How to Afford Your First Home

I was recently reflecting on the fact that in just a few days, we will have been back in Madison, Mississippi for a YEAR! It has flown by for sure.

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Our current home

We went from owning our home in Biloxi (which was our second house) to moving into a friends boathouse up here in Madison, to finally selling our Biloxi house and being able to buy a home up here.

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Our Biloxi home when it was still being built

Even though this is our third home, the home buying process was still special and the financial part of it is still a huge factor and something we worked hard towards. Even though we were very young when we got married, we were still able to purchase our own home as newlyweds. Make sure when buying a new home you have air testing done to make sure the air in the house doesn’t have any harmful chemicals.

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Our first home after we made an offer!

We rented apartments before then, and saved up our money from our jobs for a down payment. It wasn’t a glamorous house but it was ours (well, the banks!) Since we are now on our third house I feel like I am pretty knowledgeable of the home buying process and what it takes to make your dream of owning a home a reality, so here are my best tips.

afford a home

1.) Save save save: This one is kind of a given, but in an age where people want everything RIGHT NOW and they aren’t willing to wait to get what they want, it can be difficult to see the bigger picture. You can start with something as simple as a jar in your kitchen, or you can even set up a separate account at the bank and have a certain percent of your money you make go into that account. Set up a timeline, and work backwards to see how much you will need to save before a select date arrives. You will probably need to make some sacrifices along the way, so decide right now how important this is to you. Lunch out every day and Starbucks seven days a week may need to be cut down in order to make your dream a reality. It really adds up!

2.) Eliminate debt: I know this may seem contradictory to the previous point of saving, but by simply not purchasing things you cannot pay for RIGHT NOW, you will save yourself a lot of heartache when it comes to purchasing your first home. My husband and I have always had a rule with the credit card: If we can’t pay it off IN FULL at the end of the month, we don’t buy it. The exception to this for us has been a mortgage and student loans, and some people lump car payments into this as well. I’m talking about vacations, that cute new handbag, or that new couch you just “HAD to have”. Friends, we used TV trays as nightstands for the first few years of our marriage. Trust me, you do not “have” to have a brand new expensive couch. The less interest you have to pay on things you own, the more money that can to towards your new home. Even if you have already made mistakes in this department, you can start TODAY by not buying more stuff, and paying off the things you owe on. Baby steps, you can do this!

3.) Do research: There are a lot of other costs to think about when buying a home aside from the cost of the actual house. You need to think about closing costs, moving costs, and things you will of course want to buy like blinds or curtains, lawn equipment, etc. Be sure to include these things in your overall price so you don’t get surprised by them later on. Also, be sure to research locations and neighborhoods. Think about the value of a home location for resale purposes, it does matter!

4.) Get prequalified: So let’s say you have been saving, eliminating our debt, doing research, and you think you are ready to start looking at homes. You will need to know how much of a house you can afford, so be sure to get prequalified. Also, just because you are told you can spend up to X number of dollars, doesn’t necessarily mean you SHOULD spend that much.

5.) Be realistic: Everything around us today tells us we need a big fancy house with beautiful décor from the day we get married. TV shows and the like paint a very unrealistic picture of what most young couples can afford in a first home. Most people can’t afford their “dream home” for their first home, and that is NORMAL! You have to start somewhere, and having a smaller house and smaller mortgage to start with can help you save for a nicer and bigger house later on. (Also, ideally, your monthly housing payment shouldn’t be more than 28 percent of your gross household monthly income). For instance, if you don’t plan to have kids for 5-7 years, don’t buy a house with five bedrooms! Don’t put all your eggs in one basket, and think ahead to the future and what your current need is, and match it to your price point. No one wants to be “house poor”. I know you have seen them, people who have a huge fancy house with minimal furniture and they can’t afford anything else because of their mortgage? Don’t be that couple! There is plenty of time for another purchase.

6.) Learn about home loans: CapitalOne is a great place to start! Their goal is to help first-time homebuyers understand how the home loan process works, which is why they have launched a new online learning center that features the know-how you’ll need to become the savviest homeowners on the block. The Capital One Home Loans Online Neighborhood is a free online resource where you can learn all about home buying. Buying a home is an important process, but certainly not a simple one – Capital One’s new online resource lays the groundwork with a glossary of terms you should know, an overview of the loans available and more. You can visit their website for more info.

Happy Buying!

QOTD: What was the hardest part of saving for or buying a home for you and your family?

I was selected for this opportunity as a member of Clever Girls and the content and opinions expressed here are all my own.