The transition from the holidays and 2018 is behind us now, and we are well into the first month of the new year. Once 2019 officially started, I believe I heard a collective sigh of relief echoing throughout the following days. 2018 was a good year, much better than we had anticipated it being–for most of us anyway. 2019 feels like a beacon of light, illuminating the path to an auspicious year ahead; a new year, a new decade and what seems to be the worst is behind us.
For some people the New Year is just a party or another day, for others it is a time of reflection and resolutions, and for others it is a benchmark–a way to remember annual projects. I am not really a resolutions person myself; I figure if I do not make it, I cannot break it. I do, however, remind myself to up the ante on what I should be doing anyway and to plan for goals and projects ahead.
The hard part is sticking to the plan after the luster of the New Year starts to fade. For the rest of January we will be offering resources on making and keeping home resolutions, whether you want to update your current home, start saving and shopping for your first house or sell the home you have. Here are some tips to get you started making your home resolutions:
Everyone’s list of things to accomplish in the upcoming year is different, but one thing is pretty universal: most of us are too ambitious for our own good. The best thing to do is make reasonable goals for yourself and work towards accomplishing them one at a time. So be realistic. You may not renovate your entire home, but in all likelihood you can finish your kitchen remodel. You may start the year with plenty of momentum; just remember to pace yourself when it comes to big goals–it’s a marathon, not a sprint. Here are some tips to keep your goals in check:
Set a goal: I find it useful to create a bucket list of all the things I want to do and prioritize the most important, most time consuming and most expensive. Your goals and what you do to accomplish them will differ whether you are making your home more your style, saving to buy or preparing to sell. From this list you can prioritize the goals in order by urgency, seasonality, and difficulty. If you cannot fit all your projects in this year, move them to the rolling 2012 bucket list.
Make a budget: Do your research and make an informed budget. If you are looking to renovate, you will want to make a plan, check resources and make an informed budget. If you are looking to save up for your down payment on a home, you will want to assess how much you need to have saved in order to have enough to put down, and create a budget plan. Creating a budget is a great way to keep your finances in check and keep your projects as affordable as possible.
Set benchmarks: If you have a big goal, breaking it up into smaller bites is the best way to stay motivated. If you can do a little bit every week to keep your home clean and tackle an organization project, you are more likely to sustain the momentum than if you attempt a complete overhaul. Also, there’s one great thing about goal setting, budget making and project planning: the more you practice, the better you become!
Stay motivated: Your resolutions may already be going by the wayside now that we are caught back up in life-as-always. It may help to write out your resolutions in a central place–a document on your computer desktop, a list on your fridge, or benchmark reminders in your mobile calendar. The key is to keep your resolutions at the top of your mind so you can work towards them a little bit every day/week. For more advice on how to keep your momentum, go here.
Entering into debt is a concept I grew up diametrically opposed to. I was raised, like many with frugal family members, to understand that anything you couldn’t pay for on the spot was something you couldn’t afford. But as we age we learn the pathway to financial growth requires a commitment beyond what many of us can deliver up front. Building and stabilizing wealth is, for many families, tied to home ownership. To reach that initial threshold, most aspiring homeowners will need to apply for a mortgage loan. That process can be daunting, but the long-term rewards of securing your home are worth it.
Step One – Break down your budget
A major financial decision like this can’t be made lightly. Many experts recommend a 50-20-30 style plan for finances, particularly for first-time homeowners. That means 50% of your budget is committed to core, unavoidable, monthly expenses like rent, groceries, loan payments, utilities, insurance, etc. The 20% segment is savings, placed in reserve towards a general or specific future financial goal. The final 30% (at maximum) is left as a remainder for personal spending, however, is most desired. Once this is set, you’re ready to evaluate the rate at which you can repay your loan and adjust accordingly.
Step Two – Take the time to get it right
It’s exciting to be in a position to purchase your first home, but if you find the right spot and realize the funds aren’t there yet it can be a huge disappointment. That’s what makes seeking pre-approval for a loan a must – particularly if it’s your first time. Having your credit in order, along with all key financial documentation (bank statements, tax returns, debt copies, prior records of significant ownership). If your credit isn’t in a great place, it’s likely worth taking the time to amend it before applying for your mortgage loan. When you earn lower interest rates and more manageable monthly payments you’ll be thankful for your prudence.
Step Three – The bigger the down payment the better
It’s rare that first-time homebuyers have significant cash on hand, but whatever you can muster makes a difference. Typically, the greater a down payment you can muster, the lower your subsequent interest rates will be. For many, there’s only so much that’s tenable as a bulk sum up front, of course. If that fits your situation, seeking a loan insured by the Federal Housing Administration (FHA) can earn you a healthy loan for a down payment of just 3.5% of your home’s total value. To calculate the limitations of your target home’s loan options, you can input your information on the Department of Housing and Urban Development (HUD) website here.
Step Four – Stick to the plan!
After all the effort you’ll go through to secure a mortgage loan, you’ve earned the home it’s helped you purchase. That loan, like any loan, is contingent on your continued monthly payments. It can feel daunting and dispiriting after a time to continually be paying for a home you’re already living in, but maintaining your financial balance is vital. You’ll never be able to predict every expense that comes up but maintaining your budget towards paying off your mortgage loans will set you up to be more financially flexible in the future. Should you ever hope to purchase a second home or other major investments requiring of loans, having a record of consistent mortgage loan payment can help you secure far more favorable interest rates in the future.
A mortgage loan, like any loan, is a major commitment, but entering into homeownership is a massive step towards financial stability and future life-planning. With proper patience and focus, you can get the loan you need at the rate you can afford.