The new year is the perfect time to take action on your goal of buying your first home! By creating a clear plan and sticking to it, you may be on your way to making that dream a reality. Here’s a useful guide to help you get organized, start saving, and take confident steps toward homeownership this year.
Assess Your Current Financial Situation
Knowing where you stand financially is important to building realistic goals that may lead to homeownership. You can start by reviewing your income, expenses, debt and savings to determine where you may stand.
- Income and Expenses: Begin tracking your monthly income and expenses to see where your money is going. Understanding your spending habits can make it easier to find ways to save!
- Debt-to-Income Ratio (DTI): Calculate your DTI by dividing your monthly debt payments by your gross monthly income. Lenders may use this percentage to gauge your ability to afford a mortgage and monthly payment, so understanding where you currently stand can help you improve your DTI before you submit an application.
Set Clear Measurable Goals
One way to make your homeownership dream a reality is to set clear and achievable goals. As you begin to consider what your homebuying goals are, here are a few items to consider:
- Budget: Determining your budget is the an important step. After assessing your current finances, think about how much you could comfortably afford. Be sure to consider not only the mortgage payment, but the additional costs that come with homeownership, such as property taxes, homeowners insurance, maintenance and utilities. There may be other costs associated with homeownership and loan origination that you may want to take into account.
- Timeline: Consider your timeline for when you would like to buy a home and how long you plan to live there. Understanding your intended timeline can help you make decisions about the type of home, the mortgage terms, and even the location.
- Location: Choosing the right neighborhood may be as important as choosing the right home. Factors such as commute times, school districts and nearby amenities can have an impact on your homeownership choices.
Set a Savings Goal
Saving for a home is about more than just the down payment — it’s also about preparing for ongoing costs and fees that come with homeownership. Start by researching home prices in your target area and setting a realistic savings goal based on your budget. Please be aware that there are other fees and expenses that go into a home than just the home price.
- Create a Budget: After reviewing your expenses, set a budget that allows you to save each month. You may be able to identify areas where you can cut back, even just temporarily!
- Don’t Forget an Emergency Fund: While many homebuyers think of a down-payment as their primary homebuying expense, remember there are other costs involved in homeownership that need to be prepared for as well. Building an emergency fund alongside your down-payment can help with unforeseen expenses!
Build Your Credit Score
Your credit score can play a role in your homebuying journey. Here are some items that may help:
- Check Your Credit Report: View your credit report regularly to ensure all information is accurate and to recognize any negative patterns that could affect your credit. You are entitled to a free credit report from each of the major credit bureaus each year, so take advantage of this to get ahead of any credit impacts!
- Improve Your Score, If Necessary: Pay your bills on time, pay down outstanding debts and avoid opening new lines of credit as you get closer to applying for a mortgage. Consistent, on-time payments and reducing your balances may make a difference in your score over time.
Research Homebuyer Programs and Incentives
One of the most exciting aspects of being a first-time homebuyer is the variety of special programs and incentives, if available and if you qualify, designed to make homeownership more accessible and affordable! Local and federal programs may offer options like grants, down payment assistance, and low-interest loans that can significantly ease the financial aspects of buying a home for qualified borrowers. Each program comes with its own eligibility requirements, so it’s wise to research these early in your homebuying journey to ensure you can make the most of the benefits available to you. Please be aware that restrictions may apply and programs may not be available for all borrowers or in all areas.
Buying your first home can be quite an adventure, but by setting clear goals and taking it step-by-step, you may be closer to making your dream a reality. Whether it’s assessing your finances or improving your credit, each step can bring you one step closer to the keys to your first home.
Ready to make your homeownership goals happen? Learn more about the Pulte Mortgage process!
