Getting your finances in order is essential if you want to become a homeowner, although first-time buyers will need advice and guidance to put themselves in the best possible position.

With that in mind, here is an overview of the basics of money management that should set you on the path to purchasing a property without falling foul of common mistakes.

Build a Down Payment Through Budgeting

The sooner you start to save up for a deposit on your first house, the better equipped you will be to take the plunge when the time comes.

Building a deposit is much easier if you get serious about budgeting, as you can only grow your nest egg if you know how you are spending your money at the moment.

You can make a simple budget in a spreadsheet, factoring in your salary alongside the essential outgoings you have each month, such as things like rent and utility payments. You can also analyze any non-essential expenditures and see whether there is space to cut down on your spending so that more cash can be allocated towards your deposit.

Of course, your budgeting efforts will be made easier if you use specialized software to do this. Stewart from Paperless Pipeline – a real estate transaction management software –  mentions that aspiring homeowners should leverage all the digital tools at their disposal to track their finances since this will better prepare them for the rest of the property purchasing process.

Paying down debt

Connected with your deposit-building efforts should be a desire to pay down any debts you have. This is not only necessary if you want to have more cash to put aside for your dream home, but also because the less debt to your name, the better chance you will have of getting your mortgage application approved.

In addition, you should also aspire to avoid accumulating any new debts if you have a target of buying a home on the horizon. It is all about getting your priorities straight and sticking to the rules you set for yourself, according to your long-term financial goals.

Improve Your Credit Score

Another of the main factors which come into play when determining whether or not lenders will be willing to provide you with a mortgage is your credit score, which is calculated based on your credit history.

There are a lot of different metrics used to measure your credit score, and one common misconception is that you should avoid taking loans or using credit cards altogether. In reality, the opposite is true; credit agencies and lenders alike will want to see that you have a history of using credit responsibly. This means that you should build your score by paying off debts according to any deadlines that apply, as missed payments will cause your score to tumble.

Increase Your Household Income

On a superficial level, the more money you make, the larger the amount lenders will be willing to give you when you apply for a mortgage. Having a sizable deposit will obviously be helpful, but unless you have a decent salary to back this up, your options may be limited.

Lots of first-time buyers take a proactive approach to boost their income, such as by adopting a side-hustle to supplement their take-home pay from their main job.

Another solution is to buy a home with someone else, which obviously makes it easier if you are in a couple and can combine your incomes jointly on a mortgage application.

A joint mortgage application is a better option for self-employed people, since buying a home with someone who has a permanent job will let you sidestep a lot of the concerns that lenders might otherwise have when considering freelance customers.

Consider Other Costs

Lastly, first-time buyers should also take the various costs that come with homeownership into account on top of the likely monthly repayments on their mortgage.

From insurance and utilities to repairs and maintenance expenses, you need to adjust your expectations according to how much you can reasonably afford to pay out each month. And if you are not ready to commit, always remember that being patient is better than rushing into such a monumental decision.

WHO IS FULTON GRACE?

We are one of Chicago’s leading providers of comprehensive real estate services. We are home to an ever-growing team of savvy & reputable local realtors, seasoned property managers, and customer-service-oriented staff. Whether you’re looking to find a new home, sell your home, or have your property managed, let us be your trusted real estate advisors.