Charting priorities will help you save for down payment


It's 1991 and you're still an unhappy renter?

Then you have a lot of company. Of the millions of Americans who rent, more than half would buy if they could, according to a survey by the National Association of Realtors. Many renters have the income to support house payments but lack the cash to get in the front door.

If cash for a down payment is the only barrier between you and homeownership, take notice. Realty and finance specialists say that by clearly focusing on your house goal and by redirecting cash, you should be able to buy.

"It's a matter of changing your priorities from red Firebirds to two-bedroom cottages with white picket fences," says Daryl Jesperson, a senior vice president with the RE/MAX realty chain.

The first step toward your goal should be to visualize it, says Jeffrey Scott, who oversees the Columbia office of Cigna Individual Financial Services Co., a financial planning firm. You may have the foggy feeling you want a house, but by actually seeing property for sale, you will increase your motivation to save.

"You need to let yourself get the feel, taste and smell of homeownership," Mr. Scott says. The idea is to find the kind of home you'd like and then picture yourself cooking dinner in the contemporary kitchen with the built-in microwave, or spending an afternoon in the family room watching a basketball game on TV.

To arrange a preliminary tour of a property, telephone a realty agent and ask to see homes in your expected price range. When you call, Mr. Scott says, don't be embarrassed to admit you've yet to raise the down payment. Simply tell the agent you're interested in an overview of homes on the market. A good agent should be happy to accommodate you, on the basis that you could represent a sale down the line.

Once you've visualized your goal, it's time to chart your financial priorities. If you're like most people, you've probably never spent the few hours it takes to create a plan for using the income your household brings in. Instead, you've been making major spending decisions on a case-by-case basis.

But raising the money you'll need for a down payment on a home takes more forethought than that, personal finance specialists point out.

"There's no question that if you're going to be successful in purchasing a home, you'd better do some financial planning -- unless you come from a very wealthy family," says Theodore Barr, a planner with IDS Financial Services in Silver Spring.

Boiled down, the purpose of most financial plans is to chart current expenses and then make adjustments. Financial planners help you categorize your spending by its level of necessity. You may have little control over certain expenses, such as rent payments, but you have a lot to say about what's spent for restaurant tabs, clothes and other discretionary expenditures. The idea is to reallocate money from discretionary expenses to savings for the house.

You don't have to hire a fancy financial planner to create a spending plan for yourself. Free budget counseling is available through the Consumer Credit Counseling Service, which has offices in East Baltimore, Perry Hall, Catonsville, Laurel, Bel Air and Salisbury.

The non-profit organization deals primarily with those who have serious credit problems. But you needn't be in trouble to get help from the group. Call 747-6803 in the Baltimore metropolitan area; 742-4422 in Salisbury; 498-9400 in Laurel; or 838-6112 in Bel Air.

Of course, you can always create a spending plan on your own. Do this by estimating current expenses (canceled checks and credit card bills are a big help) and then discussing the adjustments you wish to make with others in your household.

Whether you liberate cash by selling your precious jewels or by canceling a trip to Australia is a matter of personal choice. But the fact is that if buying a home is your No. 1 priority, financial sacrifice will undoubtedly be required.

While setting spending priorities is ultimately a personal matter, personal finance and realty specialists point out a few red flags. These are expenditures that keep many young people from fulfilling their goal of a home purchase.

* Expensive cars.

"A lot of people view the car as a status symbol. The unfortunate thing about a car is that there are very, very few of them that appreciate in value and most people can't afford these. Rather than spend $15,000 or $20,000 for a car, why not take half of that and use it toward a house," recommends David Fier of Metlife Securities Inc., the financial planning company.

While a house may not be an appreciating asset in the near term, it is likely to increase in value over a period of time. In the meantime, you can live in the property and deduct mortgage interest when you fill out your annual income tax returns, Mr. Fier reminds.

* Razzle-dazzle weddings.

"The cost of a big wedding has absolutely skyrocketed," says Mr. Jesperson, the RE/MAX vice president. "Take the cost of the flowers, rental of a hotel ballroom, the food and the band and you can easily go over $15,000."

Indeed, the cost of getting married in style can exceed the cash down payment on a modest home in the Baltimore area with an FHA mortgage. (Federally-insured FHA loans typically require less than 5 percent down on a property, and you can also finance part of your closing costs. With an FHA mortgage you can now borrow up to $124,875 in most parts of Maryland.)

Given the high cost of a fancy wedding, an increasing number of parents are giving their children the option of receiving financial help for a home purchase instead, according to Mr. Jesperson.

* Costly vacations.

You may long for a two-week cruise around the Caribbean or an expedition through sub-Saharan Africa, but the thousands you put into such a sojourn could be used to advantage in building a nest egg for a home.

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