We all know the classic scene in The Wizard of Oz when Dorothy clicks her heels together and says, “There’s no place like home.” Suddenly, she’s home sweet home again, and everyone lives happily ever after.
If only buying a home were that simple!
So ruby slippers aren’t an option for you. No problem! With a steady eye on your goal—and these three steps—you can make your home ownership dreams come true.
Attack Your Debt
First things first: You’ve got to get out of debt. So cut up your credit cards and kick your student loans to the curb! Use the debt snowball method to build serious momentum, starting with your smallest debts and working your way up to the largest. The more income you free up now, the more you can put toward your home later!
Build Your Emergency Fund
You know the old saying: If something bad can happen, it will. And when it does, having three to six months of expenses stored up for emergencies will keep you from dipping into your new home fund. Plus, it makes it easy to keep your head above water when the roof leaks or the water heater goes out.
Determine Your Goal
Now it’s time to put your dream to paper. Make a list of the neighborhoods you like and the features you want in a home then work with an experienced real estate agent to set a realistic budget. If you’re getting a mortgage, aim for a payment of no more than 25% of your monthly take-home pay. Plan to save a down payment of at least 10–20%.
By now, you’ve proven you have what it takes to work toward a goal. You’ve worked as hard as you can to outrun debt on your way to a life without payments. Keep the momentum up by keeping your expenses down and take the money you save to the bank. Every penny puts you closer to purchasing a place of your own!