Develop a family budget. Instead of budgeting what you’d
like to spend, use receipts to create a budget for what you actually spent
over the last six months. One advantage of this approach is that it factors
in unexpected expenses, such as car repairs, illnesses, etc., as well as
predictable costs such as rent.
Reduce your debt. Generally speaking, lenders look for
a total debt load of no more than 36 percent of income. Since this figure
includes your mortgage, which typically ranges between 25 percent and 28
percent of income, you need to get the rest of installment debt—car
loans, student loans, revolving balances on credit cards—down to
between 8 percent and 10 percent of your total income.
Get a handle on expenses. You probably know how much
you spend on rent and utilities, but little expenses add up. Try writing
down everything you spend for one month. You’ll probably
see some great ways to save.
Increase your income. It may be necessary to take on
a second, part-time job to get your income at a high-enough level to qualify
for the home you want.
Save for a downpayment. Although it’s possible
to get a mortgage with only 5 percent down—or even less in some cases—you
can usually get a better rate and a lower overall cost if you put down
more. Shoot for saving a 20 percent downpayment.
Create a house fund. Don’t just plan on saving
whatever’s left toward a downpayment. Instead decide on a certain
amount a month you want to save, then put it away as you pay your monthly
Keep your job. While you don’t need to be in the
same job forever to qualify, having a job for less than two years may mean
you have to pay a higher interest rate.
Establish a good credit history. Get a credit card and
make payments by the due date. Do the same for all your other bills. Pay
off the entire balance promptly.