Owning a home is a big deal and an accomplishment everyone should feel proud of. However, reaching this goal is not something that can simply happen overnight - but that can, unfortunately, feel like the situation for many military families receiving permanent change-of-station orders. To become a (responsible) homeowner, especially under short notice, you need good financial preparation to ensure it's a smart and feasible purchase. The process begins before you ever talk to a real estate agent or apply for pre-approval.
Buying a home is a big financial decision not to be taken lightly. Not only do you need to prepare for the actual down payment and mortgage costs, but also the upkeep of bills that inevitably come with the investment of a new home. While all of this is exciting, it can also seem like an intimidating process, especially for military families looking into real estate. But with knowledge comes empowerment, so here are the top four ways to financially prepare yourself for home ownership.
First: Save For a Down Payment
Depending on the type of mortgage you apply for, the standard for a down payment is anywhere between 3% and 20%, and you'll need some extra cash for additional closing costs.
Saving on the little expenses over time can add up. Therefore, the first way to prepare financially is by cutting back on costs. Throughout the month, cut down on your grocery bill, get rid of cable, or find ways to reduce bills such as car insurance payments and cell phone bills. Over time, these monthly expenses add up to money toward your down payment amount.
Secondly, create a budget.
That's right, the ugly B-word. The reality is that your expenses will change once you become a homeowner; start preparing now so you don't have sticker shock once you begin paying those monthly house bills. There are several online tools to help you set a realistic budget and create a flexible system that works for you.
Third: Take Care of Your Credit.
Before you can get pre-approved for a loan, you will need to make sure you have a good credit score. There are several trustworthy resources available that can help you check this safely. To have a good credit score, make your credit card payments on time and improve your debt-to-income ratio.
Don't Make Yourself House Poor
Once you're in a good place to get pre-approved, try not to accept the maximum amount of money that is offered by the lender. Doing so could make you "house poor," meaning the monthly costs of your mortgage account for a large part of your budget. Find a mortgage rate that is comfortably within your means and leaves you space to enjoy leisure, going out to eat, and the hobbies you enjoy.
Remember, getting yourself to the best financial position to make a smart purchase can take a few months to a year before you're ready. And that is okay. In the long run, it's better to save money, improve your credit score, and build and maintain a budget to make the wisest home-buying decision.
When you're ready to begin this exciting process, it's important to find a real estate agent you can trust. Be sure to seek out a partner who understands what you're going through and can guide your home-buying process.
This guest post was authored by Tonya Marie Towles
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Ms. Career Girl was started in 2008 to help ambitious young professional women figure out who they are, what they want and how to get it.
