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Buyers'
Guidebook
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8
Steps to Getting Your Finances in Order
1. Develop a family budget. Instead of budgeting what
you’d like to spend, use receipts to create a budget for
what you actually spent over the last six months. One
advantage of this approach is that it factors in
unexpected expenses such as car repairs, illnesses, etc.,
as well as predictable costs such as rent.
2. Reduce your debt. Generally speaking, lenders look for
a total debt load of no more than 36 percent of income.
Since this figure includes your mortgage, which typically
ranges between 25 and 28 percent of income, you need to
get the rest of your installment debt—car loans, student
loans, revolving balances on credit cards—down to
between 8 and 10 percent of your total income.
3. Get a handle on expenses. You probably know how much
you spend on rent and utilities, but little expenses add
up. Try writing down everything you spend for one month.
You’ll probably see some great ways to save.
4. Increase your income. It may be necessary to take on a
second, part-time job to get your income at a high enough
level to qualify for the home you want.
5. Save for a downpayment. Although it’s possible to get
a mortgage with only 5 percent down—or even less in some
cases—you can usually get a better rate and a lower
overall cost if you put down more. Shoot for saving a 20
percent downpayment.
6. Create a house fund. Don’t just plan on saving
whatever’s left toward a downpayment. Instead decide on
a certain amount a month you want to save, then put it
away as you pay your monthly bills.
7. Keep your job. While you don’t need to be in the same
job forever to qualify, having a job for less than two
years may mean you have to pay a higher interest rate.
8. Establish a good credit history. Get a credit card and
make payments by the due date. Do the same for all your
other bills. Pay off the entire balance promptly.
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Reprinted
from REALTOR® Magazine Online
by permission of the NATIONAL ASSOCIATION OF REALTORS®Copyright
2005. All rights reserved.
www.REALTOR.org/realtormag |
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