Each January represents a fresh start, a new year, a new opportunity to set goals for the subsequent months and year. Some people start the year with resolutions; others prefer a more long-term outlook of goal setting. Whatever the method is, it is important to set a roadmap on how to attain the desired outcome.
When the goal is to purchase a home in the next year, a key component is to break the ultimate goal down into manageable chunks. The first is to determine the timeline for the purchase and put it in writing. Research shows that when a goal is written a person is as much as 42% more likely to attain the goal over those that are not written down.
The down payment, debt-to-income ratio and credit rating are all key factors in securing a mortgage. It can be very helpful when determining the path to homeownership to meet with a lender to discuss the goal of home ownership and what it will take to get there. A lender can serve as a guide to what type of loan program is best suited for the buyer, what improvements – if any, should be addressed on one's credit and help determine the goal for the down payment and closing costs. Once these items are determined, one can begin to break them down into manageable chunks.
A buyer will need a significant amount of money to pay for the costs associated with purchasing, like home inspections and appraisals, as well as the closing costs and the down payment. Building one's savings is a key component to attaining home ownership. Establish a budget and determine how much to save each month in order to reach the amount necessary to purchase a home.
Paying off debt and not acquiring new debt are key steps to establishing an attractive debt-to-income ratio for a lender. When setting the monthly savings goal, this is also a great time to establish how much debt needs to be paid off/down.
Check and track credit ratings. There are several free credit tracking programs available that can aid in guiding a buyer toward improving their credit. Setting a goal of disputing errors and cleaning up any issues and maintaining on-time payments will ultimately result in a better chance of qualifying for a mortgage.
Research the market. Once the down payment amount is determined and the budget is established, this will determine how much one can afford. By researching the market on home prices and areas, a buyer can then determine what their goal city, section or neighborhood is and begin to outline more specific goals.
Outline wants and needs in a home and write them down. For example, a buyer has always wanted to live on St. Andrews Way. What style of house on St. Andrews? Does it have a large yard or is yard work not a part of the vision/goal? What size home and amenities does one require? What amenities can one live without? Is a steam shower really a key piece of the homeownership goal?
Another key piece to is to determine what is this home to the buyer. Is this the forever home or is it a stepping-stone to get into the real estate market? Is this ultimately going to be a rental property after a few years? Determining what the long-term play is for the home will help to achieve an overarching focus for the homeownership goal.
Taking the pragmatic and specific goal-setting approach creates a path and plan to achieve homeownership within the desired time frame.