A quintessential aspect of the American Dream is to own your own home. More than that, living in a home that is owned free and clear may be part of your long-term retirement plan. However, if you are struggling to pay your monthly rental payment, you may wonder how you can possibly afford to save for a down payment on a home or make a regular mortgage payment. Regardless of your current financial state, it may be possible to improve your life and become a homeowner. Turn your attention to these steps to get the ball rolling.
Improve Your Credit Scores
Many people who buy a home do so with financing. In order to qualify for a home loan, you typically need to have a good credit rating or better. You can obtain a free copy of your credit report annually from each of the three primary credit reporting agencies. Review the information to ensure that everything being reported about you is accurate, and update or correct information that is not accurate. Then, focus your attention on the factors that are bringing down your scores, and make an effort to improve your credit scores if necessary. For example, you may need to pay off a few credit cards to improve your rating.
Save for a Down Payment
The days of 100 percent home loan financing are now gone. You may be able to find a home loan that requires a five percent down payment or even less in some cases, but it may be more advisable to plan to put at least 10 percent down when buying a home. This will establish equity in your property initially. In addition to saving for the down payment, you also need to save for closing costs. Closing costs on a typical home loan maybe as high as two or three percent of your home’s sales price. Adjust your budget so that you can start saving money regularly to achieve this financial goal.
Get to Know Your Real Estate Market
To accurately determine how much money you need to save for a down payment and closing costs when buying your first home, you need to have a rough idea of what your new home’s sales price will be. This means that you may need to learn more about your local real estate market. A smart idea is to begin looking at listings online. Focus on the size and style of home you want to buy in a neighborhood that is desirable to you. You may also visit a few new home builders in Utah or wherever you happen to be looking to live to tour model homes. This will give you a better idea about what you are looking for in your first home. Remember that adjusting your expectations regarding home size or location can help you to save money on the sales price in some cases.
Focus on Your Budget
After you know your desired sales price and target down payment amount, you can use an online loan calculator to estimate your monthly mortgage payment. Plug this figure into your current budget to determine if it is affordable. Remember that you may also need to pay for home repairs and maintenance, property taxes and real estate insurance. If the cost of your mortgage and related expenses is too high, now is the time to start adjusting your budget so that you can more comfortably afford the expenses associated with home ownership.
The thought of owning your own home can seem like a far-fetched dream, but the reality is that many people can buy a home if they create a thoughtful plan. Regardless of what your current financial state is, you can easily employ these tips so that you can achieve your dream.