3 money-related steps for prospective buyers

Did you know April is National Financial Literacy Month? While we’re not financial advisers, it’s important that anyone who is preparing to buy a home anytime soon is well-versed in the money aspect of it all, so we gathered essential tips from the experts regarding saving effectively for your future home.

Organize your finances. There’s a reason the first five steps of this comprehensive guide to buying a house are all related to money. It’s a big deal. Start by analyzing your income and expenses to understand where your monthly money goes. Then, categorize your spending into essentials (such as rent, groceries, and utilities) and non-essentials (like dining out, entertainment and luxury purchases). This breakdown will highlight areas where you can cut back.

Pay off debt. High-interest debt, especially from credit cards, can be a major barrier to homeownership. Why? Credit utilization and debt-to-income ratio are key factors when applying for a loan. If either of these are too high, you may miss out on a chance to buy your dream home. 

Start by listing all your debts and focusing on paying off the ones with the highest interest rates first. This strategy, known as the avalanche method, is a proven way to save you money in the long run. If possible, consider consolidating your debts or refinancing what you can to get a lower interest rate. Paying more than the minimum payment each month also speeds up the debt elimination process. 

Focus on saving for a down payment. Once you have your debt under control, it’s time to focus on savings. The down payment is often the biggest financial hurdle in buying a house. Traditionally, this is 20% of the home’s purchase price. (You may have heard this is a requirement to purchase a home, but it’s a myth.) Many loans are available with only a 3 to 4% down payment required, and some programs don’t require a down payment at all.

Explore ways to boost your savings, like taking on a side job or selling items you no longer need. Additionally, look into homebuyer programs that offer assistance with down payments, especially if you are a first-time buyer. Talk to your loan officer, real estate agent or our team if you want to know more.

One piece of extra advice. If you’re thinking of buying a home but don’t think your finances are strong enough yet, you can still reach out to a loan officer. That professional can answer your money questions and help you understand your future goals. They’ll also be able to determine if it’s a good time to get pre-approved or if more work on your finances will pay off in the long run.  

Every small step you take now is a leap towards the goal of homeownership, and our teams are excited to help you cross the finish line at the end of the journey. Stay committed, and soon, you’ll be opening the door to your very own home. Reach out to us anytime!

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