I recently read an article that stated that the majority of Millennials and Gen Z surveyed felt that their best chance at being able to afford to purchase a new home would be to win the lottery. Home prices and interest rates are up, as well as an increase with most other everyday costs with the rise of inflation in the last couple of years. So I get it, however, winning the lottery is not a strategy!
Here is an actual strategy for deciding if purchasing a new home is the right option for you:
Lay out your income and expenses for a month and a year. Also, plan for future years based on what your goals are. For example, if you are planning on getting married and starting a family make sure that you add additional expenses to your monthly plan… kids are expensive! A popular general rule of thumb is that your budget for housing should not exceed 30% of your income. This is a good reference, but the right plan comes down to the individual, and it is up to you to decide where you are comfortable based on your income and expenses. The goal is to figure out a monthly budget that you are comfortable with and make sure you do not exceed that. You don’t want to be “house poor”
If you have no money saved and are living paycheck to paycheck, I will be brutally honest to tell you that homeownership may not be the best choice to pursue until your financial situation stabilizes. Unless you have the proper savings to purchase a home and an established saving plan on top of that, it can be risky to pursue the goal of buying a home by putting all of your eggs in one basket. If you have money saved up, then decide what you are comfortable with using to go towards a home purchase and what your goal is to have left over in additional funds. Stick to the budget and the plan, and if you do not have enough saved currently then work on that as the weeks/months/years progress from here so you can reach that budget/savings goal.
If you are in a position where you have your monthly and savings budget numbers figured out, then the next step is to take those numbers to a lender and see what financing options are available to purchase a home. This is the step where you can explore all options to reach your monthly payment goals and/or find out what loan and grant programs are available to get creative with around cash out-of-pocket requirements to go towards a down payment and closing costs for a purchase.
Real Estate Game Plan
From here you are both ready and able to purchase a home financially. Now you need to find out if you are willing to do what is needed to purchase a home in your local market. Your trusted Realtor can guide you and help you develop a game plan relevant to what locations you are looking in, for the type of home you want, and within your budget. Every market is different, so finding out what is going on and what it will take to purchase a home logistically as a competitive buyer is a key piece to this theme of being comfortable with the process of making a purchase.
Achieving the dream of homeownership is obtainable and one that happens every day to those that thought they never could. The dream of winning the lottery is not obtainable! Let us help you “scratch off” the items on the list for being able to purchase a new home!!!
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