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When planning to buy real estate, one should complete a balance sheet and planned
balance sheet. A balance sheet will allow you to calculate your net worth. Net worth is your total assets minus your total debts. Lenders view favorably a positive net worth, in case
you lose your job or are temporarily unable to pay your mortgage.
Below is an example of a balance sheet and a planned post-home purchase balance sheet:
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PRE-PURCHASE BALANCE SHEET |
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Assets |
401k |
$75,000 |
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Checking & Savings Account |
$5,000 |
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Home Down Payment |
$35,000 |
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Auto (market value) |
$14,000 |
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Other Liquid Assets |
$5,000 |
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$134,000 |
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Debt |
Auto Loan Balance |
$10,000 |
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Credit Card 1 Balance |
$3,000 |
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Credit Card 2 Balance |
$2,000 |
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$15,000 |
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Net Worth |
|
$119,000 |
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POST-PURCHASE BALANCE SHEET |
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Assets |
401k |
$75,000 |
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Checking & Savings Account |
$2,000 |
| |
($3,000 less for closing costs) |
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Home (market value) |
$175,000 |
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Auto (market value) |
$14,000 |
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Other Liquid Assets |
$5,000 |
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$271,000 |
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Debt |
Mortgage Balance |
$140,000 |
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Auto Loan Balance |
$10,000 |
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Credit Card 1 Balance |
$3,000 |
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Credit Card 2 Balance |
$2,000 |
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$155,000 |
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Net Worth |
($3,000 less due to closing costs) |
$116,000 |
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Real Estate 101 Page
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