When we think of the classic “American Dream”, a happy family living in a house with a white picket fence likely comes to mind. For many, the purchase of their first home is the biggest financial investment they will ever make. If you are planning to make this leap soon, it takes careful planning and savvy savings techniques to afford a home within your budget.
Determine What You Need
The first step is to figure out how much money you will need to make a down payment. Conventionally, 20 percent of the purchase price would secure you as the new homeowner. However, many banks today accept down payments as low as three percent. There are also a number of government-backed mortgages that offer loan programs with no down payment at all. Meet with a mortgage loan officer to carefully review your qualifications for home loans.
Manage Your Debt
The next move will be to start paying down your debts. In a perfect world, you would have no debt but student loans, car payments and credit cards make this a nearly impossible dream. If you owe a substantial amount of money to various lenders, this can make it quite difficult to qualify for a mortgage. Start with the high balances and interest rates to get your debt down to a more manageable level.
Your credit score – a number that represents your ability to pay back a loan – is also a factor. Although there is no official minimum number, you’ll want a score above 600 to increase your chances of obtaining a mortgage loan.
Have an Investment Plan
There are many options for saving money and the investment strategy you choose can make or break your dreams of homeownership. Avoid high-risk stocks, real estate trusts and start-up ventures, as you want to have money available when needed. The best advice is to play it safe with a savings account or a certificate of deposit that accrues interest over time. A financial adviser can help determine the appropriate savings vehicle for you.
Stick to a Budget
The age-old financial tip is to create a budget and closely track spending. Rather than simply checking your monthly bank statements, monitor expenses day-to-day with a simple tool you can manage yourself. An Excel spreadsheet is a more organized way to see everything and can help identify where you might need to curb spending. Keep in mind, once you own a home about 30 percent of your income will be dedicated to housing expenses.
With the right financial planning, your dream of owning a home can soon become a reality! Get started on your search with By Carrier’s custom communities.