The dream of owning your home can often seem like an unattainable goal – especially if you have a limited income. However, evaluating your spending habits, building up your savings, taking advantage of buyer’s assistance programs and polishing up your credit score can make that goal well within your reach.
Revaluate and Save for a Down Payment
When living on a limited income, it often feels like there’s not a penny to spare. Although you may not take fancy vacations or own a flashy car, that doesn’t mean you don’t have resources available to save for a down payment on a home. A truthful examination of your checkbook or debit card statement can reveal hidden potential. Look for little things you do on a recurring basis, add them up and trade them in for a solid start toward homeownership. Skip that daily store-bought coffee at $2 per cup and bank $730 after the end of the year. Bring leftovers for lunch and save up to $25 per week, which calculates to $1,300 per year. Give up acrylic nails and add another $650 to your account. By the time you add up the savings, you could grow your nest egg by $2,000 to $3,000 per year.
Many of us get a number of expected or unexpected monetary payments during any given year. Tax refunds can be $1,000 or more. Birthday or other gifts can also bring in cash. Work bonuses or the sale of items we’re not using are another great source of seed money. Resolve to save as many of these windfalls as you can throughout the year and you could be looking at a sizable addition to your down payment fund.
Buyer’s Assistance Programs
First-time buyers, military veterans and other hopeful homeowners can often benefit from federal, state or local buyer’s assistance programs. Low-cost loans or no-cost down payment funds exist in many different forms. Contact city or county officials to find what type of local programs are available to you. Research government websites for other assistance programs. Combining low-cost loans, assistance funds and your own down payment could be exactly what you need to get you into your very own home. Although loan programs vary by lender and state, down payments can be as little as 3 percent of the home's value with a good credit score. However, larger down payments can yield lower interest rates and better loan terms.
Maximize Your Credit Score
All potential homebuyers need to pay particular attention to their credit scores before shopping for a home mortgage. A good credit score is anything above 700. Obtain your current score and then work diligently to raise it as fast as you can by consistently paying your bills on time and limiting or reducing outstanding debt. Know your debt-to-income ratio before applying for a loan. HUD requires the total monthly payment of principal, interest, taxes, insurance and homeowners' fees to be less than 31 percent of your monthly gross income. A shining credit score will make you a good candidate for a home loan – even with a limited income.
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