So, you think you might want to buy your own place? Congratulations! There are few better ways of building wealth! Whether you buy a condominium unit, duplex, townhouse, or detached structure,
Five Ways to Start to Buy Your Own Place
Dated: July 16 2020
So, you think you might want to buy your own place? Congratulations! There are few better ways of building wealth! Whether you buy a condominium unit, duplex, townhouse, or detached structure, every payment will increase your ownership and permit you to share in your community’s rising property values. So, well done starting to think seriously about it.
But, beyond just thinking about it, how to take this crucial step of buying your own place? Purchasing property can seem so complicated. And expensive. The whole process can feel impossible. What should you do first?
Here are five steps you can take to start making owning your own place a reality.
Step One, get to know your area credit unions and choose one. Credit unions are non-profit financial cooperatives that, generally, offer better interest rates on savings and charge lower interest rates on loans. They have also built a reputation for being very consumer-friendly and can help you do some important cost cutting which, as we will see, is crucial for the next step.
Step Two, reduce your fixed monthly costs as much as you can. Prior to the 2007 Great Recession, saving for a down payment for a home loan was the biggest challenge facing many first-time property purchasers. And it remains a significant challenge. But now, borrowers must also show potential mortgage lenders that their monthly payments for things like autos, credit cards, student loans, and personal loans do not take more than a certain percentage of their income, called the Debt to Income Ratio (DTI).
Your financial institution, particularly a credit union, or your mortgage professional (see Step Four) can help determine your DTI and perhaps lower it through refinancing existing debt to lower interest rates and payments.
The key thing is that the get the amount of money that you have to spend each month down as low as possible. This will both help you qualify for a mortgage eventually and help get you ready to purchase property and that is Step Three.
Step Three, develop good savings habits. Like I noted above, saving for a down payment used to be about the biggest obstacle to getting a home loan. And while it’s no longer quite the biggest obstacle, it’s still a pretty big challenge.
The best savings strategy is to pay yourself first. Paying yourself first means that you will save a certain portion of every paycheck, for example 10%, off the top. If you get paid by direct deposit, this is especially easy. Simply direct your employer’s accounting department or payroll company to split your pay deposit, 90% into checking and 10% into savings. This way, you don’t have to manually make the savings deposit yourself, it just happens automatically. And if you don’t ever see the money in your checking account you are less likely to miss it. Eventually, the pool of money saved will grow to where it can make a down payment for a home loan.
Step Four, find and get to know a mortgage professional. Most people only get to know a mortgage professional when their Realtor asks them to get conditionally approved for a home loan. But wise first-time property purchasers get to know their mortgage professional earlier. He or she will advise and direct you as to the best mortgage product for your needs and the things you will need to do to qualify for that loan.
Step Five, Start thinking about where you want to live and what sort of property you need before you start looking for one. Popular house search television programs make the direct property search appear to be the biggest part of finding a new property. But, in reality, those programs merely show the final stage of what has already been a long process. If you don’t know an area very well, consulting with a Realtor can help you get an idea of the qualities of neighborhoods where you might want to live before you start looking for a property.
I am a Virginia licensed Realtor who takes my role and obligations to clients seriously. Whether you need to sell or lease, buy or rent, please contact me to discuss your situation and let me help you....