8 Steps to Getting Your Finances in Order to Buy Lake Property
- 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.
- 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 percent and 28 percent of income, you need
to get the rest of installment debt—car loans, student loans, revolving
balances on credit cards—down to between 8 percent and 10 percent of
your total income.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
Go back to buying lake property
Reprinted from REALTORŪ Magazine Online by
permission of the NATIONAL ASSOCIATION OF REALTORSŪ
Copyright 2005. All rights reserved.
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