Anyone that has ever gone house shopping can relate with the overall. At first, there is great excitement. You’re driving around from house to house, checking out various neighborhoods and taking tours. You start to picture your master bedroom setup or how you would lay out the living room.
Then, however, the drag starts to set in. You arrive to a house only to find out it’s been purchased. People start outbidding you. Your dream house is out of your budget. You can’t bear to be handed another realtor’s magnet calendar.
Money is the biggest issue for people buying a house. While everyone would like to reach that plateau of 20%, it may not be possible. That dream house may be just a bit out of your financial reach.
Or, you haven’t even started planning the financial side of purchasing the house. You may just be starting out. Purchasing the house is a big deal, what are the financial steps you should take?
Oh boy, it’s time to break out the spreadsheets! If you’re an active budgeter, you may already know how much per month you’re spending on groceries, gas and other expenses. If you’re not truly aware, then maybe it’s time you start looking more closely.
You’ll want to figure out how much you can put away each month without having to sacrifice anything necessary. This may mean not going on vacation this year or cutting back on Friday afternoon drinks to once a month. Try to set a certain dollar amount and put it into your savings immediately.
One of the best ways to go about it is thinking that the money you put into savings isn’t even there. If you’re earning $1000 per month and you put in $300, it’s like you’re really earning only $700.
It’s easy to say “I want to buy a house”. Most people want to buy a house, but figuring out the “when” can be a much more difficult step.
Set out a goal on your calendar of when you would like to move into your new home, or at least start looking at homes. You could be racing career goals, the market or your own personal timeline of moving out.
Make a savings schedule and never forget your overall goal of becoming a homeowner.
Christmas and birthday money are always nice little bonuses from the family for being alive, so make sure and store up on those during the year.
You can also capitalize on your tax-refund or work bonuses, tossing that in the savings fund. It might be tempting to treat yourself to a vacation or a new TV, but it’s better to have that money for a house where your new TV will fit.
You might have had a moment at work where your business can in under budget and they used that extra cash to purchase a new copy machine or new chairs for everyone.
You shouldn’t be purchasing any new chairs, but you should toss any extra money you have into your savings. Even though $100 may not seem like a lot, doing that five times in a year is an extra $500. Every little bit counts at this point.
Look and see how much money you’re saving from spending money on non-essential items and toss that extra cash in to your pot.
With your salary and savings, you may already have a range of what you can afford. Even though the median house price in the US is around $230,000, it might be drastically different in your area.
Once you have a range of what you know you can afford, you can start tempering expectations and look more efficiently. Some houses can get gobbled up quickly and you don’t want to waste time looking at houses that are out of your price range.
If you’re putting down 10%, shoot for that magical number but know what banks will require for different kinds of property. For example, those purchasing rental property will need to put down at least 20%. Other properties may let you put down as little as 3%. It all depends on you and your situation.