What's the best way to start your homeownership journey?

What's the best way to start your homeownership journey?

First you have to understand your own particular capabilities. Start with a budget. If you are good at a spreadsheet, use it to list all of your monthly expenses to the penny. Be very detailed and don't cut corners. This will not only be a good first step to finding out if you can afford your own home, but will also help get your financial house in order.

Once you have all of your monthly expenses listed, add a cushion. I can't tell you what that cushion should be. I can recommend at least $500, but more is better. Things always come up when you own a home and this money will be always be needed.

Now that you have an itemized list of expenses look at it carefully. Do you see any additional bills coming down the road: Healthcare, retirement or college funds? Is there any place you would be willing to cut costs? Don't cut too much, I don't want you to be house poor. Better to live in a smaller or older home for five years, earn equity and decide to move up, than to start in a big house that drives you into bankruptcy.

After you have beaten that budget up, you will have a great idea of what you can afford. The next step is to see your trusted and ethical mortgage lender. All business should be handled locally because you will have questions, and having someone close by to talk to will be comforting. Besides, if they are a good mortgage broker, they will have national rates and loan programs at their fingertips.

With your budget in hand, discuss with your lender how much you can afford. Investigate all the loan products that are available and ways you can structure your purchase. Try taking advantage of seller concessions to keep your home loan closing costs down. The mortgage person today has a lot of resources and can offer you more of a home than you can probably afford. It will be easy to succumb to this enticement but if you've done your budget properly, stick to it. The worst thing you can do is run your home finances in the red. Don't count on any raises or gifts, they rarely come through when you expect them to.

Stick to your budget and try not to let others talk you up.