It’s 2019 and with a new year comes a new chance to makes changes to your lifestyle. If you’re still in the renting game but aspire to homeownership, 2019 could be the year you make the changes which will take you to that goal. The present buyer’s market in NYC is predicted to last until the 2020 presidential election. If you hope to cash in on it, start making the changes now that could see you becoming a homeowner by this time next year. That might seem ludicrously optimistic to many New Yorker’s but if the potential is there it’s well within the realms of possibility. At the very least, picking up these habits will give you a realistic sense of what homeownership is like. As well as giving an estimate of when you can make it happen.
1. Sacrifice a few luxuries
This is pretty obvious, but it deserves underlining. If you can’t make a few sacrifices, then how can you expect to save for that 20% down payment? Sure, an FHA loan can come with as little as 3.5% for the down payment. But these are very inflexible loans and you’ll have to take out mortgage insurance which hovers at around 1% of the cost of the loan. Start proving to yourself that you can make the sacrifices necessary to save for that 20%. This is also good practice for showing that you can keep up with your mortgage payments.
Aim to eat out less often, cut the cable bill, revise any ongoing subscriptions, and quite your gym membership. It costs far less to make your own meals and there are plenty of ways you can get a full workout without paying a penny. Don’t just limit this to the small expenses, avoid big expenses as well. Is there a cheaper vacation you can find for this summer? Do you have an expensive car that you can do without?
2. Set up a home savings account and make regular deposits
Starting a home savings account is the first concrete step toward homeownership. These accounts are designed to provide renters with a tax-advantaged way to save for a down payment. It’s a risk-free way to invest funds and you can make deposits at any time. Create a plan to make weekly, biweekly or monthly (whatever’s feasible) deposits. You can even set up the account to automatically deposit a set amount from your salary each month. Within enough time you can have a tidy amount saved and start to see what your budget is for a home.
3. Start learning about the home buying process and local market
Without knowing the process to buying a home, how can you expect to know what the steps ahead are? What type of property are you interested in? There are condo and co-op apartments, townhouses and standard one or more bedroom apartments to choose from in NYC. The home buying process differs slightly for each one so read up on what you can expect ahead. Learn about the real estate agent’s job and how you can choose a good one. Study the local market by keeping up-to-date with market reports and real estate news. Attend open houses to see what’s out there and motivate you to save more. When you can see the road ahead it becomes a lot easier to follow it.
4. Do a trial run of homeownership
There’s a lot more to owning a home then just coming up with the 20% down payment. There’ll be monthly mortgage payments, maintenance costs, property taxes and insurance to pay. Those living in co-op apartments will have a set monthly maintenance fee. Condos come with monthly common charges. Based on your homeownership ambitions, you need to get a rough idea of how much you’ll need to save each month to keep up with payments. For one month, set aside the anticipated amount you’d need to keep up with monthly expenses and an emergency fund. If you can’t live within that budget, you’ll know you need to revise your buying ambitions.
5. Work to boost your credit score
How high your credit score is will determine to a large extent how much you can qualify for a mortgage and at what interest rate. A lot of things go into determining your credit score and there are several things you can do to boost it. Pay all your bills on time, pay down your debt rather than shifting it around and dispute any inaccuracy’s in your credit reports. You should aim for a minimum score of 600 but getting it to 700 and above will ensure a far better interest rate. Improving your credit score will also teach you good financial habits which are all part of what it takes to buy and maintain a home.