How Can I Better Understand the Process, and How Much Can I Afford?

The process of buying a home can seem overwhelming. You need to decide on key things like how long you plan on living in an area, school districts you prefer, what kind of commute works for you, and how much you can afford to spend.

Keep in mind, before you start the process to purchase a home, you'll need to apply for a mortgage. Lenders will evaluate several factors connected to your financial track record, one of which is your credit history. They'll want to see how well you've been able to minimize past debts, so make sure you've been paying your student loans, credit cards, and car loans on time. We have loan officers we trust and can refer you to them.

According to ConsumerReports.org,

"Financial planners recommend limiting the amount you spend on housing to 25 percent of your monthly budget."

How Much Do I Need for a Down Payment?

In addition to knowing how much you can afford on a monthly mortgage payment, understanding how much you'll need for a down payment is another critical step. Thankfully, there are many different options and resources available that, if you qualify, could reduce the amount you need to put down on your new home up front.

If you're concerned about saving for a down payment, start small and be consistent. A little bit each month goes a long way. Jumpstart your savings by automatically adding a portion of your monthly paycheck into a separate savings account or house fund. AmericaSaves.org says,

"Over time, these automatic deposits add up. For example, $50 a month accumulates to $600 a year and $3,000 after five years, plus interest that has compounded."

Before you know it, you'll have enough for a down payment if you're disciplined and thoughtful about your commitment.

Saving Takes Time: Practice Living on a Budget

As tempting as it is to settle in each morning with a fancy cup of coffee from your favorite local shop, putting that daily spend toward your down payment will help accelerate realizing your dream of homeownership. It's the little things that count, so start trying to live on a slightly tighter budget if you aren't doing so already. A budget will allow you to save more for your down payment and help you pay down other debts to improve your credit score. A survey of Millennial spending shows,

"70 percent of would-be first-time homebuyers will cut spending on spa days, shopping and going to the movies in exchange for purchasing a home within the next year."

While you don't need to cut all of the fun out of your current lifestyle, making more considered choices and limiting your spending in areas where you can will make a big difference in making your dream of homeownership a reality sooner.

Bottom Line

If homeownership is on your dream list this year, take a good look at what you can prioritize to help you get there. Let's schedule some time to discuss your home ownership dream and the best steps you can take to start the process.