Find The Options With A Buyer’s Budget Consultation

calculator and papers

The market for home buyers seems to be historically challenging. With high prices and swelling interest rates, buyers—especially first-time buyers—are feeling squeezed out of the market. Or, they are delaying homeownership altogether. While these market forces are outside of any one buyer’s control, you can educate your potential clients on what they can control: their finances.

Just five years ago, NAR research showed that financial literacy and foundational education is needed to support first-time buyers. The report found that 16 percent of renters believed they would struggle to qualify for a mortgage due to a lack of financial knowledge. A slightly smaller percentage (13 percent) said they had difficulty identifying the initial steps in the home-buying process.

Personal financial habits are actually the foundation for home-buying opportunities. So, helping a client understand their personal budget will allow them to determine not only what their home-buying or investment budget may be, but also spot opportunities for aligning their habits with their goals.

To help you consult with potential first-time buyers (or any buyer client!) KellerINK has created a budgeting worksheet resource. Click “Your First Home” and you’ll see the “Personal Budget Worksheet.”

Follow the rest of the consultative steps in this newsletter to help educate your client about their budget and options with this powerful tool:

The Path To Homeownership Begins With A Budget

Have your client gather the following materials:

• The last three months of their bills, pay stubs, bank and credit card statements, and any other financial document.

• Using the categories provided in the personal budgeting resource, have your client calculate how much they spend, on average, in a month.

If your client is satisfied with their spending habits, congrats! Their work is done. You know their monthly budget and can use it when evaluating the investment they want to make in a monthly mortgage payment.

Once each of the categories is filled, if they feel less than stellar about how much they are spending each month in total or in any one of the areas, they may need to re-evaluate their habits. 

As their agent and fiduciary, remember that you cannot decide what is important to your client. Your commitment to them is that you will help them evaluate their priorities and their options. So, if your client needs to adjust their budget, have them work through the following exercise to decide where to make adjustments.

Help Clients With Their ABCs

Take the personal budget that your clients have created and ask them to review it, checking off the columns that correspond with each expense. The different types of expenses are:

A – These expenses are essential.

B – These are expenses that are nice to have that your client would prefer to keep.

C – C is for “Cuts.” These expenses are not necessary and should be eliminated.

After identifying what’s essential, what’s optional, and what can be cut, your clients are now armed with information that can guide their decision making. These decisions will help them understand and adjust their spending and saving habits so that they can work toward what their home-buying budget may be.

Even if you’re working with a client that’s getting closer to the closing table, you can still be of service by sharing this financial tool with them.

“Becoming a homeowner drastically changes the way your budget works, and understanding how your budget will change is key to managing your finances for the future,” writes Madison Fisler Lewis from Housing Finance Agency.

During a time of inflation and a topsy-turvy stock market, even established clients may thank you for helping them get clear about whether their spending matches their priorities. As Carissa Acker and Gary Keller say, “The path is in the math.” Your clients will be thankful that you are helping guide the way.

What do you think the largest financial hurdles to homeownership may be? Have you used this consulting tool and have tips? Let us know on our our Facebook page and don’t forget to subscribe to our newsletter for more research, models, and goodness.

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