Summer spending can add up, but what if one of your big financial goals is to buy a house? The idea of making such a life-altering, huge, often emotional purchase can take a lot more than just turning spending habits into saving habits. For many people, it’s easily one of life’s most daunting transactions. It doesn’t necessarily have to be. If you’ve been dreaming of owning your own house and you’re ready to start planning to take the plunge, I’m here to break it down to basics so that you can learn how to make your own life-changing, exciting purchase.
What to Do Before You Buy a House: The Money
Learn how to balance spending with saving: Buying a house starts with saving money for a down payment, extra closing costs, and clearing up your credit. These days, it’s not a secret that home prices have skyrocketed, but you can still purchase your dream home with the help of long-term finance options like a mortgage. Getting a mortgage is very common, and an overwhelming 97% of Millennials are utilizing mortgages to buy their first home. An accepted rule of thumb is to save at least 5% of the home price for your down payment. However, some loan options will require even less, and some FHA loans require as little as 3.5%.
Get your debt under control: Time to be diligent about checking your credit report and also learn what actually goes into baking up your credit score. No matter where you are in the credit/debt bucket, taking the time to raise your credit score will pay off big before you apply for a mortgage. Raising your credit score will help you qualify for a better rate. Payment history, age of credit, and debt to credit ratios have a bigger impact on your score. You can keep your score healthy by making on time payments and by paying down high balances. Also, don’t close your credit cards once they are paid off! Your credit history factors into your score and you erase that history if you close a card, it can also lower your credit availability. Tuck those cards into your safe at home. You don’t need to close them. Your credit behavior matters just as much as the amount you owe to lenders, so be consistent and don’t make any large purchases that can impact your credit right before buying a house.
Consider working with a money coach: Investing in your not-too-distant future is a lot easier to do when you are equipped with people who can help you create a strategy and make savvier money moves with support. When you work with a money coach, all of your money goals are on the table, including your home buying experience. Finances can feel overwhelming, so having a professional on your side can help keep you in the driver’s seat throughout the homebuying process, and any other financial milestones. If you’ve never worked with a money coach before, don’t be afraid to reach out to me, and let’s talk about how we can work together.
Look within your means: The dream house looks different for everyone, but the most important thing you can do for your home is to purchase within your reasonable means. As a homeowner, you’ll have new expenses for upkeep and repairs that can cost as much as a monthly mortgage payment. You need to factor those costs in when deciding whether or not you can afford the mortgage you’re applying for. Every big purchase comes with risk, and houses are a big expense to run every single month. I lost my house in the 2008 mortgage crisis and one of the reasons I had to short sale was because I couldn’t afford the hefty mortgage and upkeep after my husband lost his job. I had to face some eye-opening mistakes, and one of them was taking on too big of a mortgage at such a young age.
Achieving those Financial Milestones
What’s important to remember about your financial life (no matter what it looks like now) is that you are not alone. The more you get involved in your money, the more empowered you will feel when it comes to creating the life that you want. I’m committed to helping people raise their worth and have a more secure financial future, and that includes making their dream home a reality. Buying a house can feel daunting, especially if you’re doing it alone, but it is doable (even in today’s market). Don’t fear the steps of the process because the more you learn, the farther you can go with your money goals.
If you’re looking for a community of women to support your money goals this year, join mine. If you want help getting your $hit together so you can buy a house, sign up for my next GIT Elevated Money Course today.