A lot of us love the romance of getting a new home. We get excited about the prospect, check the market to see what there is and then we decide we are ready. However, sometimes we find out how NOT ready we are! When we finally get to the place we are checking our monthly budget to see what we can afford, it can become discouraging if we have champagne house dreams on a beer budget.
So, lets get practical people! Here are some ways to find out if you can afford that home of your dreams...and some ways to save some cash:
1. Find out how much your new house payment might be and save that money each month for a few months. Can you really afford to move up in house? Use a mortgage calculator to see what kind of down payment you think you may have (or not) and approximate what type of payment that might go along with the home upgrade (or downsize). Then, when doing your monthly budget, save the added amount in a savings account to see if you can swing the monthly payments or not. Not only will this give you a more realistic expectation of what is to come, it will also put some extra cash in your account for a down payment, moving expenses or whatever else.
2. Approximate any other charges that might go up. Will there be higher taxes? A Homeowner's Association Fee? Higher utilities? Higher home insurance? Will your or your spouse's commute to work change? These are also all things to consider. Like the higher house payment, budgeting all these extra expenses for a few months will help you get a better picture of what lies ahead.
3. Ask your REALTOR for hints and tips on what other expenses come up when you buy a home and what kind of financing may be available. This is extremely important when you are buying a home. Let's say, you can swing the house payment, all the new bills and expenses seem like you can handle and you have a little money put back. What is next? Well, different financing programs have different qualifications and different down payments or not. There are different interest rates with different types of loans and in the purchase of the home itself, there are inspection costs, closing costs, moving costs and maybe even some other things you haven't even considered. Having a REALTOR in your corner can help you answer those questions so you can be prepared.
Now let's say you have done all the "leg work" and know what all it's going to take to get you into that new home. You know what you need to save--but you need some extra ways to get there faster! Here are a few tips to help you save some extra cash fast:
Locate Lost Cash - Businesses or institutions that owe you money, but can't find you are required to hand the cash to the state rather than keep it. So check online for "escheated property" and a state name; that should take you to a searchable database. Claiming money is free (so if someone asks for a fee for it--don't do it). Personally, I once received $200 from the state of Indiana because of this!
Split Your Paycheck - Do you have direct deposit with your paycheck? Have some of each check be split off into a savings account. If your company doesn't offer that, set up automatic transfers on paydays.
Review Your Credit Card Bills and Cell Phone Expenses - Go over your statements with a fine tooth comb and see where maybe there are charges that you don't need (like an insurance on your phone, or fees for something you no longer really need or use). This is a good thing to do with your cable, dish or internet bills too. See what can you get rid of to save more each month. Then do it!
Download Shopping Apps or Coupon Apps - I haven't used a lot of these things, but, my favorite grocery store has a feature where you can clip coupons digitally and then when you are in the checkout, they automatically come off your bill! They also have insentives to help you save more money on things you normally purchase. It's easy and makes a chore more fun. Check out what your favorite places offer and make good use of them!
Prevent Big Expenses - Maintain your car, your home and yourself! Not only can those big purchases keep you down for a while financially, so can medical bills. Some medical bills can't be helped--and will happen. But, planning for those and doing your best to stay healthly can help keep these high costs down.
Cut Your Own Lawn - Or start to do some things you have paid someone else for, yourself. Whether it's mowing, trimming, painting, cleaning, walking the dog or going to that coffee shop every day, figure out what things you can take on and save a bit more. Some things you may not be able to change, but others you may. Take inventory and see what your schedule will allow.
Keep a Loose-Change Jar - In our household, we don't use a lot of cash, but when we do, we always seem to have loose change somewhere. Start collecting it in a jar. You'll be surprised after a bit of time what you may save up! Even if you only save enough to get an ice cream cone with your family, that's one thing you can do for fun that keeps the rest of your money in your wallet or account.
Spend on What Matters - I did this when I got married and had a budget for the wedding and reception. I made a list of what was most important to less important and then I made a budget to spend more on what mattered and less on what didn't. If you do this when you are purchasing items while trying to save, this will make you think twice before spending on something you shouldn't. Do you really need that item? Is there something else you need more and need to keep the cash ready for that?
Above all Stay Positive. Buying a home takes a bit of time, effort and money! It may take you awhile to get that new home, but, nothing worth having comes too easy, does it? Keep your "eye on the prize" and you will see how you can make your dreams come true.--Jen Lush, Real Estate Assitant and Realtor mother