The average monthly rental income in New York City is $1,300.
That’s a lot of money, but not nearly enough to cover the $1.5 million you’ll need to move into a new home in a decade.
But how do you get there?
Here are the steps you need to take to make sure you’re putting away as much money as possible.1.
Start small and save for the futureThis is one of the best ways to save for your home and ensure you get enough for your kids, says Jason Wiedemann, chief financial officer of the Association of Realtors.
So, first, start by saving your minimum monthly payment for the next decade.
“If you have a mortgage or a home equity loan, you’ll have to lower it to match the income of your new place,” he says.
“For a rental, that will make a difference.
For a condo, that’s a huge difference.”2.
Get a mortgage that matches your incomeThere are two ways to get a mortgage.
You can pay for it on your taxes or apply directly with the federal government.
A combination of the two approaches can give you a big payoff: if you pay less than 30% of your net worth in taxes, you can receive a tax-free mortgage.
But if you don’t pay at least 30% on your income, you might have to pay an even larger tax bill to qualify.3.
Apply for a mortgage with the governmentOnce you have your home equity in place, you should apply to get your mortgage from the government.
If you’re in a tax bracket of 50% or less, you don.
For those in the 35% to 50% bracket, you need a 10-year fixed rate mortgage with an annual percentage rate of 3.8%, and you can apply to apply to have a loan modified for inflation by the IRS.
If your income is over 50% and your mortgage rate is higher than 3.75%, you’ll pay an additional 3% of the monthly payments.4.
Compare your current mortgage rates with those of lendersThe mortgage rates offered by lenders are often very competitive, says Wiedeman.
So you can compare the rates of lenders with the interest rates offered from banks, so you can see how much more you’re paying compared to other home buyers.
If the rates offered at a lender are less than 3%, you’re not eligible for a loan modification.5.
Start saving for retirementThe National Low Income Housing Coalition estimates that if you retire with no income, your retirement savings could total $40,000.
That would put you in the “prime” category of homeownership, which includes buying a home at an interest rate of 2% or 3% a year.
So your best bet is to buy a home that will last a few years, so that you can get started.
Wiedems points out that if your income doesn’t go up enough to qualify for a 20% down payment, you could end up paying an even bigger price for your retirement home.6.
Move in and get a loan for the mortgageThe best time to get an initial mortgage is when you’re about to be unemployed, Wiedema says.
If that’s the case, you may want to consider applying to have the loan modified to help with future expenses.
But in most cases, you shouldn’t apply to borrow money from the federal Government as you might for other kinds of loans.
“The federal government is a good lender,” says Wieemann.
“But you have to understand that it’s not a great loan.
The interest rate can be higher than 4%, and it’s very difficult to qualify.”
The best option is to apply directly to the lender, which may be more appealing than borrowing from the bank.
But even if you’re already in a high-interest-rate mortgage, you’re still likely to have to make a down payment.
“You may have to take out more than the $300 you’re able to borrow and you’ll still be paying higher interest than a mortgage,” Wiedemeans advice.7.
Start paying down your mortgageFirst, you must pay off your mortgage.
“This is the easiest step.
It can take months,” Wieemeans says.
You’ll need some cash in your account to cover your payments.
“Then, once you’ve paid off your debt, you will need to put it in a checking account for safekeeping,” he adds.
If, for some reason, you’ve not paid off all your mortgage, a mortgage modification can help with that.
“With a modification, the loan will be refinanced for the full amount,” Wieses says.8.
Pay off the loan and keep your houseIf you decide you don