Homeownership has long been considered the American Dream, and it’s one every American should feel confident and powerful pursuing. But owning a home is also a deeply personal dream. Our homes provide us with safety and security, and they’re places where we can grow and flourish and where our best memories are anchored.
We remember the legacy of Dr. Martin Luther King, Jr. We recall his passion and determination for the causes he championed, and we frequently hear recitation of his famous “I Have a Dream” speech in 1963. As we reflect on his message, it may inspire your own dream of homeownership. And if so, know you’re not alone. With a trusted real estate advisor at your side, you can begin your journey toward homeownership by answering the questions below.
Where Do I Start?
The process of buying a home is not one to engage lightly. You need to decide on key things like how long you plan on living in an area, how much space you need, what kind of commute works for you, and how much you can spend. Understand that your first home need not be your “dream home,” but a starting point from which you can grow, thanks to equity appreciation, i.e., the increasing value of the property while you own and live in it, a powerful benefit not available to renters.
Then, when you decide you’re ready to buy, you’ll need to apply for a mortgage. Your lender will look at several factors, including your credit history, to determine how much you’re able to borrow. Lenders want to understand how well you’ve managed paying your student loans, credit cards, auto loans and other past debts.
According to Freddie Mac:
“To get a rough estimate of what you can afford, most lenders suggest that you should spend no more than 28 to 30% of your monthly gross (pre-tax) income on your mortgage payment, including principal, interest, taxes and insurance.”
How Do I Save Enough for a Down Payment?
Speaking of how much you can afford, you’ll want to know what to save for a down payment. While the idea of saving for a down payment may seem daunting, there are many different options and resources that can help.
According to Business Insider, automatic savings can bring you one step closer to achieving your target down payment:
“If you receive your paycheck as a direct deposit, you may want to arrange for your employer to send a percentage of each check directly into a savings account for the down payment… The automatic-savings strategy relieves you of constantly having to remember to save money.”
Before you know it, if you’re disciplined and thoughtful about your process, you’ll have enough for a down payment. And the best part is, you may need to save less for your down payment than you think. You may not even need a down payment. Your lender can help you understand your options. I’d be happy to refer you to a local lender who’s competent, resourceful, knowledgeable and communicative.
How Can I Reach My Financial Goals?
Another way to increase your savings is by adhering to a planned budget. If you’ve never budgeted before, there are tools available. For example, MoneyFit.org provides a budgeting worksheet you can use to create your own plan and five rules to follow when you’re saving. They recommend you:
- Identify Goals
- Record Expenses
- Record Earnings
- Compare and Calculate
- Fix Weak Spots
If you’re already budgeting, consider finding ways to tighten your spending a bit more to accelerate your journey to homeownership. After all, putting even a little extra into your savings each month can truly add up over time.
Bottom Line
As you set out to realize your dream of homeownership this year, know that it’s achievable with careful planning. And, most importantly, know that you don’t have to walk alone. As a real estate professional, I’m there to help every step of the way.