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Owning a property is everyone’s dream. Not only does it help you build wealth, but it gives a feeling of accomplishment and shows where your hard-earned money went. But in this economy, how can one obtain a property? To finance the property, you will need a mortgage unless you have cash sitting around. In this article, I will show you how I was able to purchase my first property in one of the most expensive cities in the world and hopefully you can gather a few tips in preparation of getting your first property.
1.Saved for a downpayment– One of the first thing that I did when I got a decent job was to find my own apartment. Instead of renting a full apartment, I rented out a bedroom and shared the common area. By doing this, I was able to save a least 75% of my small salary. Renting out a bedroom, enables you save on buying furniture, and allows you to only the space that you need. Living on my own, allowed me to also save money on eating out as I made sure to use a grocery list when going out shopping. To ensure that my savings plan was on target, I made sure to use my saving plan calculator which I purchased as part of my digital planner, and this kept me on track.
2.Increase my credit score- To obtain a mortgage with a good interest rate, I knew that I needed to have good credit. I ensured that I paid more than the minimum payments of my bills and on time too. I also obtained a copy of my credit score to ensure that there were no surprises and that all items that should be there was. Paying my bills also provided confidence to the bank that I wasn’t going to have huge debts whilst having a mortgage.
3.Follow a budget-I knew that if I was hoping to become a homeowner, the first thing that I had to do was create a budget and stick to it. I created a Digital Planner which came with a Personal Monthly Budget, a savings plan, a loan schedule and a retirement planner which saved my life. I carefully planned and tracked my income and expenses every month and save every extra amount that I had. I made sure to stick to a grocery list like this one each time I went grocery shopping and still do up to this day.
4.Have a stable Income– Having a stable income is key. Most financing company would want to see that you have consistent income which will allow you to make your mortgage payments as well as pay your other monthly payment. Knowing this, I ensure that I had a full-time job which provided consistent income for at least two years. I know that in this day and age, where the economy is impossible to predict and inflation is at its high, the only thing that one can do is to remain positive. Read my articles on a few tips to help beat inflation to get some ideas.
5. Pay down debts – Paying down debts was another important aspect that I did. This is super- important in the approval process for financing. It comes in handy when calculating Debt-to income ratio. The debt-to-income ratio is a measure of the amount of debt held by a person or household to the amount of disposable income they take in. It is calculated by summing all the debts held and dividing by the yearly income (before taxes and other deductions). Having a low DTI ratio will also make you more attractive to lenders because they will see you as a less risky borrower. A good credit score and a low DTI is the recipe in getting approved by lenders.
Finally, I looked into purchasing a power of sale property– A power of sale property is a property which is sold by the bank because the owners defaulted on the mortgage. The bank would normally try to sale the property at market value in order to recoup their payments. Most of the time, these properties are cheaper because of the condition that they are being sold. I was fortunate that the property that I bought was in a good condition and did very little maintenance after purchasing.
In conclusion, owning a home in one of the most expensive cities in the world on a single income is not only possible but rewarding as well. If I can do it- anyone can.
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