings patterns. Having money in a retirement or savings account always makes a borrower’s application look stronger. The bank can see you are prepared financially for the unexpected. Making sure any and all of your existing debts are paid on time for at least the last 12 months will make your likelihood of paying back a mortgage look stronger. Running your business for at least the last 2 years with the same income stream is important to show stability of income. 

Collateral: The condition a prospective home should be closely looked at. Look at the age of the roof, appliances and utilities (like a HVAC system), or if the home is outdated, what would require updates? All these things matter when buying a home. No one wants expensive repairs coming up right after making a purchase. Knowing these things, you can bargain with the seller by asking for a closing cost credit which can help offset future expenses in the home.  To learn more about what a closing cost credit is, click here

It’s best to set yourself up for success by taking your time to prepare before making such a huge financial commitment. Do your research and remember to focus on the 5C’s before you decide it’s time to buy a home for you and your child care!  

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