Lesson Three – What Do Lenders Want of Me & How Can I Prepare?
Hey hey, how was yesterday’s Google Searching?
Make sure to share as much as possible in the group, trust me when people get to calculating the cost of purchasing a home, they begin to do all types of searches for free money. Reference it often to ensure you get as many resources as possible 😊. Now, let’s move on to lesson three.
When preparing for home ownership, lenders look at eight key factors to determine if you’re eligible for a home loan:
- Stability of your income
- Employment history
- Monthly debt payments (credit card bills, car loans, etc.) in relation to your income
- How you save money and how much you have saved
- The type of mortgage you are considering
- The type and value of the property you want to buy
- The amount of the down payment you plan to make
- On-time payment of rent and utilities
Look at the list above and tell me what they all have in common?
And if you can’t properly manage your money, your chances of claiming and keeping your home keys are slim to none.
So, let’s start here first: Budgeting!
Today, we’re going to do an analysis of your current finances to determine the amount of income you bring in and what you are spending it on.
How can a budget help you?
Your initial budget is merely a written journal of how you spent your money. You’re able to see how much income you brought in for the month and where your income went.
Moving forward, you are going to tell your money where to go, versus sitting on the sidelines swiping and seeing where it went.
Money needs instructions in order to grow.
If you merely spend, while checking your bank balance along the way, while waiting for your next pay day to come, you’re not in control; and I’m going to need you to get very uncomfortable with being broke.
I said this in a workshop once and a gentleman stood up and said, “I make well into the 6-figures, I’m far from broke.” I said, yeah but how much are you keeping? If you were unemployed for 12 months, would your savings and investments last you until you’ve gained employment again? If you were in an accident and had to retire today, can you confidently say that you’ve utilized your nice 6-figure income to take care of your future self? Crickets.
It’s never about how much you make; it’s about how much you KEEP. And being in control of where your money goes is super important to get to this point.
Now, many people give up when it comes to budgeting, that’s why I’m starting you out on this topic while you’re all excited about claiming your keys, Lol!
Your desire to own a home should supersede your dislike (or discomfort) with budgeting.
So… let’s get started!
Assignment – Create A Budget
Start off by going to Excel or Google Sheets (if these are not an option, good ole pen and paper will do! There’s an excel spreadsheet in the Files Section of The Prosperity Club as well. Intensive students, a budget worksheet was included in your emails, and your workbook).
Gather roughly 3 months of bank and credit card statements and begin logging your income from all sources. If your income varies, average it over the past 3 months OR take the lowest realistic amount and use that for budgeting purposes. Place your income in the ‘Income’ columns, being sure to customize each cell of the spreadsheet (if using) to notate where the income is coming from; i.e. Main Job Paycheck, Part-time Job Paycheck, Side Hustle Income, etc.
Next, add up all your expenses, and add them to the spreadsheet.
Customize the expenses listed to fit your lifestyle (for example, if there’s a space for child care and you don’t have children, you’ll just personalize that field to an expense that you do have).
For items that you pay quarterly, semi-annually or annually, divide by 3, 6, or 12 respectively so that you can get a monthly amount for that expense.
Essentially, your equation is: Income – Expenses = ?
Next, evaluate. Where are you?
Are your expenses more than your income; and you are only spending on necessities?
Income on point, but spending way too much on non-necessities?
Doing all right?
Let’s Chat About it in The Prosperity Club:
- What are the biggest items in your budget?
- How much are you saving each month on your current budget?
- How could you save more money?
- What expenses could you cut or reduce?
- In what ways do you see your financial picture changing in the next year? In the next five years?
Any Other Questions? Post them to the group! If you’re in the Intensive, log your questions in your workbook for our Live Lesson as well. That way when I post for questions for our Q & A, you’ll have them ready.
Today, you learned where your money went. Tomorrow, I’m going to teach you how to tell your money where to go.
See you tomorrow at 10a cst!
Your Partner in Prosperity,
P.S. Have you shared the awesomeness you’ve gotten from this Challenge? Here’s that link again: bit.ly/ClaimMyKeys.