Transitioning
from renter to homeowner is one of the biggest decisions you’ll make throughout
your lifetime. It can also be a stressful experience if you don’t plan ahead by
building a budget and saving prior to embarking upon home ownership.
Budgeting
is a core ingredient that helps alleviate the stress associated with money
issues that can sometimes arise if you purchase a home without knowing all of
the associated costs – including down payment, closing expenses, ongoing
maintenance, taxes and utilities.
The
trouble is, many first-time homeowners fail to carefully think about their finances,
plan a budget or set savings aside. And in this society of instant
gratification, money problems can quickly escalate.
The key
is to create a realistic budget based on your goals. Track your spending and
make your dollars go further by sticking to your budget once it’s in place.
Budgeting offers a step-by-step formula for figuring out how to best save your
hard-earned money to invest in home ownership.
Start by
listing your household income, then your household expenses, and review your
spending habits. All of this can be done on a pad of paper or on a computer
spreadsheet.
Keeping
receipts for everything that you purchase will enable you to accurately keep
track of where your money is going each month so that you can review and make
necessary changes to your plan on an ongoing basis.
Examine all areas of your life from
entertainment to the type of food you buy, where you buy your food and clothes,
and how and where you travel. Also look at your spending personality and make
necessary adjustments. Are you a saver, a splurger, a spontaneous shopper or a
hoarder? Become smarter with your money and avoid impulse buying.
If you find you’re spending a lot of
money in one area, such as entertainment for instance, set aside a reasonable
amount each month and prepare to stop spending money in this area once your
budget has been exhausted.
Budgeting
provides you with the opportunity to re-evaluate your needs and wants. Do you really
need the magazine subscriptions, the gym membership and all the other things
you may spend money on each month? Although everyone needs some “me time” to
wind down, could you not get that by taking a walk or reading a good book you
borrowed from the library?
If you can set your budget solidly in
place before you head out home or mortgage shopping, you will be far more
prepared to purchase your first home.
Following
are three top tips to help you prepare for the purchase of your first home:
1. Set up a savings account. You can deposit a predetermined amount into this
account each pay period that you will not touch unless it’s absolutely
necessary. This will enable you to put money aside for a down payment and cover
closing costs, as well as address ongoing home ownership expenses such as
maintenance, taxes and utilities.
2. Save up for big-ticket items. As you accumulate money in your savings account,
you will be able to also save for specific purchases to help furnish your home
– avoiding the buy now, pay later mentality, which can have a negative impact
on your credit when you’re seeking mortgage financing.
3. Surround yourself with a team of professionals. When you’re getting ready to make
your first home purchase, enlist the services of a licensed mortgage
professional and a real estate agent. These experts are invaluable to you as
you set out on the road to home ownership because they help first-time buyers
through the home purchase and financing processes every day. They will be able
to answer all of your questions and set your mind at ease. A mortgage
professional has access to multiple lenders, and can help you get pre-approved
for a mortgage so you know exactly what you can afford to spend on a home before
you head out house hunting, while a real estate agent will be able to match
your needs with a house you can afford. Both parties will negotiate on your
behalf to ensure you get the best bang for your buck. And, best of all, these
services are typically free. They will also be able to refer you to other reputable
professionals you may need for your home purchase, including a real estate
lawyer and home appraiser. If you have any questions contact David Cooke, your Calgary mortgage broker via http://davidcooke.ca
http://davidcooke.ca
