Cascade Title's Manager Message
With home affordability at the highest rate seen in many years, there is no doubt in my mind that now is the time to be thinking about making a purchase. Many renters want to turn over a new leaf by investing in a starter home and many current homeowners want to take advantage of low prices and buy the home of their dreams or just step up to a bigger and nicer home. Interest rates continue to stay at record low levels, so all the keys are in place to act now.
The key to buying in today's market is having the funds and financial stability. So, how can you go about saving to buy that starter home or dream home?
While buying a home is normally the largest investment the average person makes, it can also be the best investment they will ever make. If you do not have at least 10% to 20% of the purchase price to put down, then you can't afford the home you want and you need to demonstrate the ability to save. How do you get to that point? The first important step is to commit yourself to the goal of homeownership, and this may require a change in habits. Many households today spend every penny that they make each month. Instead of saving 10, 20, or 30 percent of their monthly income like they should, they strategically make minimum payments. Many others spend well beyond their means and slip further into debt with each purchase. In order to change old habits, you must replace them with new habits. Start by working out a budget. It can be very sobering to see the real numbers on how you spend your hard earned dollars. Keep track of your spending for a month and note how much you are truly spending on dining out, entertainment, household spending, clothes, and all those little extras that add up. This goes double for cash purchases -- make sure to keep every single receipt.
Now that you have the facts, it's time to come up with a new budget. Set aside money for all of the necessities like rent, mortgage, car payment, food, medical, etc. As hard as it may seem, cut out the unnecessary items. Do you have to have cable? If so, perhaps you can modify over to a smaller package that costs less each month. Do you need to go out to dinner or lunch multiple times a week? Why not pack a lunch and choose to cook at home as a family. It's healthier and if you need to drop a few pounds you can adjust what you are eating much easier.
Now that you've cut out the unnecessary wants and needs, it's time to focus towards buying a home and it's time to channel those extra funds into a savings account. Some people new to the savings game find it easiest to set up an automatic savings transfer each month as this keeps you focused on your goal. Everyone will have some desires that need to be part of this budget, after all, we are human and you need to enjoy life and have some fun. Maybe you like to dine out, shop for clothes, see movies, or go to concerts. This is all right if you can afford it, but in a real down and dirty savings game you might want to consider alternatives. Rent movies instead of taking the whole family out, and if you are like me, it is no big deal to wait for new releases. Plan "Staycations" in your own community instead of paying traveling and hotel costs. Supporting your local community helps our economy! When you go shopping (which includes the grocery store), always go prepared with a list and only buy items that are truly needed, not those items that simply catch your eye. Give bigger purchases some time and thought and watch for specials. It pays to wait a week or two and do comparison shopping and decide on what you really can afford. I even find that after waiting, I sometimes do not even make that purchase.
At the end of the day, learning to save is about learning to follow your own instincts. You will figure out when you are making an impulsive buy or spending more than you should. It tells us when we could easily bring lunch from home instead of going out to eat. And when you do buy that home after doing all that math, please use a Realtor and make sure to use Cascade Title!