Buying a home is an accomplishment that most Americans want to experience one day. People from various economic classes can all experience this American dream if they plan correctly. Before beginning the home purchasing process, first time home buyers must first develop a budget plan that will ensure they are be able to afford the property. So many individuals have lost their home to foreclosure because they did no set a budget plan before purchasing their property. The following steps can help first time buyers avoid ever losing their property.
Step One: Know Your Credit Score
Your credit score will directly affect how much money you will need to budget for monthly payments. The higher your credit score, the less interest rate you will have to pay on your mortgage.
Step Two: Do Your Calculations
There are online mortgage calculators that can help show you how much money you will need to put down on a home and how much your mortgage payments will be every month. This step is extremely important because it will give you an idea of exactly how much money you will need to save for a down payment and budget for a mortgage. The two aspects of this step are:
- You should seek to put down 20 percent of the cost for the property to avoid any extra fees.
- Your monthly mortgage should not exceed 30 percent of your salary. The online mortgage calculator can help you know how much your monthly payments will be based on your credit score (see Step One), your down payment amount and your mortgage length (15 or 30 years). If the calculator shows you that a certain property will cost you more than 30 percent of your income per month, you cannot afford that property.
Step Three: Begin to Save
Now that you know how much you will have to spend on a down payment and monthly mortgage payments, begin to find ways to cut expenses in order to save money. Some ways you can begin to save are:
- Eat out only once a month (if that). And when grocery shopping, buy food according to what is on sale and not what you crave.
- If you are dating, seek inexpensive expressions of love such as picnics and long walks. Whether the person you are dating is your mate or someone you are just getting to know, they will understand that you have a goal you are trying to achieve.
- Get basic plans for your cell phone and cable service. While you are saving for your home, some luxuries are going to have to be limited.
- Seek a second income that will not take away a lot of your time. There are ways to earn money that do not call for you to work an extraordinary amount of hours per week. Seek ways to earn an extra $500 a month ($6,000 a year). There are many legit online jobs you can work from home to make extra cash.
Buying Your First Home
Buying your first home is more than a purchase. It’s an experience — one you’ll never forget. Plan accordingly and see what dream homes await you in Louisville: