You know you want to own your own house, condominium, or townhome someday, but “someday” is not very specific. How do you know when you’re ready? While the exact answer will differ for everyone, due to the physical and emotional implications of home ownership, a good rule of thumb is to see if you successfully accomplish the following financial goals.
- Create a budget and stick to it – If you’re the kind of person who saves all their receipts and bills, gather them up and take a good look at where your money is going. If you’re more lax about your financial paper trail, take a few months and track everything you spend. Also keep track of things you purchase and let go to waste, such as groceries or leftovers that go bad before they get eaten, and any funds you put into savings. Compile a comprehensive list of all your recurring expenses, both fixed costs, such as rent, student loan payments, or haircuts, and variable costs, such as groceries, gas, and utility bills. Then compile any occasional expenses – both the fun ones, like birthday gifts, and the not-so-fun ones, like car repairs. Compare your total expenses to your total income for the same period – how much money do you have left over? If you’re satisfied with your current spending-saving situation, that’s good – just make sure you stick to your current patterns. If you’re not satisfied, comb through all your costs and look for ways to tighten things up. Can you pack a lunch for work instead of going to a restaurant every day? Can you get your hair trimmed every three months instead of every six weeks? Whatever you settle on, make sure you can stick to it, and remember: budgets fail more often because they’re unreasonably strict than because they’re too loose.
- Examine all the military financial benefits available to you – There are a lot of government-sponsored programs designed to help service members and their families save money. Are you contributing to the Thrift Savings Plan, a 401(k) that’s much simpler and more efficient than many civilian retirement funds? Are you able to shop at the commissary and exchange on a military base, rather than spending more at local civilian groceries and department stores? Are you fully utilizing all your healthcare benefits? Don’t be shy about asking if civilian businesses offer military discounts either – some don’t, but the ones that do can certainly add up. All of these options can make noticeable differences in your budget.
- Corral your debt – While there’s no hard-and-fast rule about how much debt you can have and still get a VA loan, it’s a good idea to aim for a debt-to-income ratio of 41% or less. If you have more debt than that, or certain kinds of particularly damaging debt (collections, for instance), you’re more likely to have to meet additional financial requirements to obtain a loan. Take a look at the debt you have now and choose one or more strategies to decrease it. For example, you could focus on paying off credit cards with the highest interest rates first; transfer balances from high-interest cards to ones with lower interest rates (be mindful of transfer fees, though); or commit to paying more than the minimum required amount on all your bills. Avoid taking on any new debt, co-signing loans with other people, or using short-term lending options, such as payday loans.
- Research and practice a mortgage payment – Gather pricing information on the kind of home you think you’d like to own in the area where you’d like to live, then look into common interest rates on home loans. If you’re currently paying $750 rent each month but your mortgage payment would likely be $1200, try putting an extra $450 away in your savings each month for several months. If you can live that way without issue, you’re probably in good shape to start the process of obtaining a loan and buying a home. If putting away the extra money is too much of a strain on your current budget, it’s time to reexamine things. You may be able to find additional income and/or make additional cuts to your budget, or you may decide instead to set your sights on a cheaper home or a different residential area.
There’s no doubt that good financial habits require intentional design and discipline, but there’s also no doubt that being able to achieve your goals in life makes all the hard work and self-control worth it in the end. If you’re ready to achieve your goal of owning a home, or if you’re still unsure but have important questions, Fortress VA Loans is here for you. Our family of VA loan specialists and lenders is committed to giving back to American service men and women by making the VA loan process as simple and painless as possible. Wait no more – contact us today!