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Figure out your monthly spending: Knowing how much money you have committed to things like bills, debt, food, car payments, etc., is a great way to calculate how much you have available to spend on a mortgage payment. Remember, you have to think of ALL the expenses involved in owning a home: maintenance, insurance, taxes, etc.
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Work on your credit: Your credit needs to be in good shape when you are ready to start making offers on homes. But your credit score is NOT the only factor that matters. Things like the length of your employment at the same company and the debt-to-income ratio are some of the most significant determining factors when applying for a home loan. The rule of thumb is, don't change jobs or make any large purchases when you are on the market for a home.
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Talk to a loan officer (mortgage lender): A lender can look at all the factors mentioned above and give you a good idea of how much you can afford. They will also advise on ways to repair your credit if necessary.
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Save for closing costs & a down payment: Depending on your loan officer's advice, property requirements, and what you are comfortable with, a down payment is typically between 5% to 20% of the purchase price. In addition, closing costs can be 2%-5% of the purchase price, depending on the type of loan and the closing agent assigned.
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Be realistic: The best way to achieve any goal is to establish a deadline. Maybe you assessed your finances, and becoming a homeowner in 2022 might still be out of reach. But don't let this stop you from getting yourself closer to your dream. You can set goals that include saving a specific amount by the end of the year, cutting down unnecessary spending, or paying off a large credit card balance. Do not forget to write it down and make it attainable and measurable.
