How to Afford Your Dream Home

 

Whether you’re venturing out to buy a house for the first time, or you’ve made a couple of home purchases in the past, you can identify with the excitement generated from the phrase “dream home.” And while that seems like owning such a home is a far-off, well, dream, it may not be. Learn how acquiring your dream may be a closer reality than you once thought.

Start Saving Now

First step to affording your dream home: saving money. This isn’t exactly rocket science. Little things you can do to save up some extra cash include: avoiding the temptation to spend money on that which you don’t need. So, whether your weakness is clothes, fine cuisine, automotive “toys,” etc. — try to hold off. The money you normally spend on these kinds of purchases should get channeled right into a savings account.

Need a more significant way to save up cash? Consider your schedule. Do you have time to gain extra income through a part-time job or some freelance work on the side? If you can swing it, you’ve got yourself a steady flow of money that can go right into your dream home down-payment fund. Do you have any extra assets or property that you can sell? Or, if you’re feeling the burden of debt, liberate yourself. Start aggressively paying down any overhanging debt so that you can either save up more money after the fact, or to increase your overall budget for future mortgage payments.

Get Pre-approved

If you’re really serious about buying your dream home, then show sellers just that by getting pre-approved. You can also determine just how much money you need to have saved up for a down payment and how much house, in general, you can afford. Getting pre-approved typically makes the whole home searching/home buying process much smoother and greatly increases your chances of actually being able to close on the house on your dreams. Once you get pre-approved, you can begin your home search in earnest.

Shop Around

Even if you’ve been pre-approved by one broker or lender, that doesn’t mean you have to close using that source for your dream home funding. We strongly recommend that you do a little shopping — different sources will be able to offer different rates and packages that might require less money down.

You should also contemplate how long you plan on being in this home. If it’s really and truly your dream home, and you aren’t planning on moving any time soon, then a traditional 30-year, fixed-rate mortgage is probably the best way to go. However, if you’re planning moving in a few years, then an adjustable-rate mortgage might actually give you a lower monthly payment during your truncated time in the home.

Get Some Assistance

While shopping around for the mortgage deals for your dream home, you might be eligible for government-backed loans. For instance, those struggling to generate a sizable down payment may find refuge with an FHA loan, which allows buyers to put down smaller down payments as low as 3.5 percent. There also government-insured mortgage loans available for veterans (VA loans) or rural home buyers (USDA or RHS loans).

Have your eye on house in need of some TLC and not sure how you’ll fund it? Don’t chalk it up to a loss just yet, because there are government programs that provide funding for home improvement and renovation. Learn more on the details for that here.

Reconsider Your Must-Haves

Don’t get completely carried away with your idea of what a dream home must entail. Sometimes a dream home must be patched up first before it becomes dreamy. Sometimes a dream home is actually a condo or townhouse. Regardless, if you set your standards too high, that dream home might become rather elusive or, it might stretch your budget way too thin.

So, when looking for your dream house, keep a balanced of dose of reality on hand. Do you have kids? Is your dream house decked out with granite countertops, teak floors and private backyard in a nice neighborhood with good schools? Or will you end up having to dish out more money for private school tuition? Can you settle for a smaller house in a nicer area that you can “bedazzle” later? You also need to pay attention to the commute to and from your job, and that of your spouse’s, as well as the surrounding area. If you revel in the nightlife, you probably want to make sure you don’t have a 40-minute commute to your favorite stomping grounds, and vice versa.

Be Patient

Above all, be patient. While it goes without saying, buying a house requires a serious commitment. So, don’t try to rush into anything or succumb to less-than-ideal circumstances because of your sense of urgency to occupy your dream home. It’s good measure to pay attention to the market. Trying to score a dream-home deal in a seller’s market will be challenging. If the market doesn’t look ripe for your dream home transition, you might want to consider staying put for a little while longer or taking a step forward into a different home for the time being.

Also, don’t dump all of your savings into a down payment without first putting aside some extra money for closing costs, costs associated with moving or any additional you might need for sudden projects in your new home.

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