Iu2019ve 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 doingu2014and Jackie Berryu2019s superb answer give you a multi-pronged approach on gradually working your way out to a place all your own.Iu2019d 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, itu2019s a pain in the ass, but youu2019ll be truly amazed at u201cuselessu201d things youu2019re 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. Donu2019t eat lunch out every dayu2014brown 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 u201chouse brandsu2022 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 youu2019re u201cleakingu201d 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 incomeu2014and they can pull an u201cin fileu201d credit report showing if youu2019ve 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 donu2019t think youu2019ve got sufficient funds for a down payment, be upfront about that with the lenderu2014they understand, and can help you focus on the total amount youu2019re 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 donu2019t necessarily need 20% downu2014it 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 u201cgood faith estimateu201d of the total costs and total amount of cash youu2019ll need for down payment and closing costs. Be upfront about your inability to buy nowu2014but that youu2019ll 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.comu00ae or Zillow or similar sites for properties in your price. This is just to help you start thinking about what youu2019d 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 u2019em on the bathroom wall of your current place. (Youu2019ll see those pictures regularly, and theyu2019re great for reminding you of your homeownership goal!)When youu2019re maybe halfway or more toward your downpayment/u201dhouse buying fundu201d goal, meet with a Realtor, Youu2019ve had a chance to think about what youu2019d like in a house that you can afford (see #2 above). Make it clear you arenu2019t buying now, but will be back later for the agentu2019s help in finding the best place for you (and keep that promise!). If youu2019ve 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 goalu2014so smile sweetly and ask to see that one house! Itu2019ll be a motivator to keep you going in your homebuyer program!Donu2019t try to buy at the top of your purchase range. Itu2019ll leave you with no money for cosmetic things you want to do to the new houseu2014hell, you may not have money for that new sofa or bed youu2019re gonna need u2022 and if youu2019re car needs an emergency repair, you donu2019t want all your money going to a house payment. Youu2019ll 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 thereu2019s a phenomenal sale on your favorite big screen tv with surround sound systemu2014but you gotta decide: is that vehicle, trip, or gear more important that your own place? I suspect the new place will win outu2014so keep your priorities clear. And, once youu2019ve applied for a mortgage, make NO big purchases since the change in cash or your total debts can change your credit u201cprofileu201d 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 Europeu2014and the cash reduction was enough that they no longer qualified to buy the house!)It sounds like youu2019ve got the will and can develop the small changes in discipline to make your home purchase happen soon. Good lucku2014and let us here on Quora know how it goes!