"Neither a borrower nor a lender be" could be translated as: Maybe it's time to stop renting (borrowing) and buy a home of your own. But how do you know what you can afford? And how do you make the leap from renter to good loan risk? There are many types of loans, but there are two main criteria for qualifying:
Good credit. A good credit history with no or low debt is the ideal. Even if you're way ahead of the sheriff, if you're carrying high debts you need to reduce them. Contact creditors and establish realistic payment schedules. Start paying new bills on time and in full. If it takes a year to get your debts under control, put off house-hunting, find the bliss of discipline, and know it will be a year well-spent.
Income. Have you held your current job for at least two years? As a loan prospect, you're considered a better risk if you have a low but steady income rather than a short-term higher income. Will you be secure (and content) for the next three years? Are you confident in your company's stability?
Speed up your savings savvy
Let's start with the main chunk of change: the down payment. There's some wiggle room here, but for a conventional loan you're looking at 5, 10, or 20 percent of the purchase price. (At 20 percent, you avoid mortgage insurance, which is otherwise up to 3 percent of the home's purchase price.)
Change Your Habits
Stay on top. Create a savings schedule, and post it someplace where you'll see it daily. Open an account specifically for down payment savings and make regular deposits, however small, every payday. Keep your cheque book balanced.
Adjust withholding taxes. If you're qualified to do so, changing your salary withholdings can give you more cash for your house piggybank.
Moonlight. If working at a second job for a year or two will make the difference between living hand-to-mouth and saving a down payment, take it on. Once you've covered your down payment, you can probably lose the extra gig.
Simplify. What luxuries can you live without as you beef up your savings? Think pay TV, mobile phone, Italian shoes, handheld computer, caller ID, and music and books hot off the presses. Hit up the library for music and literature. Sail past the mall and head for a discount mall—or try consignment shops for clothing and furniture. For essential items, wait for sales. Shop at less expensive grocery stores, compare prices per ounce, and adapt your diet: Alternate expensive meats, seafood, and store-bought sauces with produce and grains.
Cut up your cards. If you have more than one or two credit cards, consolidate. Use the cards with the lowest APR, and give the boot to your "spares." You'll be less tempted to charge, and you'll save on annual fees.
Earn interest. Term Deposits and treasury notes are secure and earn a higher interest rate than do savings accounts. Talk to a representative at your bank about your options.
Ask for help
Mom, Dad? Will your folks consider a financial gift toward your down payment? Or your parents might be willing to co-sign for a loan, in which case your lender might approve their paying your down payment. They would be jointly responsible for your monthly mortgage payments, and the title would be in their name. It's a bit tricky, so if you go this route, invest in a financial advisor and a real estate solicitor. After you've built equity in the house, or when your finances improve, you may be able to refinance the loan in your own name. Alternatively, your parents could purchase a home and lease it back to you. You'd make monthly payments; they'd receive a tasty tax break.
Find a partner. Is a friend or family member looking for a long-term investment with low responsibility and high-yield potential? They could pay the down payment if you carry the mortgage payments—or you can split all costs and divide any profits when you resell the house.
Sell, sell, sell
Real estate. If you already own property, you can sell it or borrow against it.
Vessels and vehicles. If you own a boat, car, or motorcycle that you can live without, sell it and add the proceeds to your savings account.
Securities. If you own securities, you can either sell them or establish a loan through your stock brokerage to borrow against them.
Refinance existing loans. If you're making payments on other loans, refinance and add the savings to your down-payment kitty.
Disclaimer: This information is a guide only. Consult your financial advisor before acting on it.