Are you dreaming of owning your own home? There is a lot more to consider than just renting. Maybe you are currently shopping and not sure if you’re ready. There is one major financial move that can make all the difference. Here are a few ways to become financially responsible homeowners.
Secret to Becoming Financially Responsible Homeowners
The key to being successful at homeownership is to use a budget. It sounds pretty simple, but it makes all the difference. Now, a budget doesn’t promise to necessarily get you a bigger house or find oodles of savings all over. But you may be pleasantly surprised at how your money stretches when you follow a budget. Let’s find out how you can become financially responsible homeowners.
Saving for a Down Payment
First, let’s take a look at saving for a down payment in a budget. Your budget needs to be realistic, accurate and goal oriented (SMART). That means reviewing it at least monthly, making adjustments as the weeks go by is even better. In case you have a major expense in one area, you can redirect funds from a more discretionary area to help cover it. If you are checking regularly, you could go way over budget. Be sure to include savings specifically named for your down payment. Place any extra money at the end of each month into savings.
Saving for a down payment may also mean getting out of debt. If you have a lot of debts, it may be wise to eliminate some of them first before saving for another huge debt. Try the Snowball or Avalanche method. The more debt relief you find, the more free money you will have for your down payment. Plus, if you get into a house and then hit some financial struggles, there will be less to deal with then.
Finally, you may want to create a visual reminder of your savings goal. You can mimic one of those thermometers and fill it in as you go. If your kids are old enough, get them involved! It’ll be fun and motivating to stay on track. The larger your down payment, the more money you will save. Lower down payments require Private Mortgage Insurance or PMI. Sometimes, this extra charge can be cancelled when you reach a certain amount of equity. However, this isn’t always the case. Check with your lender about these details. Additionally, the less money you have tied up in a mortgage, the less interest you will pay over time. Here are some mortgage terms you may not be aware of.
Managing a Mortgage & New Home Expenses
Now, here is how a budget makes all the difference with a mortgage. There are plenty more expenses associated with being a homeowner than just being a renter. Taxes, HOA fees, interior and exterior maintenance include some of those expenses. Lawn mowers, furnaces, plumbing, updating appliances, changing paint colors, etc are all examples of expenses you will encounter.
Creating room in the budget for these additional homeowner expenses can keep you from serious credit card debt. If you haven’t purchased a home yet, consider these costs as you look into how much house you can afford. If you are already homeowners, it’s better late than never! Anticipating costs is a great preventative step to stop financial stress. You could stash money away each month in a general fund. You could also have a few funds desginated for certain costs- like a new roof or lawn care.
Becoming financially responsible homeowners may take some time. Adjusting spending habits can be challenging and there will probably be some set backs. As long as you keep moving forward with a solid budget and savings goals, you will be on your way.
Visit ACCC’s Housing Services today for more information.