Is buying your first home one of your 2017 goals? As a homeowner, you can receive some big perks. Among these are the ability to build equity, capitalize on some serious tax deductions, and gain control over your living space.
But buying a home isn’t all granite countertops and backyard BBQs. It’s a big commitment that requires a large chunk of change. To secure the best mortgage rate possible, you’ll want to get your finances in order. Use these five tips:
Set a Clear Savings Goal
Make your savings goal as specific as possible. This gives you a clear measuring stick. For many prospective homebuyers breaking their goal down into monthly goals is even more helpful. To do this, determine how much you’ll need for your down payment and closing costs. Then divide that number by the number of months you plan to save.
Make Saving Automatic
Even the most diligent among us can struggle with self-control when the proverbial donut is placed right in front of us. Simplify your savings plan by opening a separate savings account and setting up an auto transfer. Some online accounts, like CapitalOne360 and Ally, even allow you to set up more than one account that you can identify for a specific goal. (Another perk of online banking accounts is they often offer higher interest rates – helping you reach your goal more quickly!)
Evaluate & Revise Your Budget
Depending on your monthly savings goal, you might need to take a look at your current budget. If your total expenses don’t leave enough for you to save the desired amount, something will have to give. In some instances, you might be able to, “trim the fat,” and reduce your monthly expenditures.
Start by looking at your discretionary income. Meeting your savings goal could be as simple as eating out less, canceling the gym membership you never use or going without premium cable channels.
If this doesn’t get you all the way there, evaluate your bills and living expenses. Cutting those costs entirely is probably not an option, but could you reduce them? Talk to your providers, like the electric company, to see if there are ways to reduce your monthly statement.
Don’t Forget Your Rainy Day Fund
Hitting your savings goal for a new home is awesome! But, don’t forget about your rainy day fund. Life happens. Unexpected expenses occur. Wiping out all your savings to buy your new home could leave you in a precarious situation.
Keep Written Records of Everything
In order to secure a mortgage, your finances are scrutinized to the max. This isn’t just to protect your lender – it also protects you. The last thing you want is to take on debt you can’t afford. If you make any large financial moves – such as big transfers or accepting a gift from a family member – you’ll need written proof that the transactions weren’t loans. This digital trail will need to include your bank statements, all appropriate letters of explanation, and photocopies of any deposited checks.
What Next
One of the essential elements of setting a savings goal is to know how much home you plan to buy. Get a jump-start by giving me a call to see where you stand financially.
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