January 26, 2018 | Jen Hellmich

I truly appreciate this article. Most of us think budgeting stinks, but we really do have to add up our spending now and then to figure out how to reach our goals. 

Start a resolution ANY TIME! 

Posted on   Jan 19 2018 - 2:17pm   by   Housecall     By Megan Wild

If you want to buy a home this year, you may be in the midst of  planning—or perhaps you're already well on your way. Purchasing a home  is a process made up of many moving parts, including your finances, your  overall goals, your planning ability and your current financial situation. That said, it’s the season for New Year’s resolutions, right? Start making some financial ones along with your other goals.
To get you started, here are five financial resolutions that can help you reach your goal of buying a home in 2018:

Make a Budget

Just over 40 percent of Americans have a budget.  Budgets are invaluable to prospective homeowners, though. Why? Well,  you can see how much you spend per month—and you need to know that  before deciding on what mortgage payment you can afford.
Many people hazard a guess at their discretionary spending. You may  think you spend $200 a month on dining out with friends, for example.  But if you totaled it up, you may find that it comes out closer to $300.
That’s important, because those who spend more than they earn, or  squeak by financially every month, often do it because they  underestimate what they’re paying. So, use a personal finance software  like Mint or You Need a Budget and enter everything you purchase for at  least a month.
As you build your budget, divide it into categories determined by  your monthly expenditures. You can tweak this going forward. Tally  together what you need for necessities, like rent and utilities. Add  together discretionary spending, like movies and eating out.
How are you doing? If you’re within your earnings, great! If not,  review your spending for how you can save. Can you eat out less? Maybe  cut down on that second or third video streaming service? Brew your  coffee at home?

Save, Save and Save Again

Purchasing a house costs money. If you’ve been diligently saving for  the down payment, congratulations. If not, one of the most crucial  things you can do to prepare for homeownership is saving for the down  payment.
Once you’ve got the down payment, continue to save, as you will need  moving expenses and a cash cushion. As a rule of thumb, moving and  establishing a household always costs more than you think. You may need  new furniture or plumbing repairs, so be sure you have an emergency  stash of cash.

Establish a Clear Goal

Like budgeting for your expenses, you also need to know your overall savings goal.  It’s like creating a fund in the event of losing your job—you want a  six-month cushion, at least. You will find it easier to save if you can  visualize yourself reaching your final goal.
Scope out starter homes in your area. Look at neighborhoods you’d  like to live in with your family. Use an online mortgage calculator to  figure out how much you’d be paying for the average starter home per  month.
Once you have a general sense of how much your mortgage would cost,  as well as utilities, figure out how much you will need for a down  payment. While six months’ worth of your salary is ideal, you can also  aim for three months to start.

Get Your Credit Score

Most mortgage lenders will only approve mortgages for people with good to excellent credit scores. Good credit scores range from 690 - 720 and excellent credit scores range from 720 - 850. The average credit score in the United States is 679.
Factors that determine your score include:
  • History of debt payment
  • Total amount of debt
  • Length of credit history
  • Number of credit sources
Credit scores are relatively easy to obtain, whether from banks,  financial software or one of the credit reporting companies, such as  TransUnion. In fact, you’re entitled to a free credit score each year, or every 12 months from Experian, TransUnion and Equifax.
Find out your score before applying for a mortgage.
If you have a bad credit score, it’s unlikely a bank will approve  your mortgage application. But, the great thing about getting your  credit report is that you will find out what categories are pulling down  the score. Knowledge is power—once you know, you can fix it. If your  record of paying bills on time is poor, for example, try to take care of  them the minute you get the bill. Your score will go up.
If your score is average, see if you can increase it before you  apply. Many lenders give preferential interest rates and other financial  advantages to people with high credit scores, so you want the highest  credit score you can get before applying.

Pay Down Debt

There are two main reasons you want to pay down debt as much as you can before purchasing a house.
First, the less debt you have, the higher your credit score is likely  to be. The higher your credit score, the more likely your lender is to  give you preferential treatment, like a lower interest rate or fewer  points and fees.
Second, the less debt you have, the lower your money debt obligations  are likely to be. Less debt can free up monthly cash that you can put  toward your savings, home purchases or other expenses, instead of  directing that money toward paying off interest fees.
Ready to become a homeowner this year? With these five resolutions,  you can make 2018 your year by boosting your savings and credit score,  as well as becoming a go-to candidate for a mortgage with low-interest  and fees.

This article is intended for informational purposes only and  should not be construed as professional advice. The opinions expressed  in this article are those of the author and do not necessarily reflect  the position of RISMedia.


You message has been sent!

Send us a Message

View our Privacy Policy