Get ready to buy your next home with these 3 tips:
When it comes to home buying your fiances are more than just your checking and savings accounts. You need to understand your debt-to-income ratio, your overall expenses and other assets you have. Debt-to-income ratio is simply your total debt payments per month compared to your total earnings. Most lenders want this ratio to be 43% or less. If you make $6,000 and have payments that add up to $2000, your debt-to-income ratio is 33%.
Your lender will walk you through more of what this means and changes you can make to optimize your approval.
The key to understanding your budget is to write it all down. You can do this is a spreadsheet or by hand, whatever works best for you. Even the most organized budgeters can learn something from this exercise. Before setting new home buying goals, you need to fully understand your income and expenses. Nothing is too small to exclude here.
Start by totalling your income - which you likely did to calculate your debt-to-income ratio. From there organize your additional expenses to discover how much you spend on your home.
Buying a home, for the first time or when it’s time to upgrade or downgrade, is a long-term goal. Give yourself the necessary time to write your goals down and make a plan of execution for your down payment. Depending on where you are in your financial journey, this may be as simple as putting your current home on the market and as complicated as creating a savings plan.
This plan isn’t static and needs to have some flexibility so you can judge the market and make changes as fit your budget allows.
Make sure to have fun along the way!