FINANCE OWN

The Road Home

TAKE TIME TO CONSIDER THESE KEY FINANCIAL TIPS TO SAVE FOR YOUR FIRST HOME.

The dream of homeownership can feel more like a nightmare if you are struggling to save enough money for a down payment. However, if you sort out the money side of things you could soon be sleeping soundly under your very own roof.

You can expect to put down at least 10 to 20 percent of the sale price on your first home or condominium. Following the sub-prime mortgage meltdown, lenders are more cautious with mortgage applications and with any luck, borrowers have learned some lessons about risky home loans. Of course, socking away $10,000, $20,000, or more is not easy.

Here are some keys to opening the door to homeownership:

DETERMINE HOW MUCH YOU WILL NEED AND WHEN YOU WILL NEED IT.

Every journey needs a roadmap. Seeing this in black and white will help motivate you and allow you to track your progress toward your goal.

SET A DEADLINE.

This can push you to find ways to save you may not have considered.

CREATE A SEPARATE SAVINGS ACCOUNT FOR YOUR DOWN PAYMENT.

This will help you avoid the temptation to tap into your down-payment savings and use that money for other things. sacrificing other things. Make an effort to reduce major monthly expenses like auto loans or credit card payments. Not only will this free up more cash to save, it will improve your debt-to-income ratio, an important factor in calculating your mortgage rates.

MAKE YOUR SAVINGS CONTRIBUTIONS AUTOMATIC. Once you have determined how much you need to save each month, have that money automatically transferred to your down payment savings account every week or two, or have it directly deposited from your paycheck.

HERE ARE A FEW SIMPLE WAYS TO REDUCE COSTS:

MAKE

HIGHER CONTRIBUTIONS TO A TRADITIONAL IRA.

Traditional IRAs that let you invest in pretax dollars can provide an oftenoverlooked benefit for first-time homebuyers, who can withdraw up to $10,000 for first-time homebuyer expenses (including the down payment). First-time homebuyers are not required to pay the usual 10 percent early withdrawal penalty assessed for IRA withdrawals prior to age 59 1/2. Roth IRAs provide a similar benefit but with more complicated rules. If you do use your IRA to help fund your down payment, you must be efficient, however. The withdrawal has to be used within 120 days of the acquisition date of the home. If you cannot use the money for some reason, you can redeposit it and it will be treated like a rollover.

PARE DOWN LARGE MONTHLY EXPENSES. Saving for your down payment may mean

• If you have a membership (to a gym, book club, etc.) and do not use it regularly, cancel it. You can buy inexpensive apps or DVDs for home workouts and borrow books from the library.

• Cut out those specialty coffees. Bring your favorite coffee from home.

• Use coupons.

• Take your lunch to work.

• Ask for a reduced rate on your credit card. Pay it off each month.

• Rent movies.

• Read magazines online.

• Look for no-fee checking accounts.

• Pay car insurance semi-annually or annually to lower costs.

• If you smoke, stop. You will save more than money.

• Sign up for free customer reward programs.

• Make a shopping list.

• Invite friends over instead of meeting at a restaurant.

• Your local dollar store can be a great place to buy staple items.

• Purchase cards, wrapping paper, and gifts for the following year after the holiday at half price.

• Buy generic or house brand products.

• Buy clothing that can be mixed and matched to create different looks.

SOURCE: “Annual Savings Survey Reveals That Only Half of Americans Have Good Savings Habits and Think They are Adequately Prepa red for Their Financial Future.” Consumer Federation of America. www.consumerfed.org/news/644 (Accessed Jan. 20, 2014) [Securities and advisory services offered through SII Investments, Inc., member FINRA, SIPC and a Registered Investment Advisor. Fross and Fross Wealth Management and SII Investments, Inc. are separate companies. SII does n ot provide tax or legal advice.]

If you are making the transition from renter to homeowner for the first time, you will want to look at a number of things that will affect you financially. What type of mortgage is best? That may depend on whether you expect your finances to change over the next several years, how long you are planning to live in the home, and whether you are comfortable with a changing mortgage payment.

What is the total cost of homeownership? You will want to figure if there are any additional expenses you may not have factored into your monthly budget. For example, if your utilities have been covered in your rent, you may want to ask your real estate broker to help you get information from the seller on how much he or she pays annually for heat and electricity.

In addition, you might have to budget for homeowner association or condominium association dues. Of course, you will also have to set money aside for property taxes and homeowner’s insurance, and it does make sense to begin saving for home repairs.

Owning a home is an important part of the American dream. Like many life goals, it is achievable with good financial planning.

THOMAS H. RUGGIE, CHFC, CFP is the founder of Ruggie Wealth Management. With more than $425 million in assets under management, he has been ranked among the nation’s 50 Fastest Growing RIA Firms , the Top 100 Wealth Managers, Top 100 Independent Advisors, Top 40 Most Influential Advisors, and again, as one of Barron’s Top 1,000 Advisors. truggie@ruggiewealth.com