Saving money is, without a doubt, important when it comes to making the biggest purchase in our lives — buying a home. Even if you take out a home loan, you’re still required to pay some percentage of the sale price upfront. This down payment will determine how much you pay monthly for the mortgage; so the more you pay upfront, the less you struggle every month. As a rule of thumb, you should be able to pay at least 10% for the down payment in order to get a good mortgage deal.
If you’re a first-time homebuyer, you probably have no idea how much your ideal home will cost. Write up a list of all the must-haves for your home and browse online to see how much it would cost to buy a home that fulfills all your requirements. Take 10% of that price and voila! Now you know how much you are looking to pay for a down payment. It’s a big amount, right? Well, here are the 6 ways to save up for your dream home.
Open a savings account
If you haven’t already, open a savings account. Not only will you have a safe place to store all your life savings, but you can also earn money in small increments. The next time you receive your annual bonus or a monetary gift from a wealthy family member, you can chuck the money into your savings account and save it for the down payment.
Opt for auto-save
Everyone is prone to giving into the temptation to buy the pretty earrings or the new game console. But if you really want that dream home, you need to stay away from splurges. Thankfully, there’s an easy way to do just that. Have a fixed proportion of your paycheck go straight into your savings account. This is an automatic transaction, so you won’t even notice that some of your money is being stored elsewhere.
Start a budget
Do you eat out four times a week? Or maybe you drink a tall Caramel Frappuccino every morning. Your total expenses, when written on paper, can make your jaws drop. To avoid an empty wallet at the end of the month, use a spreadsheet to create a budget and keep track of all your receipts. Now, compare your net income with your current monthly expenses. If you have a good amount left over, good for you! But remember, you’ll have to pay the mortgage, homeowner’s association fees, maintenance fees, insurance, and taxes every month and housing expenses should not use up more than 30% of your income.
Reduce your spending
If, on the other hand, you barely have money left over, you should probably cut back on some of your expenses to make room for your future monthly housing costs. Cutting back on the early morning donut and coffee is a good start, but you may want to target something bigger. Take, for example, your current living situation. If you live alone in a one-bedroom apartment, you may want to consider moving into a studio apartment to save on rent. It can be tough, but think about the beautiful condominium you can buy with the money you save.
Check your interest rates
You were probably overly concerned with interest rates when you first signed up for a credit card or bought a car with a loan. Well, have you thought to look over them since then? If you have been punctual in your monthly payments, it might be possible to lower your interest rates. That’s right; you might be paying more than you have to!
Check your credit score
You know how you were worried about what colleges and employers will think about your grades? Unfortunately, those days are not over. As an adult, your credit score act as your grades. It changes based on how much you have borrowed and how many late payments you have. If you have been making timely payments, your credit score will be high. And just like your grades, a higher credit score makes you a favorable candidate for a new loan. You also get the advantage of paying a lower rate in loans, so it’s best to clean up your credit score before applying for a mortgage.
Buying a home is one of the biggest occasions of your life, so you want to make sure that you are ready. Even if you don’t have the funds for it now, you still have time to save up. Just follow the tips written here! And when you’re ready to buy a home, check out NuProp for a list of newly launched properties.
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