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Five Profitable Steps Closer to Your New Home in 2015

Tuesday, January 06, 2015

Five Profitable Steps Closer to Your New Home in 2015

Five Profitable Steps Closer to Your New Home in 2015

Economic forecasts for Colorado in 2015 predict continued expansion in the state’s economy. Colorado now ranks in the top five nationally for growth in population, employment, wage, salary, and personal income.

If there were ever a year in which to get serious about purchasing a new home, this would be it. Here are five simple but powerful steps you can take today to move closer to actualizing your dream.

Pinch Every Penny

It can be humbling to examine your spending habits, but there is great power in making change and seeing tangible results. Look for what Suze Orman calls "hidden money."

Can you downgrade your cell phone plan? Do you really need a landline too? Swap cable television packages for streaming Internet. Exchange the gym membership for walks and hikes.

Shop your car insurance! It is not uncommon to pay 30-50% more than you should if you have remained with one carrier for years. Raise your deductible or designate one car as low-mileage driving only (under 15,000 miles a year).

Supplement income with overtime, turn a hobby or unwanted items into cash, grocery shop once a week with a list and meal planner in hand.

Polish Your Credit Score

Your credit score and credit history are two of the biggest factors that determine the type of loans you qualify for. A score of 720 or higher is ideal. Credit Karma is very useful for tracking your score and obtaining a free credit report. Examine your report closely for errors. It can take time to dispute and purge inaccuracies, so get an early start.

Always pay your existing bills on time. Reduce credit card balances faithfully, paying off the highest interest rate cards first. During this period, do not close any existing accounts, make large purchases, or apply for new cards or lines of credit.

Know Your Market and the Marketers

It pays to become very familiar with your local and regional real estate market. Track and monitor the selling prices of comparable homes in your area with websites such as Zillow and Trulia. These sites also provide information about the neighborhood, schools, and crime rates. Create Google Alerts for new homes coming on the market in your area. Scan the local real estate magazines.

Begin asking your friends and neighbors for a real estate agent referral. Interview prospective agents, looking not only for their experience but also their preferred methods of marketing and communication. Ask agents to provide you with a list of references from their previous clients and consult them.

Deconstruct Your Budget

“How much house can I afford?” is probably the most important question you’ll ask. Determine your “housing expense ratio.” This measures housing expense as a percentage of gross income. Mortgage lenders prefer a housing expense ratio of 28% or less.

Lenders might also consider your total expenses; housing plus all other fixed monthly obligations. Total expenses should be less than 36% of gross income. Be sure to factor in all the other costs such as taxes, insurance, maintenance, and emergency repairs.

Personal finance Suze Orman recommends buying a house you can comfortably afford, “Because if you can’t sleep at night worrying about paying the mortgage or fixing your broken water heater, you’re spending too much.”

Preapproved is Power

While a pre-approval letter is not a guarantee, it reassures real estate brokers, sellers, and other lenders that you are credible and creditworthy. Once you’ve selected the financial institution that best fits your needs, the income and credit score information you’ve provided will be verified to determine the maximum loan amount for which you qualify.

Set your intention, commit to your future, and keep your eye on the prize. 2016 will find you settling into the new home of your dreams.

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