Money Saving Tips: How To Save For Your First Home
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The prospect of buying your first home is so exciting – soon you’ll have a place all to yourself that you can make your own. But the journey to becoming a homeowner isn’t always easy.
Not only do you need to determine your budget, prepare all of the crucial documents, and remain incredibly patient throughout the process, but you also need to assess where you’re getting the money for a down payment from – as well as how you’ll finance the mortgage each month.
In this country, it’s becoming more and more difficult to afford a house or apartment. While it can be easier at times to qualify for a conforming loan when the down payment is lower, you will still be better off to put as much money down from the get-go. This will help to decrease the amount that you’re paying each month.
However, you don’t only need to consider saving for the down payment. You’ll also have to take into account the other costs associated with the move - such as closing costs or repairs you need to do within the home.
So how can you efficiently save enough money for all of the costs? Here are some money saving tips that you can use to help:
Set A Goal
Before even looking at houses, you need to take a look at your finances to assess how much you can realistically afford. By using a tool such as a mortgage calculator, you’ll be able to see how much a property will cost you each month, along with the interest.
An invaluable tool, it’s key in the first stage of your house hunt – no matter what you think your budget will be. It also helps you set your expectations lower – because as nice as it would be to afford a million-dollar house from the get-go, that simply isn’t possible for most first time buyers.
Be Strict with Yourself
When you want to buy a house, you need to be strict with yourself financially. Otherwise, this dream might soon become a thing of the past. Cut back on going out, cancel memberships you might have, etc. – you’ll be surprised at how much you can save each month.
Now, this doesn’t mean that you have to completely miss out on a social life or enjoyment when you’re at home. It’s just simple changes that you can make that will help make the chance of becoming a homeowner come sooner rather than later. To do this effectively, there are budgeting apps that can help you – including YNAB and Clarity Money.
Cut Back on Grocery Shopping
Do you spend far too much on groceries every month? Then it’s time to cut down. By shopping at a cheaper store or buying things in bulk, you’ll be able to save a little bit more money each month. As well as making this swap, it’s also worth cutting back on the number of times that you eat out – an expense which will prevent you from saving effectively.
Make Some Extra Cash
As well as saving but making certain sacrifices each month, it’s a good idea to look into ways that you can make some extra money. This can be anything from organizing a yard sale to sell off all of your old possessions to taking on a part-time job on the weekend. By earning extra cash you’ll be able to save more towards your down payment.
Even though the prospect of taking on another job might not be appealing at first, it’s a little extra work that will make all the difference.
Consider Opening a Savings Account
As well as all of the above, it’s also worth opening a savings account either online or at the bank that you’re currently using. Of course, it’s more convenient to use the same bank as you’ll be able to transfer money back and forth from the different accounts.
This technique is a great method of putting money away each month – without you worrying that you’ll spend it if it remains within your current account. To make the temptation even less, once you have the amount you require for a down payment you could even ‘lock’ the account so that you can’t touch the money for a certain amount of time.
A Quick Word of Advice
All of the above are good methods to use when you want to save money for your first home. During the process, however, you will also want to check your credit score. This will affect the rate of what you pay, as well as how much you can borrow.
A key step towards being approved for a mortgage, if it’s good, your mortgage lender might be more likely to offer a low down payment.
Your credit score will be decided based on the information within your credit reports; electronic files, they hold information showing how much you have borrowed over the years, if you have any debt, if you have ever missed payments, etc.
Final Thoughts
So, there you go! Those are 5 ways that you can save money for your first home. The methods you use, of course, are up to you. But as long as you take action to save far in advance, there’s no reason why you can’t have your dream home.
Throughout the process, it is, however, important to stay realistic. Buying a house is a big step and one that can’t happen overnight. So just because you can’t get your perfect house immediately, it doesn’t mean that it won’t ever happen.
If you need advice throughout the stages, it’s also worth seeking professional guidance from your mortgage advisor who will give you a clearer picture as to how much you can realistically spend on the move. Once you have this, then you can start the house hunt.
During this step, however, make sure that your realtor is only showing you properties that you can afford – you don’t want to overstretch yourself or get attached to a property that you can’t actually get.