As the economy continues to improve, more and more Americans are considering home ownership this year. But between getting your finances in order and saving for a down payment, purchasing a home can be quite the financial challenge. Let’s look at seven steps you can take to make your dream of owning home sweet home a reality this year.
1. Build a Better Budget
Before you’re ready to save for a house, it’s best that you take a hard look at your budget. Let’s take a quick step back – first of all, you need tohavea budget. Most Americans (over 60% of us, in fact) are breezing through life without any kind of month-to-month financial plan. And the funny thing about money is that when left unattended, it tends to wander away from our pocketbooks. So, before you start prepping for the new house,start by creating a budget and sticking to it. Make sure you know how much money you’re spending and saving, and then make any necessary lifestyle tweaks to help you reach your house-buying goals. You’d be surprised how much money you can save when you give up gourmet coffee or cut out traditional cable.
2. Take a Bite out of Debt
To be approved for a home loan, a mortgage company looks at your debt-to-income (DTI) ratio. A DTI ratio is one of the ways lenders measure your ability to make payments toward the money you’ve borrowed. Your DTI ratio is expressed as a percentage and is comprised of your total minimum monthly debt payments divided by your gross monthly income. Typically, mortgage companies don’t want your DTI ratio to be over 43%.
In other words, you may need to get rid of some of your debt before applying for a mortgage. Whether you need to refinance student loans or exchange your new car for a more affordable used version, take the time to think about ways to lower your monthly debt payments.
3. Extra Checks, Bonuses and Refunds
As much as it may pain you, don’t spend the extra money you make during the year. The money you earn from bonuses, tax refunds and extra checks can add thousands of dollars to your down payment savings. For instance, if you’re paid on a biweekly basis, you’ll receive three paychecks in one month twice during the year. Consider saving that money, not splurging. Planning now for those three-paycheck months and other extra earnings is the best way to keep yourself from being impulsive with that extra money.
4. It’s Never Too Late to Automate
Of all the modern technological innovations, financial automation is one of the most underrated. If you’re worried that you won’t stick to your budget, help yourself stay honest by automating deposits into your savings account. For instance, if you’re trying to save $500 a month for your down payment and closing costs, set up a $500 auto withdrawal with your bank so it’s pulled before you have a chance to miss it. This way, you won’t be as tempted to spend that extra money on a spontaneous trip to Vegas.
If you’re interested in learning more about how to automate all of your finances, including your 401(k), your credit card payments, miscellaneous bills and vacation savings, check out this free eBookfrom nationally renowned financial guru Ramit Sethi.
5. A Little Help from My Friends
Every little bit helps when you’re trying to save for a down payment.BoostUpis a Detroit-based startup that’s giving you even more incentives to put money aside for a house. Once you create a savings account for your down payment goals through BoostUp, your family and friends have the opportunity to match your savings. For example, if you put $50 in your account, your parents or grandparents could match that amount, getting you to your goal faster. Also, if you set aside $750 within BoostUp and close on a mortgage through Quicken Loans, then Quicken Loans will match that $750 to use toward closing costs.
6. Small Is Mighty
To maximize your savings, you could consider downsizing. Moving to a smaller apartment can drastically cut your rent. Even saving an extra $100 a month can be the difference of buying a house this year rather than next. However, making this move can be tricky, especially if you have a family. If you think cutting down housing expenses is the right decision for you, take a look at these helpful hints for making the most of your tiny space.
7. Get to Work
Spending less is one of the easiest ways to save money, but sometimes the best thing you can do is earn more. While you probably don’t need to make a big career change, you could be looking for overtime opportunities and small jobs on the side. Just to be clear: This is going to be hard work. And you shouldn’t sacrifice your primary job or your family time to make a few bucks driving a taxi. At the same time, if you’re serious about buying a house, you may have to work uncommonly hard to get ahead. In the words of American financial author Dave Ramsey, “Live like no one else now, so later you can live like no one else.”
Always ahead of the highly competitive RGV real estate market, Marilyn Cortez is a Spanish speaking native of the Rio Grande Valley. Born and raised in Mission, Marilyn is committed to her clients, and is recognized as a Top Agent in the Greater McAllen Real Estate area, and within Keller Williams Realty. Since the start of her Real Estate career in 2007, she has sold over 40 million dollars of real estate. Known by her fellow real estate agents to be hardworking, honest, dedicated and motivated, Marilyn is knowledgeable in all areas of Real Estate and has built her business on results, with more than 70% of her clients being repeat clients.
4 Simple Ways to Invest in Real Estate BY ANDREW BEATTIE&nbs
"Marilyn was great! She was very personable and always available to discuss my needs and concerns. I was a first time home buyer and she made me comfortable throughout the whole process. If I had to do it all over again, I'd definitely pick Marilyn and I recommend her to everyone I know!"