I’ve been renting for a couple of years and now feel stuck in the rent cycle, how Can I get out and save enough to get a mortgage?
There are probably a few things you should be doing—and Jackie Berry’s superb answer give you a multi-pronged approach on gradually working your way out to a place all your own.I’d expand on a couple of things mentioned, and perhaps disagree with one item mentioned.Keep a log for a month on every penny you spend. Yeah, it’s a pain in the ass, but you’ll be truly amazed at “useless” things you’re spending on that can go into savings. Instead of $5 cups of coffee at the cute coffee shop near your office, make your coffee at home and take it with you in an insulated mug. Don’t eat lunch out every day—brown back it for 4 days a week, and reward yourself on Fridays (for making it through another successful week!) by having lunch at a restaurant. Check out the “house brands‡ at the grocery store instead of the name brands you may be purchasing, you may find their every bit as a good a quality and can make an overall savings on your grocery bill. The bottom line is that your log will show you surprising places you’re “leaking” money that can go into savings.Talk with a loan officer. If nothing else, see how much of a house you can currently qualify to buy based on income—and they can pull an “in file” credit report showing if you’ve got current issue on your credit report that you need to resolve before purchase. (Some loan officers can even recommend reputable credit repair programs that over time can help you build a higher score.) If the issue is that you don’t think you’ve got sufficient funds for a down payment, be upfront about that with the lender—they understand, and can help you focus on the total amount you’re gonna need to get into a new place, as well as make you aware of potential grants/low down payment programs for which you qualify. Where I disagree with many is on the amount of your down payment. You don’t necessarily need 20% down—it may be far better to trade a slight increase in monthly payment for the advantages of having your new place sooner (with less down payment) than later (with more down, but lower payments.) The loan officers can even give you a “good faith estimate” of the total costs and total amount of cash you’ll need for down payment and closing costs. Be upfront about your inability to buy now—but that you’ll be back later for a mortgage when you meet your goals (and keep that promise!).Check online at Find Real Estate, Homes for Sale, Apartments & Houses for Rent | realtor.com® or Zillow or similar sites for properties in your price. This is just to help you start thinking about what you’d like in a house you can afford. (See #2 above.) Review the pictures, and select a couple or three houses that you really like. Print those out, and post ’em on the bathroom wall of your current place. (You’ll see those pictures regularly, and they’re great for reminding you of your homeownership goal!)When you’re maybe halfway or more toward your downpayment/”house buying fund” goal, meet with a Realtor, You’ve had a chance to think about what you’d like in a house that you can afford (see #2 above). Make it clear you aren’t buying now, but will be back later for the agent’s help in finding the best place for you (and keep that promise!). If you’ve been reviewing available properties, and have focused on one property that you really like, many Realtors will show you that one house now, just as an encouragement for you to keep working toward your goal—so smile sweetly and ask to see that one house! It’ll be a motivator to keep you going in your homebuyer program!Don’t try to buy at the top of your purchase range. It’ll leave you with no money for cosmetic things you want to do to the new house—hell, you may not have money for that new sofa or bed you’re gonna need ‡ and if you’re car needs an emergency repair, you don’t want all your money going to a house payment. You’ll end up feeling trapped and hating your new place if every penny is going to it.Try to NOT make major purchases until you get into your new place. Yeah, a new sport utility vehicle would be fun, and all your friends are heading off to spend Christmas in London, and there’s a phenomenal sale on your favorite big screen tv with surround sound system—but you gotta decide: is that vehicle, trip, or gear more important that your own place? I suspect the new place will win out—so keep your priorities clear. And, once you’ve applied for a mortgage, make NO big purchases since the change in cash or your total debts can change your credit “profile” and shoot down a new loan. (Yup, I had a client that decided to celebrate the purchase of their new place with a 2-week first class cruise/tour to Europe—and the cash reduction was enough that they no longer qualified to buy the house!)It sounds like you’ve got the will and can develop the small changes in discipline to make your home purchase happen soon. Good luck—and let us here on Quora know how it goes!