Many a home buyer cannot truthfully answer that question. While there are many “experts” out there who will give potential home buyers all sorts of strategies for preparing to take on the burden of a home mortgage, I personally prefer a very simple and straight forward approach to taking on this issue. This approach has been summed up in 6 simple little words:

“Debt is dumb, cash is king”.

No I did not come up with that phrase by myself. It was actually coined by a very popular financial talk-show host and author named Dave Ramsey.

This approach is simple:

·         Get yourself on a budget – you have a specific goal in mind (buying a home). But you won’t get to any goal without a game plan. That’s what a budget is……..your game plan. Sit down at the first of each month and on paper, write down every dollar of income that you expect to bring in that month.  Then right next to it, assign a job for every one of those dollars (IE….$600 for rent, $200 for gas/water/electric, $50 for phone, $400 for groceries, $100 for running money, $200 for savings, etc).  Once you have your budget in place, YOU DO NOT GET OFF BUDGET FOR ANY REASON. At the first of the next month, start the process over again.

·         Put together an emergency fund – you want an emergency fund of 3-6 months TOTAL EXPENSES (housing payment, food, running money, gas/water/electric, etc).  You want a large enough fund so that if the worst should happen and you are unable to work for a time, then you will have that 3-6 month cushion to get your affairs in order and find new work or get some help.

·         Pay off your consumer debt – Credit cards, car loans, personal loans, student loans, etc. If you already have $30,000 or 40,000 in various consumer debts, then why are you going to take on the additional burden of a home mortgage at the same time? Pay off that consumer debt and then come buy a home with a clean slate.

·         Save up a down payment – the more money you can put down, the lower your mortgage payments will be and the more likely that you will be able to afford those payments.

The budget is, of course, the key to this whole approach. So what if you do your monthly budget and you find that there is no extra money to put toward emergency funds or paying off consumer debts? Well there are only 2 ways to solve that problem: increase your income (get a 2^nd job) or decrease your monthly debt (IE….get rid of the cell phone bill, the cable bill, etc). I said that this approach is simple, not easy. It will require sacrifice on your part and it may mean that you don’t buy a home as soon as you would like. And living on a budget and making smart decisions with your money won’t stop when you buy that home. However when it’s all said and done and you walk away from that closing table knowing that you are debt free (other than the mortgage)…..well let’s just say that it is a very good feeling.