How to Afford a Home
- 1). Examine your existing debt and see what you can work towards paying off. Credit cards can be consolidated or transfer the balances to one account. Many times credit card companies will offer you a deal on interest for transferring a balance.
- 2). Know that your debt to income ratio (DTI) is a strong factor in whether you can afford a home or not and is a factor taken into consideration by the financer of your loan. To calculate your DTI, first add up what you spend monthly on: your rent or mortgage, any loans that you have and any other payments such as child support or alimony. The total is your debt. Then divide your debt by your gross income and multiply that amount by 100% to give you a percentage. This amount is your DTI and most lenders like this percentage to be under 40%.
- 3). Save money whenever possible and cut back expenses. Even putting $25 a week into an account will get you started towards affording a home. Cut down on eating out and expensive gourmet coffee. Clip coupons and take your lunch to work.
- 4). Design a budget and stick to it. Calculate what your monthly expenses are and then come up with a budget that you can live with plus that will get you closer to affording a home. Make certain that your budget is realistic.
- 5). Find other ways to bring in some income. Offer to babysit for friends, get a second job or sell some things on eBay. However you do it, the extra money can go straight into savings for your down payment.
- 6). Consider other ways to reduce costs once you get into your house, such as finding a roommate. You can also forgo cable by watching DVDs or Internet for several months taking advantage of free services available at your local library.
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