For many, transitioning from renter to homeowner is one of the biggest decisions you will make throughout your lifetime. It can also be a stressful experience if you do not plan ahead by building a budget and saving prior to embarking upon homeownership.
Budgeting is a core ingredient that helps relieve the stress associated with money issues that may come up if you purchase a home without knowing all of the associated housing expenses. These can include down payments, closing expenses, ongoing maintenance, property taxes and utilities, not to mention your monthly mortgage payments of course.
Many first-time homeowners fail to carefully think about their finances, plan a budget or set savings aside. And in this society of instant gratification, money problems can quickly escalate.
The key is to create a realistic home budget plan based on your goals. Consider your potential purchase price and monthly payments and work backwards to determine how much you need to save up.
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Follow these 4 top tips to help you start budgeting for a new home:
#1 Track Your Spending
Track your spending and make your dollars go further by sticking to your budget once it is in place. Budgeting offers a step-by-step formula for figuring out how to best save your hard-earned money to invest in homeownership.
Begin by creating a budget calculator spreadsheet, either using pen and paper or software like Microsoft Excel, and start by listing your household income, then your household expenses, and review your spending habits. There are also many apps available for your smartphone.
Then look at your spending personality and make necessary adjustments. Are you a saver, a splurger, a spontaneous shopper, or a hoarder? Become smarter with your money and avoid impulse buying.
If you find yourself spending a lot of money in one area, such as entertainment, try to set aside a dedicated reasonable amount each month for this expense. You should then aim to stop spending money in this area once your set budget has been exhausted.
Budgeting provides you with the opportunity to re-assess your needs and wants. Rethink your budgeting priorities —for example, is your magazine subscription essential or a gym membership in another case? Or would you rather spend less now on non-essentials so you can save more for later when it comes time to purchase a new property?
If you can set your budget solidly in place before you head out home or mortgage shopping, you will be far more prepared to purchase your first home.
#2 Set up a savings account.
You can deposit a predetermined amount into this account each pay period that you will not touch unless it is absolutely necessary. This will enable you to put money aside for a down payment and cover closing costs, as well as address ongoing homeownership expenses such as maintenance, taxes and utilities.
#3 Save up for big-ticket items.
As you continue to save up money in your savings account, you will also be able to save up for specific purchases to help furnish your home. Try to avoid the buy now, pay later mentality, which can have a negative impact on your credit when you’re seeking mortgage financing.
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#4 Surround yourself with a team of professionals.
When you are getting ready to make your first home purchase, enlist the services of a licensed mortgage broker and a real estate agent. These experts are invaluable to you as you set out on the road to homeownership because they help first-time buyers through the home purchase and financing processes every step of the way.
They will be able to answer all of your questions and help you understand everything there is to know, including terms like shared equity mortgage and time home buyer incentive. They will also set your mind at ease by helping you get the best interest rate with the lowest down payment amount possible.
As Home Financing Advisors we strive to provide our clients with qualified and up-to-date financial advice to help them when buying a new house or property. We believe that educating and coaching our clients throughout their buying, selling, or re-financing experience helps them to not only make the right decisions but to feel comfortable and secure in their financial position.
For all your home finance needs, contact IK Financial agents. Our consultation is complimentary, so contact us today at (647) 244-1371 or visit IKfinancial.com to book your appointment.