For the first time in seven years, Black Friday sales fell, according to the National Retail Federation. It seems consumers are watching their spending and making careful adjustments to de-leverage by paying down their mortgages and other debts.
Housingwire.com reported that "Our findings suggest that the consumer de-leveraging experienced since the financial crisis will trough in the next year or two, driven by improved mortgage credit availability and better consumer demand," said Paul Miller, a managing director at FBR Capital Markets.
While some experts say this means that consumers will sit on the sidelines for a bit, they point out that the de-leveraging is a good thing which will in the not-too-distant future lead to buyers leveraging and buying homes and other big ticket purchases again in the future as the economy improves.
If you're a buyer who is wanting to make sure you're ready to buy when the time is right for you, here are a few tips to help you pave the way to successful home-buying.
Tally your debt-to-income ratio.
Know how much you owe and how much of your income is going toward paying your bills. The higher the debt-to-income ratio, the lower the chance of getting a mortgage. Of course other factors such as your credit history and how much money you'll put down matter but if your debt is too high, you won't qualify.
To understand the exact formula used to calculate your debt-to-income ratio and to learn what is acceptable, contact an experienced mortgage professional. Your real estate agent may have a list of professionals for you to contact. They'll also talk to you about reviewing your credit history and getting pre-approved so you know how much home you can afford. It's always best to do this before you go house hunting.
Keep a budget.
Very often, when the money is rolling in and the economy is good, people neglect to plan ahead. Keeping a budget will allow you to understand where your money is going. Find areas where you see unnecessary spending patterns and work to eliminate or cutback.
If you're renting now, crafting a budget that builds in a small amount each month for household maintenance will greatly help when you own your home. Inevitably, repairs pop up at the most inappropriate times such as the holidays and end of the year when you're spending more money on gifts for loved ones. Having that money set aside will come in handy.
Saving for a downpayment is very critical these days. It's not easy to save the funds if you're spending to the maximum. If you're renting a place currently, perhaps you can downsize to a smaller less expensive apartment for your next lease term to save some extra cash each month. You'll be glad when you have the extra money to put toward your new home.
Another way to cutback is to cut your cable cost.
TV viewership is down and more people are using their mobile phones and tablets to access the Web and watch movies/TV shows. You could save quite a bit over the course of year, by cutting out extras that you can live without.
Build your education.
Buying a home has many movable parts to the process. Start meeting with experts in the industry and asking questions. Read as much as possible about real estate. Use free online apps to help you save articles, videos, and photos of homes you like. The more you research and prepare yourself, the smoother the process will be for you.
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