Everyone knows that being a homeowner is expensive. Besides the fact that the house itself can cost a fortune, you’ll also have to spend on miscellaneous fees for your realtor, inspections, and other expenses involved in closing on a home. That’s why homeownership is considered a goal in itself.
So many people can only dream of having their own homes because of the high costs associated with them. However, it’s nothing that a lot of preparation can’t fix. You may have to rearrange your finances, cut costs, and start saving money as early as now, but it’s not impossible to achieve that dream of yours.
But as mentioned, it will take a lot of preparation, beginning with getting a firm grip on your finances. If you want to have your own home before you reach your 30s, you’ll need to start acting on your plans from the get-go. This is the only way you can plan your finances enough to afford the costs of buying a home.
Although, you shouldn’t be afraid of this fact because you might overwhelm yourself. You still have plenty of time before you welcome a new decade in your life, so you shouldn’t pressure yourself to work on a deadline. Here’s a three-pronged plan that you can use to prepare your finances for homeownership:
Build or Maintain Your Good Credit
If you have yet to build your credit, this is the perfect cause to open a credit line. That’s because you need to have good credit standing if you want to get approved for a loan. Having bad credit or no credit can make it more difficult for you during the application because the lender won’t have any credit history to measure your creditworthiness.
So, if you’re looking for a good reason to build your credit, this would be it. However, if you’ve already started building your credit, then the best thing to do would be to maintain your good standing. An excellent credit score can help you get approved for a loan faster because the lender will see that you’re diligent with your payments and you don’t miss out on your deadlines.
On the off chance that you currently have bad, poor, or low credit, don’t lose all hope just yet. It’s still possible to work your way towards a good credit score, provided that you change your habits. Take this chance to pay your full dues on time and don’t accumulate more debt than you can afford to pay back.
Get Pre-qualified and Pre-approved
Once you have a good credit score and enough history to fall back on, the next step is to calculate your loan potential. You can do this by getting pre-qualified and pre-approved for a mortgage, which are both essential steps in your journey to becoming a homeowner. But keep in mind that these two terms have different meanings even if they are used interchangeably.
The first step—pre-qualification—aims to determine how much loan amount you may be able to qualify for. Your chosen lender will be able to give you a ballpark estimate of how much money you can borrow through the data you’ll give them, which can include your current income, debts, and assets.
On the other hand, the second step—pre-approval—aims to provide you with an exact amount rather than an estimate. For this, you will have to submit a completed loan application and give all the documentation asked of you because your lender will need to perform a background check.
If you want to know how much money you should be preparing to buy your future home, you need to get pre-qualified and pre-approved, so you’ll have a better grasp on your finances. This way, you won’t have to leave anything up to guesswork because everything you need is already laid out in front of you.
Create a Financial and Savings Plan
The final step in this three-pronged plan is to make a feasible approach to managing your finances. Out of all the steps in this plan, the final step is the make or break part because this is where you’ll really be implementing changes to your lifestyle. This is because it would be impossible to buy your own house without making a few sacrifices along the way.
But cutting back on expenses doesn’t have to stop you from living your life. All it takes is good budgeting and ample self-control to manage your finances properly. For instance, you can begin by figuring out how much money you’re actually bringing home after taxes and making a list of all your monthly expenses.
Once you know the flow of your money, the next step would be to identify the areas where you can cut back from spending. This could be leisure and entertainment, vacations, occasional splurges, shopping sprees, or any activity that you don’t really need to have. But don’t forget to include fun in your budget because it would be too restricting if all you do is work, eat, and sleep every day.
Amid all the planning and preparation for your future, you shouldn’t forget to live in the moment. Sure, it would be satisfying to get your dream house, but it shouldn’t come at the cost of happiness and contentment for what you currently have. That’s why you have to plan realistically because you’ll only be hurting yourself by aiming beyond your means.
