It is believed that the average American will need to save more than $10,000 for a house purchase. While your down deposit depends on the lender you’ve selected (as well as your credit history and the local real estate market), it’s safe to assume that when it comes to buying your dream home, it’s a lot more challenging than you imagined.
Buying a home is a huge decision, and it’s not one you should take lightly. Of course, you want to end up in your desired neighborhood, close to work and a house which is completely designed with you in mind. However, in today’s climate, many have to compromise, or so they believe.
While saving for a home is never easy, and it seems harder than usual for millennials, there are ways for you to put money away. To do so, it will take discipline and patience, but in the long run, the hassle of being more money-conscious will pay off for you and your future.
Set a Budget
Setting a budget is the common answer to such problems. However, you do need to be sensible and thorough in deciding what you wish to save and how much you’re putting aside each month. Humans are impatient creatures, and many of us think shoving all our money into our savings accounts is the best course of action. This is further than the truth.
For budgeting to work, you first need to determine what you wish to save (look at the average housing costs in your desired location and the down deposit usually needed), and then you need to calculate any monthly payments – rent, utility bills, cost of living. Once you know, you can portion a certain amount of your money to your savings as soon as you get paid.
Remember that although you may be dreaming of a condo by the sea or a mansion in The Hamptons, you need to be realistic about what you can afford. If you’re aspiring for a home that’ll take more than five years to save for, then you may wish to consider settling for a home that’s more affordable. Plus, you need to be able to manage the mortgage on the house you’re hoping to buy. However, once you’re in the housing market, you have more flexibility when it comes to slowly climbing the property ladder if this is what you wish.
Look for Ways to Save
Putting some of your wages into your savings is the usual and most effective ways of saving, but there are many other miscellaneous ways to go about saving that extra dollar. For instance, you could consider any of the following:
- Move back home. While many people may think returning to their family home and living with their parents is a step backward, it is an effective means of cutting down on expenditure. By making your parents your housemates, you can forget about rent (although it’s always nice to offer a little token of gratitude), utility bills, food shopping and other general costs of living.
- Find a second job. If you work full-time, then offering up the little free time you have can seem like the worst thing imaginable. It is, though, a great means of boosting your income. You don’t have to give up your entire weekends, or even a whole Saturday or Sunday. Instead, you can look for freelance work that offers flexibility. If you’re a writer, then look for freelance work on online and log in a few hours Saturday or Sunday morning. Any money made can go straight towards your deposit.
- Look for the best deals. Not everyone can move in with their parents. Therefore, you need to find the best deals possible. Phone up all your providers and look for the cheapest options around, or if you’ve been with a company for a long time, ask for a discount of sorts. You may also need to find cheaper living arrangements or look into moving in a housemate.
Pay off Your Debt and Know Your Credit Score
Many of us have debt, but it’s how you go about paying it off that matters. College tuition and any debt needed to help with living arrangements should be paid off routinely. You need to prove to your lenders that you’re smart with money and reliable with payments. Any late payments can be used against you, and even if you have the deposit, lenders can still reject you on the grounds of missed payments or lack of responsibility.
Check your credit score and credit report before you apply for a house. Any bad credit will tarnish your ability to buy a house, plus there’s the potential of mistakes, and by addressing these sooner rather than later, you’re putting yourself in a better position. Of course, some of us will already have bad credit, but this is not the be all and end all. There are many companies out there that can direct your on ways to help rid any bad credit history; before you hire such services though, make sure to read reputable credit repair reviews.
Yield the Best Savings Accounts
Putting your money to one side is all well and good, but you need to ensure that the account you’ve chosen can offer security and the best interest rates. You should make sure that the Federal Deposit Insurance Corporation insures your funds for banks or the National Credit Union Association for credit unions. You should not use banks that cannot offer the above protections.
You should also find an account that doesn’t associate fees with your account transactions, has an easy deposit system in place, and you should ideally find an account that pays higher-than-average interest on your deposits while charging lower interest on your debts. Before settling on an account, make sure you speak to a variety of banks.
Saving for a home is no easy feat, yet it is possible. You may have to sacrifice a few perks and home comforts, but by being money savvy and following this guide for advice, you could be purchasing your first home in a matter of years.