After working with a housing counselor to assess your situation and map out your goals to purchase a home, the next, and one of the most important steps, is to create a plan to save money and build your credit.
Start with a Budget
Saving money is one of those things that sounds a lot easier than it is. Between our bills, food, and rent setting aside money seems out of the question, but did you know you are more likely to save money when you create a budget?
Not sure how to start? Let’s walk you through it.
- Add up all of the money you earn in a month – It sounds simple enough, but knowing what you earn is the only way you can track what is going out every month and what you have left to save
- Write out all of your necessary bills – There are some bills that we have to pay monthly no matter what. Whether it’s our rent, light bill, cellphone bill, student loans, or credit cards. These are the expenses that will make or break our credit score or living situation if we miss one. They are often the payments that do not change month to month.
- Write out your expenses that do change – Do you drive to work or take public transit? Write it down. Take ubers some weeks for more than others? Write it out. Every month we have money going out for things that fluctuate based on our usage – keeping track is key to your budget.
- Look at what you spend on entertainment – This one can be a little tricky, we all define entertainment differently. For some of us it’s going to the movies, for others it’s having drinks with friends, travel or gambling. Whatever your interest is, write out how much you spend every month on entertaining yourself.
Add Saving to Your Line Items
After adding up all of your expenses, it may feel like there’s no room to save anything, but the beauty of budgeting is being able to see where your money is going and where you can trim costs. Have a cell phone bill that is out of control? Consider going to a different provider. It’s a change, but it will help you out in the long run. Reducing your utility usage, cooking more meals, shopping for clothing less, and finding free events in your community are all ways to cut down on your monthly expenses and save towards your down payment and closing costs.
Build Your Credit
Your credit score is one of the biggest factors in the amount of interest you will pay on almost everything, including your home. Buyers with higher scores benefit from lower interest rates, saving them thousands of dollars throughout the course of their mortgage. The housing counselors in our Urban League affiliates can help you develop a plan to boost your score and land in the home you deserve at an interest rate that is fair.