The housing market is doing nothing but making renters exhausted right now. It almost seems impossible to gain a mortgage today, but it isn’t. It simply takes a lot of prep work. But the huge goal of owning a house can be made simpler when we break it into smaller pieces. Take a look at our guide to life goals that you can achieve now to be able to afford a home in the future.
Be debt free
If you are looking to buy a home, the first thing a lender is going to look at when reviewing your finances is your debt-to-income ratio, which shows them how much of your income is going to minimum monthly debt repayments. They typically like under 36% of your income going to the debt, but some go for more.
But your best state of affairs is to simply wipe the debt, allowing for a bigger mortgage. Being debt free should be a life goal in itself. You can get into debt for simple human rights like being ill or wanting an education, but it shouldn’t follow you around forever. It’ll get in the way of bigger financial decisions, like taking out a loan or buying a home.
You want to pay off that debt as soon as possible, so it’s in your best interest to pay more than the minimum monthly repayment amount as many times as possible. The longer you take to pay off the debt, the more interest will accumulate. In fact, you might be finding yourself in a cycle of only paying off the interest every month with your minimum monthly repayments.
You can make paying off the debt easier by transferring all your debt into the one balance transfer card, which doesn’t have interest for a certain period of time, or by paying it all off with a personal loan, so you’re only paying one round of interest rather than different debt at different interest rates.
While you’re dealing with financial things that need to be handled in order to get a home, look into your credit score. Your lender definitely will. Your credit score gives the lender an idea of how reliable you are at making your repayments on time and in full. If it doesn’t look good, you can improve it in a number of ways, but they all take time, so it’s best to start now.
Debt bogs down your credit score, so that’s one thing out of the way, but so can, obviously not paying your bills on time. If you’re paying everything fine, you can look into a credit builder card. Spend less than 30% of the money in the card for a lender to look favourably on you and make the repayments on time and your credit will rise over time. You can also look into getting an auto loan to build your credit.
Get a higher-paying job
That’s obviously easier said than done and depends on where you are in your career. You might need to go shopping around for a more ambitious role, or get a qualification to get a promotion for the company that you’re currently in.
You might need to brush up on your interview skills. Make sure you are ready for everything they throw at you. Read Placement’s guide to get yourself ready.
If you think you are in the position, you can always ask for a raise. It’s a scary concept, but with justification, complete with hard evidence, and confidence, you can talk your employer into offering you a better salary.
The goal of struggling
It’s time to save up. Create a budget and cut out anything you can so that you can put more money into your savings. Get friendly with all the comparison websites and look for better deals in everything from your heating to your broadband.
And then stick to your goal. Remind yourself what you are working towards with a photo of your dream home on the mirror or something. It’s too easy to dip into the savings at the end of the month when you’re down to your last cash note, so you’ll need motivation to get out of there.
It’s a sign of the times that we’re in that there is a lot of people moving back home for a year or so. This obviously isn’t an option for everyone, but if you have a good relationship with your parents you could ask to move in for a year so that you can save enough to get out again. It will fast-forward your savings to put all your current rent rate towards your home deposit.
And if you’re someone who believes that struggling builds character, you can let that rock you to sleep in your childhood bedroom.