Buying and owning your own home is considered the American dream. To live in a house where decisions on changes at home are made and what can or cannot do, without doubt it is liberating. However, to buy a house you must be disciplined, be realistic and have a plan. If you are careful and patient, buying a home is possible even if you have a low income.
- Get your credit in order. You must have good credit to make any major purchases that are not paying in full. Get a copy of your credit report and see if you have many late payments or repayments or have a lot of debt to pay. If you have these problems, improve your credit by paying your credit cards, your bills on time and making sure all people paying you owe them.
- Keep your expenses in order. List your bills and income, and don’t forget to include child care expenses. Create a financial plan that shows how reliable your current income can cover all your accounts in addition to your mortgage proposal, with money to spare. Banks do not want a mortgage on a person to pay more than 25 to 30 percent of their income. The rules of a bank may vary slightly, but if you adhere to this rule will be safe.
- Save money for a down payment. You could not save much but try to save all you can. Try to have at least 5 percent of the cost of the house down payment. A down payment helps the bank to see that you have the resources, know how to save and help cover the costs of lending money if you do not pay the loan. Having a down payment is a major selling point to show that you are faithful to the bank. If you can save even more than 5 percent, it will be better yet.
- Call the office for urban development and housing status or similar office (see Resources) to ask about any program first home buyers or buyers with low incomes. You may have programs where you can get low interest loans or grants to help right down payment.
- Go to a bank to see if you can get a pre-approved for a mortgage before shopping for a home. If you qualify, this will make finding a home more simple and specific because the bank will tell you what price range you pre-approved to buy. Even if you do not get approval, you will have an idea of what the bank is looking for you to buy a house.
- Looking for a home you can afford. Consider how much you earn per month and how much you can pay for a mortgage. You can use the amortization calculator (see Resources) to help you discover how your payment would be different rates of interest and mortgage amounts. You should not buy a home that costs more than three your annual salary. You can find a lender that allows you to do this but it is not financially savvy owe much on a mortgage if you have trouble paying your bills or save for an emergency.