Are you a huge spender? Perhaps, you are a very loyal customer to Amazon and Best Buy. (They must love you because of all the online packages you order.) As much as you love spending, if you are planning on purchasing a home, now is not the time to buy that salad spinner. (I know you might need it, but stick to French fries for a while.) Americans like to spend on a great many things, but one of things they love spending on the most is real estate.
If you don’t believe it, the statistics say it all. Experts indicate that 30% of their earnings are spent on housing. According to the data from the US Bureau of Labor Statistics, households are still spending a large portion of their income on housing. This is a statistic that indicates that with inflation, it is bound to increase. It is for this reason that it is essential that you take control of your personal finances. You cannot spend ridiculously and buy a home at the same time. (This is not a perfect world; it is dark and dingy. You need to be a Rockefeller to afford such lavish things like three-ply toilet paper.)
What You Need to Do To Prepare
There are many things you can do to prepare for affordable housing. You cannot fix your finances in one day, but you can start today. (Even if you do not want to, start anyway.) If you can handle global warming and a global pandemic in one lifetime, holding back on personal finances should be a piece of cake. Think of it as a financial cleansing. But, instead of a juice cleanse, you will keep your wallet full and your head stress-free. (That sounds better than any detox.)
One of the most universal reasons for stress is finances. Keeping your finances in order allows you to stay ahead, and dream of the future without having to go to sleep. All it requires is a little self-control and determination on your part. We will leave the positive reinforcement to the motivational speakers and let you know what you should do to prepare, instead. There are three main factors that you need to handle to be able to prepare for affordable housing. Those three factors are: getting your act together, taking care of your credit, and knowing your needs and wants.
Getting Your Act Together (No, you cannot do it tomorrow.)
Getting your act together is easy to say, but hard to implement. Everyone knows that, and there are countless self-help books that will help you do that. (This does not mean that you should clean your room and try yoga. This is strictly financial; the other stuff is up to you.) Once you get your act together, then you will have a clear image of what you can and cannot afford. This is a better alternative to making hasty decisions and ending up regretting it.
The first step that you need to take is to come up with a viable budget plan that will include all of your essential and extra expenditures. It needs to record the costs of food, drink, utilities, groceries (which are considered essential costs), and any TV packages you might have.
When you take your income and subtract by the summation of all the bills you have, you will be left with the remainder. This will be used to settle housing expenses, most importantly rent. Ensure that the remaining amount, which you will use to spend on housing, is below 30% of your total income. This is how you will be able to qualify for affordable housing.
However, in the end, if you find that you have insufficient funds, then it is important you work on a proper budget plan. This is to ensure that all expenses can be punctually settled throughout each month of the year.
Take Good Care of Credit
Credit scores are a make-or-break deal when it comes to purchasing or renting housing. For this reason, it is imperative that you maintain a good credit score. Maintaining good standing with credit is no big challenge. You just have to pay close attention to it. Bad credit scores are a big turn-off for property managers; they will be less likely to sell or rent a property to you. Most importantly when you are trying to purchase a property to own it, your credit score affects your ability to secure a loan to complete the sale.
Credit scores in the real estate market are a matter of monetary life or death. The process of checking your credit is easy and hassle-free. All you need is your Social Security number and you can check your score at AnnualCreditReport.com. In addition, you will be able to get a detailed report. Applications, such as Credit Karma, are also useful and give you suggestions on how to improve your score.
It might not seem like it, but your credit resembles your financial diary. It keeps track of the payments you make, and what you have been avoiding. If your credit score is acceptable, then it shows that you are reliable.
Know Your Needs
There is a wide variety of affordable housing programs that are out there. You may look into the following: HUD housing, Section 8 housing vouchers, Non-profit housing, and Homebuyer assistance programs. Look into each program and try to see which one serves your best interests. But, this will depend on your individual financial situation. (It is not a one size fits all kind of thing, but it depends on what your situation is in life.)
Housing is only one aspect that should be part of your long-term life plan. Therefore, it should be part of your vision on how you want to live. For this reason, it is important to determine what your needs are, in terms of space and facilities. So, you should be asking yourself questions, lots and lots of questions until your brain hurts. How many rooms do you want and what type of rooms? What type of amenities do you want the property to have? What’s the crime rate and how easy is it to sell the property once you decide to leave? These are important questions to ask yourself before buying or renting any property.
The Paperwork (It’s All in the Fine Print)
Once you go through the process of affordable housing, paperwork is inevitable. All financial and personal documents are evidence that prove what kind of person you are. (Financially. There will be no questions on whether you are a cat or dog person.) The paperwork is divided into three different sections: financial documents, personal data, and extra. (A little something, something for those who need it.)
You will be required to send these financial and personal documents throughout the process. So, why not get a head start? Government paperwork might take forever. (The server is down, the government official left early, and many other excuses you have heard before.) Make sure you keep these documents on file, so that you are not strapped for time when it is time to hustle.
This article will give you a list of financial and personal documents that you will need to turn in.
Six Months’ Worth Of Paystubs, In Consecutive Order: It is very important to keep these with you and not in a dusty drawer somewhere. Meier-Zimbler notes that this might be hard to track for people who work multiple jobs “I work with people in the performing arts and entertainment industry who have fluctuating and episodic income,” she says. If you have any W-2s and 1099s from several jobs, it is best to keep them in order. (Whatever order is up to you.) Moreover, she continues, “Come to your interview prepared to explain your situation.”
Three Years’ Worth Of W-2s And Tax Returns (Every Single Page): You will need this when you are looking for affordable housing. If you do not have them, then you can ask for a hard\digital copy from the Internal Revenue Service (IRS). This takes approximately thirty days to process and receive via mail. You should have it with you before you decide on anything, to avoid any delays.
Public Assistance Budget Letter That Is Dated Within Thirty Days: If you are a recipient of any welfare benefits or government program, then you will need to provide the paperwork to back it up. Whether it is SNAP (food stamps), or cash assistance through TANF (Temporary Assistance for Needy Families), you should arrange all documents that details how much you receive.
Other Financial Documents You Might Need
Social Security/SSI/Pension Award Letter: If you are a recipient of any social security benefits, then you must provide an official letter. You can request the official letter from The United States Social Security Administration.
Six Months’ Worth of Checking Account Statements: If you are part of the online banking service, you can easily download it. It is completely hassle-free and free of charge.
Your Most Recent Savings Account Statement: You will only need the most recent copy of your bank statement.
The Last Official Statement Of Your 401k Or IRA: This is not applicable for everyone. If you have one, then you should supply it.
Photo Identification For Every Person Of Your Household (Only Those Who Are 18 Or Older): You can provide a passport or a driver’s license as a form of identification.
Social Security Cards For Every Person Of Your Household: If you “accidentally misplaced your card,” you can always make another one. But, you should know that it takes about two to six weeks to process the request. (So, try not to lose it.)
Birth Certificate Or Passport For Every Person In Your Household Who Are Under 18: If you don’t happen to have this with you, it takes between two and eight weeks to process a request for a birth certificate copy.
Any Enrollment Information For Students Living In Your Household: If any member of your household is a student, you will be required to bring a letter that confirms their educational enrolment and status. The confirmation letter must include how many credits they have earned so far.
Extras Documents (You Never Know What They Might Want From You)
They might ask you for a $50 payment for a credit check that consists of one to two people. For households of three or more individuals, they might ask for a $75 payment for a credit check. You might have to provide a rental assistance voucher; if you are a recipient of the Section 8 Housing Program. Finally, you might be asked for a medical form filled out by your physician. This is to confirm whether you have any medical conditions that should be notified. It is best to do this as early as you can, so that you will not be stuck begging your doctor’s assistance for an appointment.
In conclusion, there are three main steps that you should take when you are planning for affordable housing. You should get your financial act together. Make sure you have control over your finances and you should be well informed on how much you spend on a monthly basis. You should take good care of your credit. Your credit is the only way that an entity understands your financial responsibility. Make sure that you pay your bills on time and stay on top of your payments. Late payments are a big no- no for lenders; most lenders are discouraged from individuals with bad credit. It shows them that the potential borrower might be unreliable.
The final step is that you should know your needs. Do not confuse your needs with your wants. If it is absolutely necessary, then that is most likely your needs. By defining your needs, you allow yourself to make decisions towards your needs. Overall, the best thing on your part to do is to organize your financial situation. You do not need to improve it, necessarily. You need to only understand it.