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Buying First Home Takes Sacrifices : Transition: Saving for down payment requires good financial planning. The motivated manage to do it.


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 Assn. 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 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," said Daryl Jesperson, a senior vice president with the RE-MAX realty chain, based in Irvine.

The first step toward your goal should be to visualize it, said Jeffrey Scott of Cigna Individual Financial Services Co., a national financial planning company. 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," Scott said. The idea is to find the kind of home you would 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, Scott said, don't be embarrassed to admit that you have 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 have visualized your goal, it is 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 will 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," said Theodore Barr, a planner with IDS Financial Services, a Minneapolis-based company.

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 or low-cost budget counseling is available through the nationwide offices of the Consumer Credit Counseling Services.

The nonprofit organization is geared primarily toward people who have developed severe credit problems. But you don't need to be in trouble to get help from the group. To locate an office in your area, call the National Foundation for Consumer Credit at (800) 388-2227 or write the organization at 8701 Georgia Ave, Suite 507, Silver Spring, Md. 20910.

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 an individual 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," said David Fier of the New York office 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, Fier says.

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