If you have hopes of trading your rental for a home of your own, you may be feeling the weight of saving for what will likely be one of the largest purchases in your lifetime. Perhaps even worse, if you’re stuck living at your parent's house, you’re probably wishing you could have this money saved yesterday.
While saving money for a home isn’t the easiest thing you’ll ever do, with a little self-discipline and determination, it can be done. In this article, we give you six tips on how to save for a home so you're in the best position to work with a mortgage lending company.
1. Create a Budget
Before you even begin looking at homes, you need to decide what you can comfortably afford. There will be discrepancies between what a bank or mortgage company says you can afford versus reality. Your mortgage, property taxes and home insurance can add up quickly... and don’t forget to account for your down payment. While it’s generally expected that you have at least 20% saved for a conventional loan, there are many loan assistance programs out there that have lower thresholds.
2. Establish a Savings Account
These days, opening a savings account is easier than ever. You don’t even have to walk into an actual bank with online applications easily accessible. While you won’t receive great interest rates on your money, it’s better than hiding the cash under your mattress. It will also help give you the tools necessary to automate your savings. When you establish your savings account, be sure to have any excess money from your paycheck automatically transfer. This seems like a small step but it will help you resist the urge to spend the money elsewhere.
3. Cut Out the Pork
Netflix, Starbucks, unused gym memberships, eating out... these little nice-to-haves add up quick. If you cut these out and instead direct those dollars to your newly established savings accounts, you’ll be on the road to home ownership sooner than you think.
4. Save your Bonus and Tax Returns
While it can be tempting to take these extra dollars and spend them on a new T.V. or on a fun vacation, it will benefit you more to save them. It’s not often that you’ll receive large sums of money like this so take advantage of it while you can.
5. Pay Off Your Debt
Nothing will cost you more money and prevent you from saving for a home, than high-interest debt. For every one step you take to make a payment, your interest rates will take you two steps back or leave you at a plateau -- never getting ahead. Try to pay off your high-interest debt or at least make a significant dent in it before you apply for a loan. Doing so will get you a better interest rate on a mortgage loan.
6. Get a Side Job
While the thought of spending more time working sounds awful, think about the bigger picture and know it’s only temporary. Some ideas of side gigs are freelance writing, driving for Uber or Lyft, tutoring, dog walking, and more.
If you follow these tips and have the self-discipline and determination to save, you will find yourself ready to buy a home in no time. Don’t forget to celebrate the little victories along the way as this will help keep you motivated to press on towards your goal.
If you’ve read this article and are left with questions, talk to US first. Our Personal Mortgage Advisors are passionate about putting people in the home they’ve always dreamed about and would love to help.