How to Improve Your Finances and Save for a Home
If you’re hoping to buy a new home but your financial history is a concern, there are several steps you can take to improve your finances and start saving for a house. From paying down your debt and improving your credit to working with a trusted broker like Home Solutions Realty, buying a new home may be more within reach than you realize. Use this guide and tips for steps you can take to become a homeowner.
Reduce your debt
One of the biggest things lenders will look at when appraising a mortgage application is a person’s debt-to-income ratio. If you have considerable debt from credit cards or other loans, it’s important to pay those down as quickly as possible to improve your overall standing.
At the bare minimum, it’s vital that you pay at least the minimum amount due each month for your loan or credit card payments. If you have the ability to pay more than that, start by paying off the lines of credit with the highest interest rates first. Make a list of payoff priorities, and use that as a guide to help reduce your debt.
If you need help with managing your debt, there are debt relief options available. If you have no hope of repaying your unsecured debt within five years, or the total of your unpaid unsecured debt equals half or more of your gross income, you can look into options such as bankruptcy, debt settlement, or debt management. Keep in mind that these options should be a last resort—first, see if you can better manage your budget to help relieve your debt.
Look at your budget
Paying down your debt quickly will require some sacrifices, but it can be done with careful money management. If you don’t currently keep track of your budget, it’s time to start: you can do this by creating fairly simple spreadsheets on your own, or by using a budgeting app or software to help you.
When budgeting to pay down debt, it’s vital to understand what you spend each month on consistent expenses such as rent, insurance, car payments, and groceries. As you begin to understand where the bulk of your income goes, you can look at where you might start reducing spending in other ways. While rent and insurance are fixed costs, spending on groceries or fuel can be reduced if you make a solid plan for yourself.
As you develop your budget, be sure to work with your partner to make a plan together. Determine where you can save money after fixed expenses are covered, and set a schedule for yourselves to check-in and make sure you’re both on track. Keep receipts if necessary, and track your progress. Set goals for your savings and debt payoffs, and remember to be patient as you watch your debt shrink.
Do some research
When you’re ready to start looking at houses, start by reviewing home prices to ensure that you’re able to afford the neighborhood or area where you’re hoping to buy into. As you look at home prices, use a mortgage calculator to determine what percentage you can afford for a down payment, which will help you understand what your mortgage payments will be each month.
Once you have your finances in order, you’ll want to work with a great real estate agent who can help you find houses in your price range. Then, work with a mortgage lender to get preapproved for a home loan.
Buying a home is a big undertaking, but by prioritizing paying off debt and improving your credit, you’ll have a tangible plan that will get you closer to your goal of buying a home. Create a budget and track your progress as you watch your debt shrink, and when you’re ready, start researching home prices so you can begin saving for your down payment.
Are you in the market for a new home? Contact Home Solutions Realty to find a home that’s perfect for your family and within your budget. Phone: 214-636-7138