Step Two: Preparing for Buying a Home: Knowing Where Your Money Goes

You've established a good year or two of steady employment. You are beginning to look like a good risk for a mortgage lender: somebody they can count on to show up and pay off the debt. It looks like you can handle the financial responsibility for buying a home.

The next step, and this is something you can do at the same time that you become a steady employee, is to get a clear understanding of where your money goes, and how you spend it.

Some people enjoy this; they like to create budgets, write everything down, and it satisfies the organized part of their soul to have a working knowledge of where their resources go. If this is you, great for you: you don't have any resistance to taking responsibility for how you use your money. Count yourself lucky, and realize that your talent doesn't always come naturally for others. Are you partnered with someone who spends just like you? (That would be a miracle!)

Random types enjoy having places in their experience, even significant, important sides of their life, for which they have blind spots. I say they enjoy this, because part of their spending habit is the pleasure derived from making impulsive purchases without anyone else, er...breathing down their neck.

They enjoy the momentary freedom of buying, and then, remarkably, they might actually forget how they've spent their money. These folks might be able to recite minutiae about which hops create the best IPAs, or could patiently teach a left-handed, hyper five year old how to crochet...but they don't even know how much money they spend per week, nor what they spend it on.

 This feels like freedom for some folks, as if not watching their money allows it to magically appear and recede within the floaty consciousness of a mirage. As if not knowing how you spend it, makes those purchases...not really count. I know of couples who deliberately keep their purchases secret from each other, if only to have a part of their lives that is not overseen and judged. If nobody knows about the extra stuff you bought, then it remains in a liminal space of nonexistence; and it feels liberating to spend money without having to justify it to anyone. Having your mate or friends berate your spending choices is a major buzzkill, but it also can lead to you even hiding your own spending habits from yourself.

If you want to buy a house, you need to have a good overview of where your money goes, period. Because whether you get this overview or not, the lender certainly will. And not understanding your own patterns, habits and needs, makes you vulnerable to your own blind spots. You need to know: if you spend seventy dollars every month on coffees, that is seventy dollars each month you could spend on taking care of your house, instead. You need to know how much more freedom you have by knowing what to cut back, and where you can save. Knowledge is power, here.

In this age of online banking statements, and mobile budgeting apps for your phone, it is more convenient than ever to keep track of your money. Take that statement and break it down into what you spend money on; know and understand each part of where your money goes. This can be a challenge. Wow, did we really spend $178.00 eating out last month? Was the pleasure or the convenience of that activity worth it? Prepare to both question your decisions, and to come to terms with them.

Step two: watch your money, look at it, track it, take it in, and be honest with yourself about it. Planning and keeping a budget: this is the next step to moving toward home ownership.

Very First Step to Buying a Home

At some point, our exhaustion with paying rent turns into a desire to own property. 

So we need to know the very first step to take to buying a home. I talk to people all the time who have a wistful cast to their voice when they mention buying a home. It seems to them to be part of the distant future, a future where they have somehow increased their income, gotten a handle on their living expenses, and, sometimes: started acting like a grownup. Owning a home becomes a dream in the fantasy sense: maybe someday...

The very first step toward buying a home is to personally establish a pattern that is a good investment for a mortgage lender. 

If they are going to lend you tens of thousands of dollars to buy your home, they need to know that you can be counted on to pay if back.

Establish a solid, two year history of taxable employment.  

Ideally, you work for two years with one employer, but a lender can also work with someone who has two years with two employers, but in the same line of work. (So if you start in Winnebago sales and move to Harley Sales, that would be good. If you switch from wig sales to Bikram yoga teaching, that would be not so good, in establishing a consistent two year pattern.)