Do you dream of becoming a homeowner one day? The journey to homeownership ought to start as early as possible, depending on your projected timeline. For me, owning a house has always been a significant goal, which took an even more prominent role when I became a mother, desiring added stability. Being a tenant isn’t necessarily bad, but the choice between buying and renting relies heavily on personal preferences and individual situations.
If you’re planning on purchasing your first home within the next five years, here are some tips to ensure the process goes as smoothly as possible.
1. REDUCE YOUR DEBT
Because managing a home can be costly, having no debt or minimal debt at the point of purchasing is advantageous. Juggling costs such as the mortgage, bills, utilities, and home maintenance in addition to monthly debt payments can squeeze your budget. Also, when applying for a loan, your debt-to-income ratio is a vital determinant of your approved loan amount. If you have substantial debt, this will materially impact your loan amount. Most lenders favor debt not exceeding 40% of income. However, you’re the best judge of your affordability given your intimate knowledge of your monthly expenses. Start by offsetting high-interest debt and prioritising your biggest debt amounts. Explore ways to earn extra income, cut back unnecessary expenses, and liberate more funds to eradicate your debt.
2. INCREASE YOUR EMERGENCY FUND
An emergency fund is particularly crucial for homeowners because unexpected repair costs can be rather expensive. Boost your emergency savings by tripling the size of your current savings. If you haven’t commenced saving yet, consider the price range of your prospective home, your preferred location, and other desired features. Unless you’re buying a move-in ready home, a sizeable emergency fund is necessary. At the minimum, aim to save up six months worth of living expenses prior to buying a house.
3. ENHANCE YOUR CREDIT SCORE
Your credit score impacts the type of loan you qualify for and the corresponding interest rate. For the most favorable interest rates, aim for a credit score in the mid 700s. Manage your credit better by paying off all debts promptly, maintaining low credit card balances, and avoiding new credit applications shortly before applying for a mortgage. Clear off any negative footprints on your credit report and file disputes early if necessary.
4. ADAPT TO LIVING COST-EFFECTIVELY
Homeownership often necessitates certain sacrifices. Many homeowners economize by minimizing non-essential expenses to comfortably afford their homes. Avoid becoming house poor by prioritizing your spending and adapting to living on a smaller income. In addition, this could provide the much needed flexibility in your budget for a substantial down payment.
5. ACQUIRE PRIMARY HOME REPAIR SKILLS
The cost of homeownership may be reduced substantially by acquiring basic do-it-yourself (DIY) skills for minor repairs and projects. This includes activities like painting, door repairs, landscape work, gutter cleaning, and even basic plumbing. Start learning these skills now or ask homeowner friends to teach you these useful tricks.
Preparing early is key to simplifying the homeowner journey. Have you been considering buying a home? What steps are you taking now to simplify the process when the time comes?
