Before approving a mortgage loan, lenders will review factors like the amount of money you have available for a down payment and your ability to repay the loan. But once your loan is approved, it’s up to you to make sure that you’ll have enough money set aside to cover closing costs and the expense of home maintenance.
The information in this chapter will show you how to track and review your actual spending, figure out reasonable spending/savings amounts and decide on how to best set up an emergency fund.
Section 1: Reviewing Your Spending Habits
A great time to get your spending and savings habits in order is before you apply for a mortgage loan.
Why is it important to review my spending habits?
Have you ever been sure you lost a $20 bill…only to stop, add up all your purchases, and find that you spent every penny of it? Knowing how and where you spend can help you take control of and successfully manage your money. It can also help you develop the habit of planning and saving for the purchases you’ll need to make as a homeowner.
As a homeowner, your spending and saving needs will vary from those of a renter. The process of closing, moving and settling into your new home will generate immediate costs, so you’ll need to begin planning and saving far in advance of your actual home purchase. By learning to track your spending and making adjustments to increase your savings, you’ll be in a better position to buy a home and to maintain a comfortable, financially sound lifestyle.
Creating a budget and fine-tuning it will help you:
- See where you may be wasting money.
- Increase monthly contributions to savings.
- Build a solid emergency fund.