We are all excited about the new year and a new decade. The time when you are making new year’s resolutions for your career, health, saving goals and even owning your own home. As a first-time homebuyer, you are probably wondering if you can afford it in the first place. Is this the right time to make such a huge financial decision?
Buying a house can get overwhelming fast especially when you don’t have enough cash. We’ve handpicked 5 homebuyer new year resolutions you should make to get you closer to your dream of owning your own home.
Keep Track of Your Monthly Budget
It is one thing to know your monthly salary or even how much you earn from your side hustles but it is another to record your monthly spending. Keeping track of your monthly budget will help you to avoid overspending and live within your means. Some of the things to record are transport costs, food, shopping, bills, child upkeep and other expenses that could come up.
Practice the 50/20/30 budget rule to help you achieve your financial goals. It simply states that you spend 50% of your salary on essentials, save 20% and 30% goes on wants. Oh, did we mention that you should have a separate account for saving for your house? This is good to avoid making withdrawals in case of an emergency.
Avoid Switching Jobs
When financial institutions are evaluating your mortgage application, they mostly focus on your income and your job history. If you are constantly job-hopping, this looks like a red flag to mortgage lenders because it shows that you lack job security. Keeping a job for at least 2 years shows that you are capable of offsetting a loan.
This doesn’t mean that you should remain in stagnant jobs where you don’t feel like you are growing. However, lenders need to know that you are in a position to repay the loan by predicting your future salary. If you find a new job while thinking of buying a house, you will have to provide extra documentation that shows your financial capacity. Remember there are other hidden costs that arise. So you need all the money you can get in the entire process.
Avoid Unnecessary Expenses
When you are saving to buy a house, any money that you get this might be the only large investment you can afford to make for some time. For instance, you can’t plan on going on an expensive vacation or buying a car. If you are someone who loves partying, you will have to cut down on that and look for other less expensive ways of spending your time.
Let this be the year of saying no. Always remember the rule of thumb: differentiate between needs and wants. If your friends want to meet, don’t be afraid to say no to them. If you want to buy something for your house, remember your saving goal of owning a home.
Pay Your Debt On Time
Financial institutions will look at your loan history and your default rate. Kenyans are in the habit of using mobile money lending applications. You might think that not repaying a loan of Kshs 5,000 will not affect your credit score but it will. Ensure that you get a clearance certificate from the Credit Reference Bureau (CRB) if you are thinking of securing a mortgage.
Your other bills – electricity, rent, student loans and any others are also under scrutiny. Paying them on time shows you are a responsible person who can pay back larger sums of money.
Reduce Your Monthly Subscriptions
There are some monthly subscriptions that you can most certainly live without if you want to meet your saving goals of owning a home. If you have a Netflix subscription, talk to one of your friends to share their password with you. You could also cancel your gym subscription and work out from home or go for a jog.
If it is an expense that you absolutely must incur, then that is fine. Only you know your priorities and what is important to you. But if it’s not necessary, then cut back and save that money.
To save more, you need to spend less. Cut down your expenses and put the money aside to help you achieve your objective of being a first-time homebuyer. Additionally, keeping up your credit score will help you secure a mortgage easily.