New to the Live Richer Challenge: Homebuying Edition? Learn more about it HERE.
Need to catch up? Click on the link where you left off and then come back!
Day 15: Your Collateral
Day 16: Mortgage Insurance
Day 17: Compliance
Day 18: Your Home Team
Day 19: The Loan Process
Day 20: Review, Reflect, Relax
Day 21: Weekly Inspiration
WEEK 3: The Home Loan Process
Today’s Easy Financial Task: Celebrate completing the Challenge and complete the “Dream Home” activity.
How to rock this task:
- Give yourself a hand clap for finishing the LRC: Homebuying Edition
- Do the “Dream Home” activity
Cue a round of applause!
You’ve made it to the final day of the LRC: Homebuying Edition! For the last three weeks, we’ve covered what you need to qualify for a home and how the homebuying process works.
Did you have a good time? I know I did!
I have one last fun activity for you today to wrap up the Challenge. It’s called the “Dream Home” activity. Today, you’re going to start visualizing the home you want and doing some research to get your home search started.
Now that you have an idea of how much home you can afford and the different mortgage products that are available, let’s bring your dream home into focus.
This activity is one that will probably take you a few days. For today’s task, you should at least do steps 1-6.
Here’s what you need to do:
Step 1: Write down three of your desired neighborhoods.
The first step in this activity is to pull out a piece of paper and write down three neighborhoods you’re thinking about living in.
Step 2: Write down your monthly home payment budget.
Next step! After working through this Challenge, you should have an idea of how much home you can afford and the monthly payment you can manage.
Keep in mind, you may not want to buy a home at the very top of your budget. For example, say your lender is willing to give you a home loan with a $2,000 home payment per month. Technically speaking — you can afford this amount because the lender is willing to give you the money. But it may be not the right choice for your budget.
Spending too much on your home payment can result in you becoming what’s called “house poor.” House poor is when you have a fabulous home, but you hardly have enough money left over to furnish or maintain it. NOT GOOD! You do not want to be house poor. With all of this in mind, write down how much you would be comfortable paying each month on a mortgage given your current salary and expenses.
Step 3: Write the amount you want to put down.
On Day 10 of the Challenge, we went through various home loans including the FHA, VA, USDA, and a conventional loan. For this step, write down the loan programs you’re considering and the down payment required.
For example, if you want to go the FHA route, there’s the 3.5% to 10% down payment. For conventional loans, you may be required to put closer to 20% down. If you need a refresher on the loans and what they require, go back to Day 10.
Step 4: Write down the current home loan interest.
Interest rates are the next thing you want to write down. Market interest rates can change from week to week. Lenders determine your rate after taking a look at your credit. For this step, get a general sense of what interest rates are doing right now. Head over to BankRate.com to review current rates. You’re most likely looking at the 30-year fixed rate mortgage option. This means the loan term spans 30 years and the rate is fixed over the entire loan term.
Step 5: Start looking for homes and write down a few prices.
Last week, you did some research to see what’s going on in the housing market overall. For the “Dream Home” activity, I want you to start looking specifically at the homes you love in your desired neighborhoods. How much do they cost? You can check Zillow.com, Realtor.com, and Trulia.com for pricing. If the homes are outside of your price range, start looking at areas adjacent to these neighborhoods. Write down the prices of homes that you like.
Step 6: Use the calculator to play with the numbers.
Take the numbers you have (the down payment you have available, the interest rate, and home prices) and type them into this calculator. Play with the numbers to see how the monthly payment changes. Look to see what happens to the payment when you put more money down. Look to see what happens to the payment when you put in a lower home price.
Step 7: Take a trip.
Next hop in the car and take a trip to the neighborhoods you’re interested in. Take pictures of houses, businesses, and other locations in the area to see if it’s a good fit. For instance, check out the schools and how far the schools are to your home. You can also head over to Google Maps to see if there are shopping malls around or other stores and restaurants nearby. This step is to help you get a lay of the land.
Step 8: Continue to build your portfolio.
Last step! This “Dream Home” activity is the start of your home wish list. Keep all of this information above and build a portfolio of pictures of homes and areas you like. You can create a folder for the portfolio on your laptop or tablet. Cut out pictures from magazines of homes, decor, and furniture so you can visualize your new home.
Finish this task and you’ve completed the entire LRC: Homebuying Edition!
I’ve had suuuchhh a good time sharing my knowledge with you on what it takes to buy a home. If you have any questions, comment below or continue the conversation in the Live Richer Forum.
You can reach out to me here:
Facebook: The Budgetnista
Private Forum: Dream Catchers : LIVE RICHER
Want to work through the Live Richer Challenge: Homebuying Edition in a workbook? It's part of a bestselling series!
Click the link below and get your copy.
P.S. If you haven't already... Get your Challenge Freebies from our Live Richer Challenge: Homebuying Edition coauthor, Netiva Heard. Click the pic below if you'd like to learn more about Netiva's services. You'll receive a discount! Just let her know you're a Dream Catcher
P.P.S. Here’s a copy of the Challenge Calendar. It’s a fun way to keep track of your progress.
P.P.P.S. Don’t forget to get your free Live Richer Challenge: Homebuying Edition Starter Kit. Download it HERE.
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What’s the Lisa Rule? If I would not advise Lisa to use a product or service, I won’t advise you to. YOU are my Lisas. I feel protective of you and your financial journey.