First of all, congratulations! You’re either ready to purchase your first home, trying to become more educated, or you’re here by chance – either way you’ve got something to gain. No need to feel intimidated here because we’re keeping it simple.
Below you’ll find 6 steps that will hopefully lead you to a better understanding of what homeownership is made up of. Keep in mind – the most important matter is knowing what you can pay and knowing what you’ll have to pay. Be patient with yourself – it’s a process, but you can do it.
1. Make a calendar of monthly expenses (focus on saving)
Ever had a payment slip your mind? It happens – especially when you’ve got a lot of bills and life is busy. Making a calendar is a great way to understand how everything adds up. There are great resources online for printable calendars – check some out! At the start of each month calculate the difference between how much you make and how much you have to pay monthly. This will give you how much money you have available to save. You may not have any money to save in the beginning but that’s why you budget – keep at it.
2. Decide on a realistic down payment
Now that you know the amount you can set aside, aim for a down payment amount that is less than what you can save. That way fees don’t surprise you.
3. Look for the home you need (size, location, + condition)
This step doesn’t have to happen in this order, but it makes it easier to focus on the type of mortgage you want to get. It also helps you build towards a specific goal.
4. Evaluate credit + research how to build it
Bad credit or no credit are temporary statuses. You can do something about them. It takes time to build good credit or restore bad credit. If you’ve fallen behind in your payments, get back up and stay current. Understand that this is like exercising, it takes a while to get in shape.
5. Plan for taxes/fees
Fees and taxes are part of the loan application, processing and closing process, but if you plan for them you can use your savings. Items like property taxes, and homeowner insurance are sure to show up.
6. Research + understand mortgage rates
Mortgages are not one-size fits all. Research different rates, points/no points and closing costs. Keep in mind that buying a home is not just paying the sticker price. The best way to have a successful mortgage is to make the purchase based upon what you can afford. Knowing the rates and different loan options lets you know what to expect.
Once your credit is where you need it to be and you’ve found the right mortgage – you’re closer to being a homeowner! However, owning a home is not the only goal. The final goal is to be responsible with your finances. So keep budgeting, be your own advocate, and learn to monitor spending.