10 Ways to Save for First-Time Home Buyers
Owning a home is a dream shared by many. But saving enough money for a down payment might seem like a far off plan. After all, you’ve got student loans to pay off, you’re working on establishing your career and you’re not sure where you’ll be in 5 years. Renting an apartment might seem like a better option right now.
Believe it or not, this is the perfect time to start saving for your first home! It pays to have a plan. So follow these steps and you’ll be on your way to achieving your dream of homeownership in no time.
10 Ways First-time Home Buyers Can Save for Their First House
Meet with a mortgage lender. This may seem like an extreme step to take right away, but it’s important to be informed before you start saving. An experienced professional will estimate what kind of mortgage you’ll likely qualify for and work with you to figure out your timeline. Plus they’ll help you understand all the complexities that come with buying a home — think down payments, home inspections, interest rates, etc.
Plan out your timeline. Based on your discussion with the mortgage lender, determine how much you need to save for a down payment and how long it’ll take you to comfortably do that. Set realistic yearly savings goals and make it a priority to stick to them so you can stay on track.
Begin your budget. It’s time to put pen to paper and map out your monthly budget. Now that you’ve got lofty savings goals, you’ll need to shift your spending habits stay consistent about meeting those yearly targets. This means cutting back on expenses and holding yourself to new rules and stricter dollar limits. It’ll be a change, but you’ve got this!
Have an emergency fund. Life happens, so it’s good to be prepared for the unexpected. Have an emergency fund set aside (and contribute to it regularly) to pay for things like car repairs, uncovered medical expenses and temporary unemployment. This way you won’t have to dip into your home savings when life throws you a curveball.
Go the safe route. A home is a big purchase, and you’ll want to be as consistent and secure as possible when it comes to your savings tools. So avoid playing the stock market or using other high-risk investment vehicles and opt for a tried-and-true savings account. Old fashioned is the way to go!
Opt for automatic. Make saving easy by choosing to have a percentage of each paycheck automatically deposited into your savings account. This way you’ll be blind to the transaction and won’t be tempted to spend the money.
Eliminate the luxuries. Tightening your purse strings and cutting out the extras is worth the payback later. It may be hard to get used to, but you can ease into it. Start by taking your lunch to work every day for a week, putting your cable TV subscription on hold for a month or skipping the clothes shopping for a season. You’d be surprised at how much these little changes can save you — and you might find these temporary sacrifices become smart, long-term habits!
Stash away the extra. Tax returns, holiday bonuses, cash from your side hustle — this is all money that falls outside of your normal income. So why spend it? Stick to your monthly budget no matter what, stash the extra into your savings and see how much faster you reach your goal.
Amp up your credit score. Having good credit will make it easier for you to borrow money, and it’ll help you get a better rate, saving you tons of money over the life of your loan. So it’s smart to keep on top of yours. And don’t be afraid to actually use it! In fact, it’s a good idea to consistently use about 35% of your available credit limit on your card as long as you’re always paying your bills on time.
Have the right protection. If you’re currently renting, connect with your American Family Insurance agent to get a renters insurance policy. This way, should the unexpected happen, we can help you get back on track without taking a hit to your hard-earned savings. Plus we’ll be there for you as you shift into homeownership to get you the coverage, peace of mind and support you deserve as your dreams change and grow.
Buying a home is a big life step! But it doesn’t have to be so daunting. Take these smaller steps to start saving now and make the transition into homeownership as easy on your finances as possible. It’s smart to be proactive.