Transitioning from renter to homeowner is one of the biggest
decisions you’ll make throughout your lifetime. It can also be a
stressful experience if you don’t plan ahead by building a budget
and saving prior to embarking upon homeownership.

Budgeting is a core ingredient that helps alleviate the stress
associated with money issues that can sometimes arise if you
purchase a home without knowing all of the associated costs –
including down payment, closing expenses, ongoing
maintenance, taxes and utilities.

The trouble is, many first-time homeowners fail to carefully
think about their finances, plan a budget or set savings aside.
And in this society of instant gratification, money problems can
quickly escalate.

The key is to create a realistic budget based on your goals. Track
your spending and make your dollars go further by sticking to
your budget once it’s in place. Budgeting offers a step-by-step
formula for figuring out how to best save your hard-earned
money to invest in homeownership.

Start by listing your household income, then your household
expenses, and review your spending habits. All of this can be
done on a pad of paper or on a computer spreadsheet.

Keeping receipts for everything that you purchase will enable
you to accurately keep track of where your money is going each
month so that you can review and make necessary changes to
your plan on an ongoing basis.

Examine all areas of your life from entertainment to the type of
food you buy, where you buy your food and clothes, and how
and where you travel. Also look at your spending personality
and make necessary adjustments. Are you a saver, a splurger, a
spontaneous shopper or a hoarder? Become smarter with your
money and avoid impulse buying.

If you find you’re spending a lot of money in one area, such as
entertainment for instance, set aside a reasonable amount each
month and prepare to stop spending money in this area once
your budget has been exhausted.

Budgeting provides you with the opportunity to re-evaluate your
needs and wants. Do you really need the magazine
subscriptions, the gym membership and all the other things you
may spend money on each month? Although everyone needs
some “me time” to wind down, could you not get that by taking
a walk or reading a good book you borrowed from the library?

If you can set your budget solidly in place before you head out
home or mortgage shopping, you will be far more prepared to
purchase your first home.

Following are three top tips to help you prepare for the purchase
of your first home:

1. Set up a savings account. You can deposit a predetermined
amount into this account each pay period that you will not
touch unless it’s absolutely necessary. This will enable you
to put money aside for a down payment and cover closing
costs, as well as address ongoing homeownership expenses
such as maintenance, taxes and utilities.

2. Save up for big-ticket items. As you accumulate money in
your savings account, you will be able to also save for
specific purchases to help furnish your home – avoiding the
buy now, pay later mentality, which can have a negative
impact on your credit when you’re seeking mortgage
financing.

3. Surround yourself with a team of professionals. When
you’re getting ready to make your first home purchase,
enlist the services of a licensed mortgage professional and a
real estate agent. These experts are invaluable to you as you
set out on the road to homeownership because they help
first-time buyers through the home purchase and financing
processes every day. They will be able to answer all of your
questions and set your mind at ease. A mortgage
professional has access to multiple lenders, and can help
you get pre-approved for a mortgage so you know exactly
what you can afford to spend on a home before you head
out house hunting, while a real estate agent will be able to
match your needs with a house you can afford. Both parties
will negotiate on your behalf to ensure you get the best
bang for your buck. And, best of all, these services are
typically free. They will also be able to refer you to other
reputable professionals you may need for your home
purchase, including a real estate lawyer and home
appraiser.

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