Homeownership has long been considered the American Dream, and itâs one every American should feel confident and assertive pursuing. But owning a home is also a profoundly personal dream. Our home provides us with safety and security, and itâs a place where we can grow and flourish.
Today, we remember the legacy of Dr. Martin Luther King, Jr. Many of us will remember his passion and determination for the causes he championed, including his famous âI Had a Dreamâ speech in 1963. As we reflect on his message today, it may inspire your dream of homeownership. And if so, know youâre not alone. With a trusted real estate advisor at your side, you can begin your journey toward homeownership by answering the questions below.
1. Where Do I Start?
The process of buying a home is not one to enter into lightly. First, you need to decide on crucial things like how long you plan on living in an area, how much space you need, what kind of commute works for you, and how much you can spend.
Then, when you decide youâre ready to buy, youâll need to apply for a mortgage. Your lender will look at several factors to determine how much youâre able to borrow, including your credit history. Lenders want to understand how well youâve managed to pay your student loans, credit cards, car loans, and other past debts.
According to Freddie Mac:
âTo get a rough estimate of what you can afford, most lenders suggest that you should spend no more than 28% of your monthly gross (pre-tax) income on your mortgage payment, including principal, interest, taxes and insurance.â
2. How Do I Save Enough for a Down Payment?
Speaking of how much you can afford, youâll want to know what to save for a down payment. While the idea of saving for a down payment can be daunting, many different options and resources can help.
According to Business Insider, automatic savings can bring you one step closer to achieving your target down payment:
âIf you receive your paycheck as a direct deposit, you may want to arrange for your company to send a percentage of each check directly into a savings account for the down payment. . . . The automatic-savings strategy makes it so you donât have to constantly remember to save money.â
Before you know it, youâll have enough for a down payment if youâre disciplined and thoughtful about your process. And the best part is, you may need to save less for your down payment than you think. But, again, your agent and lender can help you understand your options.
3. How Can I Reach My Financial Goals?
Another way to increase your savings is by sticking to a planned budget. If youâve never budgeted before, there are tools available. For example, MoneyFit.org provides a budgeting worksheet you can use to create your plan and five rules to follow when youâre saving. They recommend you:
- Identify Goals
- Record Expenses
- Record Earnings
- Compare and Calculate
- Fix Weak Spots
If youâre already budgeting, consider finding ways to tighten your spending a bit more to accelerate your journey to homeownership. After all, putting even a little extra into your savings each month can genuinely add up over time.
Bottom Line
As you set out to realize your dream of homeownership this year, know that itâs achievable with careful planning. But, most importantly, letâs connect today, so you donât have to walk alone on this journey.