Looking to buy a home in 2021? There’s no better time than now to start saving! Buying your first home is arguably the biggest financial decision you’ll make in your life. It’s not something that happens overnight, and requires fine tuning of your personal budgeting habits to meet those financial goals.
Below, we’ll offer a few tips on how to start saving now and how to get the best mortgage for your budget. Let’s jump in!
Calculate your household income tax.
The first and most important step to begin your budget planning is to figure out how much you and your family are currently making before tax. You can do this by checking your pay stubs, or using an online income tax calculator. If you want to dig a little deeper, try going through this three step process:
- Find your adjusted gross income (AGI) from your most recent federal income tax return.
- Add any additional income you have, such as tax exempt foreign income, Social Security benefits, or interest.
- Adjust your budget for any potential changes, such as expected raises, gaining or losing dependents, investments, etc.
Make a list of expenses (and know where to cut back).
Take some time to jot down all your household and external expenses. This includes everything from your power bill to groceries. Whatever you have left is considered expendable income. There are tons of helpful budgeting tools out there that connect your credit cards, so you can get a better understanding of where to cut back.
Pay off debt.
This is a golden rule when budgeting for a new home. You NEVER want to commit to a big purchase with existing debt! Not only will your credit card hurt your chances of securing the home you want, but you’ll be left with additional expenses on top of your mortgage.
Save for the deposit.
Most mortgage lenders require at least a 20% deposit when purchasing a new home. Once you have a total estimate of how much the home will be, start creating milestones to save for the deposit. For example, say the deposit is going to be $20,000, and you have ten months until it needs to be paid. This means you’ll have to save approximately $2,000 each month in order to meet that expectation. Creating a timeline and strict budgeting guidelines will hold you accountable and make it easier to manage your other expenses.
Trust us on this one — getting pre-approved from a lender will make your chances of landing your dream house more achievable. When it comes time to put in an offer, you’ll have more credibility and trust with a lender, because they’ll know you’re ready for the sale.
Budget for home repairs and/or inspections.
When it comes to selling your home, you want to make sure you get the most bang for your buck. Start thinking about which repairs or projects are worth working on before you sell. If you think you’ll get an ROI from the repairs, it’s worth doing. If it’s something that feels “take it or leave it,” don’t waste the time.
Analyze the market.
The buyers and sellers market is a tricky game to play. As you begin your house hunting, do some research on what the market value is for the area you’re looking at, and what your current home’s value is worth. Research is everything in real estate, and you don’t want to go into the process feeling unprepared and without knowledge.
Whether you’re a first time homebuyer or a veteran in real estate, Ken Venick has your back! We have over 30 years of experience in the mortgage loan business, and can you put you in the right mortgage loan product for your specific needs. Visit our FAQ page to learn more about our services, and contact us today!