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Here are five ways to achieve financial stability towards home ownership:
- Start your own personal budget plan:
Regardless of whether you are looking to buy a home, planning to save for retirement, or just looking to balance your finances, it is important to create a personal budget. In an average month, those without budgets would probably have great difficulty in being able to estimate how much they spend on various amenities. For a one month period, create a household budget which not only will categorize spending, but show actual figures of what your household spends money on.
Once that month is over, it is important to take a look at the finances and see what is being spent and where. Seeing these numbers written down is typically more effective because you can begin to allocate money to different sources if need be. For example, if you find that your household is eating out too much, allocate some money towards monthly groceries, and the other money can be used towards saving up for a down payment on a home, or perhaps paying down existing debts.
Creating a personal budget is crucial in order to be able to effectively save up for a down payment and afford a home. If you need help creating your budget plan you can email: info@ssfi.ca for a complimentary sample budget plan.
- Examine your current debt:
It is important to be aware and fully understand the current debts that you have. Take a look at not only the type of debt, but how likely it is that these debts can be paid off and how quickly.
In terms of credit cards, only use them if you know you can afford the
payments on them. You should also be aware of payment dates, as missing payments will adversely affect your credit score. Having a lower credit score makes it more difficult when obtaining mortgage financing, auto financing, or even future credit card financing. - Determine your financial goals:
Find out exactly what you want to achieve financially. Without a goal in mind, it makes it much harder to follow through with saving up and paying down debts. If you want to own your own home, own a car, or save up enough for a trip, it is important to visualize what you want.
If you’re just looking to become more financially stable, consider a target budget that you can slowly work towards. It is also important to look at your income compared to your debts to see if there is any room for improvement.
- Eliminate higher interest account balances:
High interest account balances can really hinder plans for home ownership. Credit cards promoted through various companies that typically offer “No interest” or “Don’t pay for 90 days!” also come with a hefty price tag. Big box stores that have in-house financing also typically have the highest interest rates for credit cards.
If you are trying to pay down debts, focus on paying off those with higher interest rates first before moving on to the other accounts. Another tip would be to contact your credit card company and ask for an interest rate decrease. Individuals who have good repayment history and have been with the credit card company for a significant amount of time can sometimes successfully receive a lower interest rate just by asking.
It is important to keep two active trade lines in order to maintain a strong credit score. This can be two credit cards, a credit card and line of credit, etc. Typically, having too many credit cards makes it difficult to keep track and could potentially cause missed payments.
- Find out your best mortgage financing options:
Shopping around for a mortgage is no easy task. There are many mortgage products available currently, and it is important to speak with an accredited mortgage professional to see what the best option for you is.
Many mortgage brokerages offer their services for free. Many also receive discounts from top lenders therefore are able to offer more competitive rates compared to going with a traditional lending institution, such as a bank.
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