Let's face it, times are tough for pretty much everyone, as far as finances go. But that doesn't mean you need to give up on your dreams of home ownership. Here are some tips for getting everything in order so you can afford to purchase a home.
1. Develop a household budget. Instead of creating a budget of what you’d like to spend, use receipts to create a budget that reflects your actual spending habits over the last several months. This approach will include unexpected expenses, such as car repairs, as well as
predictable cost such as rent, bills, and groceries.
2. Reduced your debt. Lenders generally look for a total debt load of no more than 36 percent of income. This figure includes your mortgage, which typically ranges between 25 and 28 percent of your house hold income. So you need to get monthly payments on the rest of your installment debt—car loans, student loans, and revolving balances on credit cards—down to between 8 to 10 percent of your monthly income.
3. Look for ways to save. You probably know how much you spend on rent and utilities, but little expense add up too. Try writing down everything you spend for one month. You’ll probably spot some great ways to save, whether it’s cutting out that morning trip to Starbucks or eating dinner at home more often.
4. Increase your income. Now’s the time to ask for a raise! If that’s not an option, you may want to consider taking on a second job to get your income at a level high enough to qualify for the home you want.
5. Save for a down payment. Designate a certain amount of money each month to put away in your savings account. Although it’s possible to get a mortgage with only 5 percent down, or even less, you can usually get a better rate if you put down a larger percentage of the total
purchase. Aim for a 20 percent down payment
6. Keep your job. While you don’t need to be in the same job forever to qualify for a loan,
having a job for less than two years may mean you have to pay a higher interest rate.
7. Establish a good credit history. Get a credit card and make payments by the due date. Do the same for all your other bills, too. Pay off the entire balance promptly.
