Open Credit and Big Ticket Loans
While actual payment amounts are used to calculate the debt to income ratio used to qualify for a mortgage another factor can come in to play; Open Credit.
An individual or couple may have a median income and average open credit and it will not be a factor in getting a home loan. What is average: a couple with $80,000.00 to $90,000.00 in total income could have Credit Cards with open credit lines of $5,000.00 to $15,000.00 and have no problem. On the other hand if the open credit line was $30,000.00 to $50,000.00 and above that could lead to the lender being nervous. They might even ask the couple to close several accounts so the lender felt less vulnerable. If the couple used the credit line to furnish the house it could, post loan, significantly change the debt to income ratio.
The Bigger the Down Payment ...
If a home buyer have a significant down payment it will change both the interest rate and the montly payment and/or make a larger/better home possible. If the down payment is gifted to the buyer it is far less impressive to the lender. So how does a young person or couple save money toward a Big Ticket Purchase Loan?
Frugality
Prioritize spending and make goals for what needs and wants are for a given period (yearly or longer). Start saving immediately and crunching numbers if you know something big, good or needed is coming. Try and have enough for when the big ticket item is available or needed. You may not be chaste like a monk, but live and spend like one to meet your acquisition goals.
The real-life changes such savings require may mean brownbag lunches to work and getting the daily caffeine fix from the free coffee machine at work. No $4 Grande Lattes from Starbucks two or three times a day. Replacing a $10.00 lunch everyday, that would probably end up being about $100 a week and over a year ($5,000.00 Plus) that ends up being a very significant capital savings.
Smokers can do even better. A two pack a day habit rounds out to $10.00 to $12.00 a day or another $70.00 a week. That yearly savings works out to be another $3,600.00.
If car-pooling works in the weekly work realm, that can add $1,000.00 to $2,000.00 a year that means this could mean a $10,000.00 dollar savings during a year. Do this for five years running and a home loan is cake walk. One of those TV moments where you have lenders fighting to give you loans at the best possible rates.
More on Gas Prices
The money spent or not spent on fuel costs can make a big difference in total yearly savings. Follow these tips to save money when it comes time to buy gas. You can't control gas prices - but you can control how much gas you need to buy.
Keep your vehicle's engine properly tuned
Keep your tires properly inflated
Carry nothing in the vehicle you don't NEED
Combine trips to make the shortest most efficient route
Buy Online
Rent Movies from Cable or Satellite
Car-Pool
Consider if purchasing a smaller more efficient vehicle makes financial sense
Prioritization
Is your big ticket item a new 72" TV, 10,000 watt stereo, a new (or needed) set of wheels or moving from an apartment to a house. Priorities are where the money decisions will make the goal(s) possible.
If your goals tend to be short term - gotta have the latest gadget now - your ability to get that new car at best financial terms or situation is going to be harder to accomplish.
Buying your first house on a budget means having all of your "money" ducks in a row. Going after the right price house with your income to debt ratio in line. The bigger down or the more in savings means stability to the lender and that is what they look for - stability and ability to repay.
Financial planning is necessary part of life. The old adage "Fail to plan" equals "plan to fail" is the most basic reason to "plan out your financial (= life) goals."
Self-awareness
Know yourself and understand how you operate so that you can make purchases that reflect what you really need. Coveting certain tech gear, designer clothing, or collectibles is ok and just make sure that the purchase is done with monies that are truly discretionary and not needed for long term goals.
Reality Check
Related to compromising, you have to realize in the end that "buying" should be like a hobby, an enjoyable pastime, and not one that should consume you to the point that everything else in life is ignored. If your buying habits are out of control and at the minimum short circuiting your long term goals or so bad that you are screening your phone calls you need to CHANGE.
Don't be blowing the mortgage and/or kids college fund to buy that "gotta have special item" - that you really don't need.
