Try These Budgeting Tips to Bring Homeownership in Sight
Despite economic conditions over recent years, some data analysts say the housing market is in the process of recovering. At the end of 2012, Case-Shiller index data released by IHS Global Insight noted how luxury homes lost a lot of momentum when the economy turned sour, but prices are now improving.
However, the picture was even brighter for home prices that fell into the lowest tier. The study data said that in just three months, the least expensive homes rose in value more than twice as fast as the other categories. This is good news for sellers, but for buyers, it means that budgeting for homeownership is even more crucial than in the past. Below, you’ll find a few suggestions that can lend a helping hand and keep your spending on track.
Your Aspirations Start With Good Credit
It’s a good idea to start managing your budget at least a year before starting to seriously shop for homes. One of the first steps should be to evaluate your credit score. An expert on MSN finance channel notes that people can make improvements to a credit score by doing things like reducing the balance on credit card bills to 30% or less of the overall limits, and paying every bill on time. Poor credit won’t necessarily bar you from getting a dream home, but it could make it harder to get affordable mortgage rates. Correcting errors on credit reports can take several months, too, so it’s a good idea to check a report annually, and more often once you move towards home ownership.
Get Smart About Your Debt-to-Income Ratio
Characteristics in your background like having a steady employment history are important, but they don’t overshadow significant amount of outstanding debts. If you’ve saved up a lot of cash and have good credit, lenders might be more relaxed about having a lot of debt in relation to your amount of income, but it’s always ideal to keep your debt-to-income ratio low. The ratio specifically compares minimum monthly debt payments and your amount of gross monthly income.
Set a Price Range, Then Supplement It With Knowledge
Deciding on a price range is one of the most important parts of saving up for homeownership. Once you have those figures in mind, it’s easier to understand the parts of your budget that might have to undergo some sacrifices. After setting a price range, start learning about what you can buy with that amount of money. Whether you’re thinking about settling in Omaha, Nebraska or Alexandria, Virginia, begin browsing websites and sort by listings that fall into your budget. Also, think about visiting open houses. This will give you a closer look at the types of materials, features and floor plans that homes in your budget might include.
Specialize Your Savings Habits
At first, a mortgage payment might seem daunting, but if you start saving before even applying for a mortgage, it can be easier. Use calculators to determine how much your mortgage payment might be in relation to what you’re currently paying now for rent. After determining the difference, see if you can afford to put that amount into savings every month leading up to your mortgage application, instead of just saving a random amount. Then, you’ll already have some saved resources and be off to a strong start.
Buying a home can be a challenging process, and much of it is related to securing the necessary financing. Follow these tips to gauge your readiness for what’s ahead and start retooling your budget to prepare for the changes.