Buying a new home can be the most important and significant financial step you’ll ever take. When you make that decision, you need to start with a vision–a big picture, if you will. Sometimes, that vision starts when a friend or family member offers you a tour of their beautiful new home. As you venture from room to room, your aspirations grow and you find yourself asking “How do I make this happen for myself?”
With some careful financial planning from Richard Balles at A-K Financial, and some minor adjustments to your spending, your dreams of homeownership may become a reality sooner than you think. Here are several steps suggested by Richard Balles, that you can take to help steer you in the right direction:
1. Define the Big Picture
A good way to gauge how much money you will need to save for a down payment will come from knowing how much you can afford to spend on a home. Richard Balles have an online mortgage calculator ot A-K Financial, that can help you determine a fair estimate of how much home you can afford. It’s also a good idea to connect with Richard Balles or one of our A-K Financial advisors who can provide you with some basic information and give you a more accurate picture of a reasonable price range.
2. Budget Yourself
Creating and following a budget is crucial to the outcome of your savings. There are many unexpected costs that can come with homeownership, such as home repairs or the need for extra furniture, which you may not be currently paying and will need to budget for. Learning to budget your finances now will increase your rate of success as you take on this major commitment.
3. Know your Credit History
Your credit score will factor heavily on the interest rates you receive on a mortgage as well as the type of mortgage you get. Reviewing your free annual credit report–by going to annualcreditreport.com–will help you gain perspective on your current situation. Address any flaws that may appear on your report and make arrangements for payment on items that are outstanding.
4. Determine Your Necessities
Downsizing your expenses can be key in pinching those needed pennies. For example, preparing meals at home each night, rather than dining out too often, can dramatically decrease spending by hundreds each month. Also, cutting back on telephone services and cable TV can make a big impact on your monthly savings. Keep in mind, if you can live without it, you should do just that.
5. Make Your Money Count
Check to see if your employer offers flexible spending accounts. These accounts allow you to stash pre-taxed dollars from your paycheck directly into a savings that can be accessed monthly for personal expenses like car payments or childcare, instead of paying for those things out-of-pocket and after taxes. Utilizing your money to its fullest can save you big dollars in the long run.
6. Save! Save! Save!
Setting money aside could be the most important thing you do. Deduct what you can consistently afford from your paycheck into a savings account. You could request that your employer have that amount automatically deposited into a savings in order to avoid temptation. Remember, there are low and no down payment mortgages available if you can’t save 20 percent of the home’s value for a down payment. However, the more money you have going into the mortgage transaction, the easier it will be for you in the long run.
7. Track Your Expenses
Tracking your monthly spending can help you pinpoint where all those unaccounted dollars are going. When shopping, make a list a head of time and stick to it. Do your best to avoid unnecessary purchases.
8. Reduce Credit Card Spending
Those little pieces of plastic we call credit cards can often cause a great deal of temptation and damage. It is not uncommon for a person to make an unexpected purchase because they had a credit card handy. The best way to avoid these situations is to avoid using your credit cards whenever possible. Credit card companies can charge very high interest rates. When you pay cash, you don’t have to pay interest on it on top of what you’re spending for an item, thus you’re spending less money in the long run.
Remember: lenders like to see you use your credit so long as you use it wisely. It’s not necessary to get rid of your credit cards altogether, but it is important that you not live beyond your means. In fact, canceling your credit cards will shorten your credit history and can substantially lower your credit score.
9. Be Patient
Challenges and financial setbacks can undoubtedly arise as you set financial goals for yourself and cause you to become frustrated. It takes great discipline to avoid breaking your budget. Hang in there, for great is your reward!
10. Be Realistic
Maintaining a budget that works for your situation will be essential to staying on track. Setting unrealistic goals will only set you up for failure in the long run. Save what you can afford and remember that life is meant to be enjoyed. You can find a healthy balance.
Richard Balles says, putting your best foot forward will prepare you for a solid start as you venture through life and take on new commitments. Owning a home is one of the largest financial commitments that you’ll ever make, and A-K Financial has experienced mortgage advisors like Richard Balles, who want to help you through the process. So as you prepare for bigger and better things, keep your eyes on the prize and remember that anything worth having takes great effort and hard work. Your return can only be as big as your investment.