Develop a family budget. Instead of budgeting what youd' like to spend, use receipts to create a budget for what you've actually spent over the past six months. One advantage of this approach is that it factors in unexpected expenses, such as car repairs, illnesses, etc., as well as predictable costs such as rent.
Reduce your debt. Generally speaking, lenders look for a total debt load of no more than 36 percent of income. Since this figure includes your mortgage, which typically ranges between 25 percent and 28 percent of income, you need to get the rest of installment debt-including car loans, student loans, revolving balances on credit cards, payments on timeshare vacations, etc.-down to between 8 percent and 10 percent of your total income.
Get a handle on expenses. You probably know how much you spend on rent and utilities, but little expenses add up. Try writing down everything you spend for one month (coffee, tips in the ubiquitous tip jars, a daily newspaper, fees for parking meters, parking tickets, movies, popcorn, sodas, etc.) You'll probably see some great ways to save.
Increase your income. It may be necessary to take on a second, part-time job to get your income at a high enough level to qualify for the home you want. Consider selling excess "stuff" on eBay or Craigslist. Explore whether that collection of comic books, sport memorabilia or Lladro may be worth selling.
Save for a downpayment. Although it is still possible to get a mortgage with only 5 percent down--or even less in some cases--you can usually get a better rate and a lower overall cost if you put down more money to start. With the current lending environment, your goal should be to shoot for saving a minimum 20 percent downpayment. The exception may be if you have a well-established co-borrower who will contribute to the downpayment and share the risk with you.
Create a house fund. Don't just plan on saving only whatever is left over after paying bills and having fun toward a downpayment. Instead, decide on and commit to a certain amount each month you want to save, then either auto-pay it into your savings or write yourself a check to this account when pay your other monthly bills.
Keep your job. While you needn't remain in the same job forever to qualify for a loan, having a job for less than two years may mean you have to pay a higher interest rate. However, if you switched employers but remained in the same field, you may not have any penalty.
Establish a good credit history. Get a credit card and make payments by the due date. Do the same for all your other bills. Pay off the entire balance promptly.
2008 All Worldwide Rights Reserved. All information contained in this report is deemed reliable, but not guaranteed; all principals to verify and all parties advised to seek expert tax, financial, legal and real estate advice prior to entering into any contractual agreement. If your home is listed for sale or you are in a contractual relationship with any broker/agent in any capacity and you have chosen to visit this Web site, be aware this is not a solicitation of your business. This information is provided for educational purposes to benefit members of the general public exploring a variety of real estate options, including, but not limited to, buying, selling, leasing and investing in real estate, and does not constitute, nor substitute for, legal or financial advice.
2008 All Worldwide Rights Reserved. No portion may be copied, scanned, altered or forwarded without the express written permission of Michelle C. Carr-Crowe. All violators and information thieves will be prosecuted to the full extent of all applicable laws worldwide, including but not limited to intellectual property; all financial, name, market, intellectual property, copyright and brand infringement violators will be prosecuted in all appropriate jurisdictions and sued for financial satisfaction. All information in this report is deemed reliable, but not guaranteed; all principals to verify and all parties advised to seek expert tax, financial, legal and real estate advice prior to entering into any contractual agreement.
Filename: Buyer 8 Steps to Getting Your Finances in Order 05/29/08mc