Dreaming of owning your own home one day? It’s a great idea to start thinking about it sooner rather than later, depending on how long-term your plans are. For me, having a place to call my own was always a big dream, and it became even more important when I became a mom and wanted more stability. Renting isn’t necessarily bad, but the choice between buying and renting really comes down to personal preference and your own circumstances.
If you’re aiming to buy your first home in the next five years, here are some tips to make the process smoother:
1. **Cut Down on Debt**
Owning a home can be expensive, so it’s beneficial to have little to no debt when you buy. You’ll be juggling expenses like your mortgage, bills, utilities, and maintenance, so keeping debt low helps. Plus, your debt-to-income ratio affects how much you can borrow. Lenders usually prefer it if your debt is less than 40% of your income. You’re in the best position to determine what you can afford, so focus on paying off high-interest debts and large balances first. Look for ways to boost your income, reduce unnecessary expenses, and free up cash to pay off your debts.
2. **Boost Your Emergency Fund**
Having an emergency fund is extra important for homeowners because unexpected repairs can be pricey. Try to increase your savings by three times what you have now. If you haven’t started saving yet, consider the cost of the home you want, its location, and features. Unless you’re getting a move-in-ready home, you’ll need a good emergency fund. Aim to save at least six months’ worth of living expenses before purchasing.
3. **Improve Your Credit Score**
Your credit score determines the type of loan you can get and the interest rates. For the best rates, shoot for a score in the mid-700s. Pay all debts on time, keep your credit card balances low, and avoid applying for new credit just before getting a mortgage. Clear any negatives from your credit report and file disputes early if needed.
4. **Learn to Live More Economically**
Owning a home often means making some sacrifices. Many homeowners cut back on non-essential spending to afford their homes comfortably. Avoid being house poor by prioritizing your expenses and learning to live on a smaller budget. This approach can also help you save a larger down payment.
5. **Pick Up Basic Home Repair Skills**
Reduce the costs of homeownership by learning basic DIY repair skills. This can include painting, fixing doors, landscaping, cleaning gutters, and simple plumbing tasks. Start picking up these skills now or ask friends who own homes to teach you.
Getting these things sorted early can make becoming a homeowner much easier. Are you thinking about buying a house? What are you doing now to prepare for that big step?