8 Steps to Getting Your Finances in Order
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.
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 debtcar loans, student
loans, revolving balances on credit cardsdown to between 8 percent and 10
percent of your total income.
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.
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.
for a downpayment. Although it's possible to get a mortgage with only
5 percent downor even less in some casesyou can usually get a better
rate and a lower overall cost if you put down more. Shoot for saving a 20
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 bills.
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.
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.