1. How Can I Better Understand the Process, and How Much Can I Afford?
The process of buying a home is not one to enter lightly. You need to decide on key things like how long you plan on living in an area, school districts you prefer, what kind of commute works for you, and how much you can afford to spend.
According to ConsumerReports.org:
“Financial planners recommend limiting the amount you spend on housing
to 25 percent of your monthly budget.”
to 25 percent of your monthly budget.”
Keep in mind, before you start the process of purchasing a home, you’ll also need to apply for a mortgage. Lenders will evaluate several factors connected to your financial track record, one of which is your credit history. They’ll want to see how well you’ve been able to minimize past debts, so make sure you’ve been paying your student loans, credit cards, and car loans on time.
2. How Much Do I Need for a Down Payment?
In addition to knowing how much you can afford on a monthly mortgage payment, understanding what you’ll need for a down payment is another critical step. Thankfully, there are many different options and resources available to potentially reduce the amount you may think you need to put down on a home.
If you’re concerned about saving for a down payment, start small and be consistent. A little bit each month goes a long way. Jumpstart your savings by automatically adding a portion of your monthly paycheck into a separate savings account or house fund.
AmericaSaves.org says:
“Over time, these automatic deposits add up. For example, $50 a month accumulates
to $600 a year and $3,000 after five years, plus interest that has compounded.”
to $600 a year and $3,000 after five years, plus interest that has compounded.”
Before you know it, you’ll have enough for a down payment if you’re disciplined and thoughtful about your process. The 2019 Home Buyer Report conducted by NerdWallet says:
“The truth: 32% of current U.S. homeowners put 5% or less down on their home, according to census data.”
3. Am I Practicing Living on a Reasonable Budget?
As tempting as it is to settle in each morning with a fancy cup of coffee from your favorite local café, putting that daily spend toward your down payment will help accelerate your path to homeownership.
It’s the little things that count, so start trying to live on a slightly tighter budget if you aren’t doing so already. A budget will allow you to save more for your down payment and help you pay down other debts to improve your credit score.
A recent survey shared on Bankrate.com says:
“70 percent of would-be first-time homebuyers will cut spending on spa days, shopping and going to the movies in exchange for purchasing a home within the next year.”
While you don’t need to cut all the fun out of your current lifestyle, making smarter choices and limiting your spending in areas where you can slim down will make a big difference.
Bottom Line
If homeownership is on your wish list this year, take a good look at what you can prioritize to help you get there, and you’ll be one step closer to making your dream a reality.
At Navigators Real Estate, we'll go the extra mile to make sure you understand what it takes for a smooth transaction with a SOLD sign at the end!
