Is Homeownership Your New Year Resolution?
Is 2011 the year for you to become a home owner? If your answer is yes, then begin thinking about a plan to make that a reality. We’ve published some tips to help get you started in our 5 Resolutions for Home Buyers in 2011 post, but here are a few pointers to help you accomplish the first resolution, which is “I will save up for up-front costs associate with buying a home.”
Living paycheck to paycheck is fine for a renter, but a homeowner needs to be putting money away. Given that homeowners don’t have a landlord to take care of problems that arise in the home, you’ll need to have a reserve saved up in order to overcome these hurdles for yourself. To prepare you for saving money once you’re in a home, use these tips to save for the home.
Determine a budget:
You already budget your finances to pay rent monthly, but buying a home also brings the added expenses of taxes and insurance. To see whether you’re able to pay for the additional costs, set yourself a budget and stick to it. Begin making “virtual” mortgage payments to build up savings and to adjust to mortgage payments down the line. You’ll be amazed how much you can save from cutting back on unnecessary expenses such as entertainment and dining out.
Get good credit:
One of the most important things a potential buyer should be working on is improving his/her credit. Having a good credit score will help you secure an affordable mortgage rate when applying for a home loan. The first step to attaining good credit is to find out what your score is. Request a free credit report at AnnualCreditReport.com.
Another step to achieving good credit is to reduce your debt. When you begin the mortgage preapproval process one of the things they’ll look at is debt to income ratio, as a mortgage payment should only be 30% of your monthly income. So reduce the amount of debt you have, especially debt with high interest payments.