Planning on buying a new home in the next few months? Today’s housing market offers some outstanding advantages and incentives for homebuyers. In order to save up for that downpayment and qualify for today’s mortgages, however, you must have your household finances in order. Check out this list of suggestions for personal finance budgeting.
Personal finance checklist
Create a budget. Keep receipts and bills over several months’ time and make your budget match what you actually spend. Some expenses are predictable, such as rent and groceries, and some are not, such as car repairs. Look for non-essential expenses you can cut out of your budget, to make the next step easier.
Start saving for a down payment. Put away a set amount of money each paycheck. After you have created your budget, this step should be easy, since you will know how much you can afford. Having the money automatically deducted from your paycheck makes it even easier. Today’s mortgages require a minimum of 3 to 3 1/2 percent of the total cost for a down payment, although if you can get a better rate if you put down a larger percentage.
Get your credit in order. Getting a mortgage today requires a credit score of 620 or higher. If your credit score is not where you want it, you can definitely improve it with some work. Make your payments on your credit cards and other bills on time, and pay your balances off as soon as possible.
Get rid of debt. Finally, reducing your debt is an important step. Your mortgage usually falls within 25 to 28 percent of your net income, and your total debt should not be more than 36 percent to satisfy lenders. That means your monthly payments on other loans, such as car loans and credit cards, should be no more than 8 to 10 percent of your monthly income.