One of the most rewarding things about being a real estate agent is helping first time home buyers purchase their first home. Of course it isn’t always a smooth ride, however we always get here. If you ask me what are the biggest challenges for first time home buyers I would say:
- Credit is not where it needs to be
- Debt is too high
- Lack of down payment.
I know first hand how challenging it can be to pay off debt and saving money for a down payment. For us, what worked was getting a plan together that helped us purchase a house.
- Do not open credit cards or add more debt
Getting out of debt is simple just not easy. The first step is to stop adding debt of any kind. Leave all your credit cards at home so that the temptation of putting it on your card does not exist. Some like to carry a credit card for emergencies, which you can do, or you can simply carry two hundred dollar bills hidden in your wallet that can help if an emergency arises.
Do not open any more credit cards and hold off on purchasing a car until after you purchase your house. You will quickly start to see that when you start to pay off your credit cards, credit card companies will start to send you “offers” on their newest and best card. Don’t even open it, just throw it away! Remember what your goal is, staying out of debt!
- Track your spending
Keep yourself accountable! Tracking your spending will help you see where the gap is on your income and your spending. What we realized from tracking our expenses is that we spent money that did not need to be spent. For example, we realized that we were spending about $100 in starbucks drinks every month. We do love coffee however those $100 can be spent somewhere else.
Create a list of all the place of all the places your money goes every month. Then split that list in two separate lists. The first list should include items that you have to pay for every month (e.g. rent). The second list should include debts you can pay off. We did an example for you here:
| Have to Pay | Debts |
| Rent | Chase Credit Card- $1,245 |
| Electricity | Target Credit Card- $520.00 |
| Car Payment | Gas Credit Card- $150.00 |
**Make sure you put highest balance of credit card first
- Eliminate Debt
We used the Avalanche effect to pay off our debt. The Avalanche effect helps you take a big chunk out of your debt every month.
- Make the minimum payment for every bill.
- Make an extra payment for the one item that is on the top of your list ( i.e Chase)
- Repeat monthly until the item on the top of your list is paid in full..
- After you’ve paid off the first item, take the money you were using to pay it off and apply it to the second item on the list.
- Knock off each #1 item every month until all balances are paid in full.
- Save Money!
Saving money can be fun! Once all the credit card debt is paid off, use the money you were once using to pay off the credit cards away and start saving. For example if you were paying about $400 every month to pay for credit cards and save for a year, you will have $4,800 in your savings! This is a down payment for an FHA loan on a $140,000 property!
Other ways you can save:
- Use coupons
- Use tax return to pay off debt
- Unsubscribe from magazines and monthly merchandise clubs.
- Create a budget
- Find deals for services
- Downpayment
Contrary to what you have heard before you do not need to have 20% saved in order to purchase a house. There a lot of loan products that can be used instead of the 20% conventional loan.
This past year we helped over 40 families purchase their first home, and we would be honored to do the same for you. To schedule a consultation with one of our buyer agents submit an inquiry below.
http://www.castillorealestate.com/contactus/