Have you been dreaming of owning your own home or even upgrading the one you currently have? With a few simple steps and a little saving, you could be well on your way to move-in day. If home ownership is on your to-do list, follow these simple steps to save throughout this next year.
Track spending and make a budget
Prior to even looking at homes, decide how much of a monthly you can comfortably afford. January is a good time to not only track all of your monthly spending and create a budget of your expenses but to look at your spending habits from the previous year. Once you’ve looked at all your expenses, you’ll have a more complete picture of how much money you truly have at the end of the month and what you can do to increase your savings.
When you get pre-approved, keep in mind what the bank may say you can afford might be drastically different from what you what you feel comfortable with that allows you to maintain the lifestyle you want. Calculate your total home costs, including mortgage, property taxes, home insurance and HOA fees, which can often add several hundred dollars to your total mortgage. A good agent can help you determine general numbers to start.
Save for a down payment
Having a low debt to income ratio will be beneficial when saving for a down-payment and getting a mortgage. Your savings are another aspect of your financial picture that lenders will be very interested in. You don’t only want to build up your savings to impress lenders. You’ll want to save money for a down payment and the closing costs on your new home.
Finally, nearly every homeowner would agree that you will want to have money saved up for things like home décor, maintenance, and renovations. Start saving early to put yourself in the best position possible to afford the home you want—and the things you want to put in it!
Check if you qualify for housing programs
Before you purchase a home, you will want to see if you qualify for any housing programs. If this is your first home, you may qualify for a first-time homeowner’s loan. These loans have lower down payment requirements and are easier to qualify for than a conventional loan. Although not just for first time homebuyers, FHA loans are excellent because, in addition to lower upfront loan costs and less stringent credit requirements, you can make a down payment as low as 3.5%
If you are not a first-time homebuyer, you still might qualify for a loan that can help you save. Military service members and veterans can get a VA home loan that doesn’t require a down payment or mortgage insurance and comes with low closing costs. There are also other loans available for teachers, police officers and firefighters through the Good Neighbor Next Door Program
Improve your credit score
Your credit score is a significant factor that lenders use to determine your eligibility to buy a home. The better your score, the better your chances will be to secure a home loan. Some ways to improve your credit score are to pay down or pay off any credit card bills, refinance student loans and refrain from opening any new accounts.
With these few simple steps, you will be well on your way to the closing table.