The Path To Homeownership

The path to homeownership often begins with a budget. But it may not be the one you think. Personal financial habits are actually the foundation for home-buying opportunities. So, helping a client understand their personal budget will help them determine not only what their home-buying or investment budget may be, but also spot opportunities for aligning their habits with their goals.

Layout A Monthly Budget

Have your client gather the following materials:

  • The last three months of their bills, pay stubs, bank and credit card statements, and any other financial document.
  • Using the categories provided in the personal budgeting resource, have your client calculate how much they spend, on average, in a month.

If your client is satisfied with their spending habits, congrats! Their work is done. You know what their monthly budget is and can use that when evaluating the investment that they want to make in a monthly mortgage payment.

Once each of the categories is filled, if they feel less than stellar about how much they are spending each month in total or in any one of the areas, they are in a position to re-evaluate their habits.

As their agent and fiduciary, remember that you cannot decide what is important to your client. Your commitment to them is that you will help them evaluate their priorities and their options. So, if your client needs to adjust their budget, have them work through the following exercise to decide where they may want to make adjustments.

Help Clients with their ABCs

Take the personal budget that your clients have created and ask them to review it, checking off the columns that correspond with each expense. The different types of expenses are:

A – These expenses are essential.

B – These are expenses that are nice to have that your client would prefer to keep.

C – C is for “Cuts.” These expenses are not necessary and should be eliminated.

After identifying what’s essential, what’s potentially optional, and what can be cut – your clients are now armed with information that can help them make choices. These choices will help them understand and adjust their spending and saving habits so that they can work toward what their home-buying budget may be.

Begin with a budget, and your client may find a path to homeownership is in the math.