• Thursday, February 29, 2024
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BusinessDay

Preparing to buy your first home

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Becoming a homeowner is many people’s dream. Unfortunately, too many people rush into this dream — only to find themselves in financial despair and facing foreclosure. This could’ve easily happened to me.

After getting divorced a year ago, I thought about purchasing a home of my own. I was working two jobs and sharing a bedroom at my dad’s house with my two daughters. I was desperate to be out on my own again.

To keep a long story short, I did make a few offers on houses. Luckily, all of the offers fell through for one reason or another. After this disappointment, I smartened up and decided to wait until I was financially stable to buy my own home. Instead of thinking about houses, I focused on keeping my expenses low and my savings high. I took out a small loan and bought a trailer to live in.

I’ve now realised how important it is to have your ducks in a row before even thinking about home ownership.

Here are three ways to financially prepare for future home ownership:

• Create an emergency fund

I’m big on emergency funds. A few months ago, I went from working two jobs to one. My take-home pay was barely covering my bills, and I had to dip into my emergency fund a few times just to get by.

Now that my income is picking up again, I’m replenishing my emergency fund and working to get more savings. This will cover just over six months of my normal expenses.

• Banish debt

I’m lucky that I have never been deep in debt. While I did rack up a couple thousand in credit card debt when I was younger, it was quickly paid off.

I did, however, take out a loan to purchase the trailer I’m living in now. The interest rate is super low, and I’m paying off monthly with a four-year term. Right now, I just look at this as a living expense similar to rent or mortgage payments. But, before I purchase my own home, this debt will have to be gone.

• Amass a big down payment

In terms of finances, I now prefer comfortable over minimal. So, I’d like to have around a 50 percent down payment when I purchase a home.

As I leap more into freelancing, my income is variable — and that’s kind of scary. I’d rather be safe than sorry.