The Homebuyer’s Guide Chapter 2 Money For Housing

Considering YOUR Financial Situation, Do You … have a written spending plan for your money? …. pay your bills on time? … know how much debt you have? … pay more than the minimum payment on your credit card each month? … save some money monthly? … save money for emergency expenses like a furnace, roofing or plumbing problems? p 9 The Homebuyer’s Guide

Why Do You Need a Spending Plan? Know what you want your money to do for you Know where your money goes To know how to save money for your goals Plan your spending in advance To know your credit limits and control your debt To develop your home as a growing asset The Homebuyer’s Guide

The Steps in Establishing a Spending Plan Determine your monthly net income Calculate your monthly expenses Subtract your regular expenses from your income Keep track for a three to six month period to recognize the ‘flow’ of money, especially occasional expenses The Homebuyer’s Guide

Keeping Track of Spending Save all receipts Use a small notebook Use a method that works for you – calendars, spreadsheets for software, paper and pencil or envelope systems are available. Spend time each month tracking your expenditures and comparing to your goals for money The Homebuyer’s Guide

Setting Goals for your Money Be specific about the goals you want to accomplish this month….this year Write down the goals you want to work on Take some time each month to determine if you are making progress on your goals. Use a net worth statement yearly as another measuring tool for your goals. NET WORTH = WHAT YOU OWN – WHAT YOU OWE The Homebuyer’s Guide

Different Types of Expenses Fixed expenses Periodic fixed expenses Flexible expenses Indebtedness expenses Occasional expenses The Homebuyer’s Guide

Ways to Make Money Management Easier Pay bills at regular times across the month Keep a schedule of when bills are due Check to see if utilities can be paid on a budget Open a checking account Open a savings account Celebrate your success with paying bills on time Recognize the limit for credit for your family The Homebuyer’s Guide

Begin by keeping track of both income (after tax) and expenses for three months BEFORE you estimate your budget. This will give you a good idea of what you REALLY spend your money on. p. 12-13 The Homebuyer’s Guide

Calculate Debt to Income Ratio to find out Your Debt Load List the monthly payment for all credit cards __________ List the monthly payment for all loans you carry Not including mortgage __________ Total Monthly Debt __________ (Total monthly credit payments + Total monthly loan payments. List your monthly income after taxes __________ Total monthly debt payments divided by monthly income __________ This figure should be less than 20% p. 16 The Homebuyer’s Guide

Ratios 38% for housing plus all other debt

Importance of Saving Consider Savings to be one of your monthly bills…just move that amount of money to another bank account like a separate savings account. The Homebuyer’s Guide

Types of Savings Accounts Regular savings account Christmas or other Club account Certificate of deposit (CD) Money market account Matched savings account The Homebuyer’s Guide

Ordering Your Credit Report The Homebuyer’s Guide

Summary Creating a realistic spending plan helps you pay your mortgage on a regular basis. Knowing how much money you need for your spending plan helps you control for flexible expenses. Setting financial goals and making a spending plan to meet your goals helps you with confidence that your new home is attainable. Setting a spending plan helps you to know how much credit is too much credit. The Homebuyer’s Guide

The Homebuyer’s Guide

The Homebuyer’s Guide