How to Make the Dream of Homeownership a Reality This Year
In 1963, Martin Luther King, Jr. inspired a powerful movement with his famous "I Have a Dream" speech. Today, reflecting on his strong & encouraging message, many of us are able to think about our own dreams, goals, beliefs, and aspirations. For many Americans, one of those common goals is owning a home: a piece of land, a roof over our heads, and a place where we can grow and prosper in happiness .
If you’re dreaming of buying a home this year, start by connecting with a local realtor to understand what goes into the process. With a trusted advisor, you can begin to answer the questions below to prepare for homebuying success.
1. How Can I Better Understand the Process & How Much Can I Afford?
The process of buying a home is a pretty big deal. You need to decide on key things like how long you plan on living in an area, school districts you prefer, what kind of commute works for you, and how much you can afford to spend.
Keep in mind, before you start the process to purchase a home, you'll need to apply for a mortgage. Lenders will evaluate several factors connected to your financial track record, one of which is your credit history. They’ll want to see how you’ve been able to minimize past debts, so make sure you’ve been paying your student loans, credit cards, and car loans on time. If your financial situation has changed recently, be sure to discuss details with your lender. Most agents have loan officers they trust and will provide referrals for you.
According to ConsumerReports.org:
“Financial planners recommend limiting the amount you spend on housing to 25 percent of your monthly budget.”
2. How Much Do I Need for a Down Payment?
In addition to knowing how much you can afford on a monthly mortgage payment, understanding how much you’ll need for a down payment is another critical step. On a positive note, there are many different options and resources in the market to potentially reduce the amount you may think you need to put down.
If you’re concerned about saving for a down payment, start small and be consistent. On a monthly basis, a little bit can go a long way! Add a portion of your monthly paycheck into a separate savings account or house fund. AmericaSaves.org says:
“Over time, these automatic deposits add up. For example, $50 a month accumulates to $600 a year and $3,000 after five years, plus interest that has compounded.”
3. Saving Takes Time: Practice Living on a Budget
As tempting as it is to pass the extra time you may be spending at home these days with a little retail therapy, putting that extra money toward your down payment will help accelerate your path to homeownership. It’s the little things that count, so start trying to live on a slightly tighter budget that will allow you to save more for your down payment and help you pay down other debts to improve your credit score.
A survey of millennial spending shows, “68% reported that shelter in place orders helped them save for their down payment.” Danielle Hale, Chief Economist at realtor.com, also notes:
“If there is any silver lining to the current economic landscape, it’s that mortgage rates are hanging around record lows…Additionally, shelter-in-place orders helped many who were fortunate enough to keep their jobs save for a down payment — one of the largest hurdles of buying a home. The combination of low rates and the opportunity to save is enabling many millennials to move up their home buying timeline.”
While you don’t need to cut all of the extras out of your current lifestyle, making smarter choices and limiting your spending in certain areas will make a huge difference.
One Final Thought
If homeownership is on your dream list this year, take a good look at what you can prioritize to get you there. Our team would love to help you determine the steps you should take to start the process today!
~Real Advantage Partners RE/MAX Precision