Spending Wisely To Own A Home

Many single people prefer to buy a home and build equity for themselves rather than pay rent to someone else. If you've been at the same job for a while and anticipate staying in the area you currently are living, buying a home is a great way to invest in yourself. Here are some tips for getting started:

Budget yourself
Figure out how much take-home pay you have each month. Add up your expenses. If you are spending more than you earn, cut back on extras like lunches and dinners out, cappuccinos and new clothing. Find a way to set aside savings each month, even if it’s only $100 or $200.

Did you borrow money for college? Work towards paying off debt from student loans. Do you owe money on your credit cards? Make those payments on time. Work toward paying more than the minimum due on your credit cards -- or you’ll never get that balance paid off. The calculators at http://www.choosetosave.org can show you how long it will take to pay off your balances. If you make a double payment, remember that you still owe the next month’s minimum payment by the due date.

Save for a home and retirement
If you find it impossible to save money, trick yourself by having the savings automatically withdrawn from your paycheck or bank account. Tell the human resources officers where you work what you’re saving for (retirement or a home) so they can set up the right savings plan. Or ask your bank to automatically transfer money from your checking account to a savings account or investment fund each month.

Establish credit
How is your credit? You can get your free credit reports (they are free once a year) and order your credit scores (a small fee is charged) from all three national credit reporting agencies at http://www.annualcreditreport.com. If you have little or no credit, start building good credit by applying for a credit card where you bank. Make small purchases and pay the entire bill before the due date.

Are you a chronic late-payer? Have the credit card issuer set up automatic payments from your checking account. If you pay even one month late, your credit score will fall. The lower your score, the more interest you may need to pay when you borrow money for a home or a car.

Traps to Avoid

Wedding debt
A wedding is a once-in-a-lifetime event. If the two of you are paying for it and you overspend, it becomes a paying-for-years event. Trim your expectations and your wedding budget so you’re not burdened with wedding debt. The average wedding for 150 people costs $20,000. Cut that guest list in half and you’ll have enough money left over to put the down payment on your first home.

Credit card debt
Only charge what you can pay off entirely each month. Before you charge a big ticket item, such as furniture, figure out how much you need to pay each month to pay the balance as quickly as possible. Avoid charging anything that won’t last as long as the payments you’ll have to make on that item.

Living beyond your paycheck
Are you living paycheck to paycheck, never saving a dime? The best path to riches is to simply spend less than you earn — no matter what size paycheck you take home. To see where your money goes each month, get a notebook and write down every penny you spend for one month. At the end of the month, figure out what you can cut to live within your means.

Identity theft
Never give callers or e-mailers personal information, such as your Social Security number, address and employer information unless you’re absolutely sure they are who they say they are. e-mails that claim you can get low-cost credit cards and mortgages or erase your debt are sent by thieves trying to steal your identify. Thieves pretend to be telemarketers as well. Most banks and credit card companies only communicate with you via letters. Do not provide financial or personal details in response to an e-mail solicitation from what appears to be your bank. If you question whether an e-mail correspondence from your bank is legitimate, call your bank and verify.

To Get Ahead

Buy your first home
It’s never too soon to buy your first home. Special programs can help you purchase a home with little money down, if you have good credit. Talk to a mortgage banker about first-time home buyer mortgages, downpayment assistance organizations and local home buying programs. Ask questions about terms. Be sure you understand how adjustable-rate mortgage payments may increase.

Make jump-ahead principal payments
Ask your mortgage lender for an “amortization chart” that shows how much of your monthly payment goes to principal and how much to interest. Look at the chart and ask your lender how you can make an extra principal payment each month. Doing this can shave years off your mortgage and save you thousands of dollars in interest.