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Being on a shoestring budget shouldn’t hinder you from achieving your property ownership goals. With a few tips and compromises, you can still attain a property that you can call your own. Here are seven lessons to learn in home buying on a shoestring budget.
A shoestring budget is a term used to describe an allotted budget that is not enough to cover the expenses of its intended use. In the early 20th century, the term shoestring arose when New York City’s poor immigrants bartered or sold their properties to survive. Most of them are so poor that they only have their shoestrings or shoelaces to offer.
This budgeting process means that every penny matters and must be stretched to make ends meet. The people with a shoestring budget do not have access to free-flowing money. As such, they make do with what they have since there won’t be any additional funding.
If you dream of diving into real estate but do not have a lot of money to work with, then these tips might be helpful for you. However, dedicated homeowners should not let a shoestring budget hinder their goals. It is a gamble that might pay off if you execute everything correctly.
Just because it is proven to be possible doesn’t mean you should go right ahead and put down an offer for a house. The first thing to do is to analyze the general feasibility. Take note of your current funding. List your savings and revenue streams. If you live in a dual-income home, make sure to take both incomes into account.
The next step is to calculate how much everything is going to cost you. These expenses typically include monthly rent, tuition fees, insurance deposits, food, clothing, personal expenses, transportation expenses, entertainment costs, pet costs, house maintenance, utilities, mortgage, and more. These expenses will be subtracted from your pool of income.
When you subtract the expenses from your income, the resulting figure is the surplus that you can use to buy a house. Identifying expenditures allow you to have a mental figure of which properties you can afford.
Take a look at the local real estate scene so that you can look at properties that fit your budget. Identifying helps you narrow down the options in terms of the properties you may purchase. The general rule is that the total homeownership costs should not take more than 25% of your monthly income.
Use a mortgage calculator to come up with an accurate cost that will allow you to buy a home. You may calculate the total costs by adding the payment, taxes, and insurance. Make sure to perform these calculations with a fixed 15-year mortgage rate.
Operating on a shoestring budget is still a risky venture. There will always be emergencies that you need to be prepared for. Cushion income is a necessity to stay afloat and be able to pay for your needs in case something unaccounted for arises.
There is also a need to grow your budget since the cost of living will continuously rise each year. As such, you need to generate more money to keep up with life’s demands.
Some tips for growing your budget include asking for a reasonable and deserved raise at work, cutting down on unnecessary purchases, eating more meals at home instead of at restaurants, going for homemade coffee instead of your typical Starbucks run, and more. These tiny changes can accumulate into huge savings that can help you get an inch closer to buying a home.
Warren Buffett advises everyone to invest in simple and understandable items. This holds true in the world of real estate. The location largely dictates the current and future value of the property. It is far better to invest in an area where you are knowledgeable and comfortable. This could be your hometown or a neighboring city.
You might be tempted to invest in cheaper properties but if they are located in questionable areas, they might not be worth it in the long run. For example, purchasing in a far-flung area may get you a 5-bedroom house but if the essential establishments and your loved ones are too far away, then your quality of life will decline.
There are alternatives that will get you the same end result. For example, you may rent to own a property. This means that you pay the rent amount during a specific period of time until you can buy it in a few years. The rent payment is a little more than the usual but it is a guaranteed investment which makes the buying costs lower.
Another option is to go for fixer-upper houses. This means you can purchase a rundown property at a low cost and then spend more on cosmetic repairs. If you have enough knowledge and experience, you may perform the repairs yourself until you end up with a house that is custom fit to your liking.
The last tip is to strike the iron when you get the chance. Waiting around may mean that the opportunity to purchase will just get delayed. The real estate market is inherently competitive. You might be tempted to stay put and save more, which will cause good deals to pass you.
The best time to get started is today. Once you tick off all the aforementioned tips, get started on purchasing your home. Do your homework and make sure to have a basic education on this subject.
One tip that will help you out is to get a loan. Consult to see if you are qualified for one.