If buying a home is in your future, you should start saving now
Are you really tired of paying thousands in rent and not having anything to show for it? Are you ready to move out of your tiny house and get into a home with some space to spread out? If so, it is a great idea to start planning for the purchase of a home as soon as possible. The earlier, the better!
You will likely need to put down 10% or more (depending on your lending institution and location) in order to get the home of your dreams. With the median house in the United States costing around $295K, you will need a good chunk of change. Feel free to contact me, Tricia Carlson, and I can give you an update on the latest interest rates, a general idea of what lenders are asking for, and some recommendations of lenders for you to contact for more information.
Saving that 10%+ may seem like an impossible task, but you can do it. Here are some additional tips to get you saving for a home of your own.
Know your credit score and beef it up
Finding out what your credit score is and looking at ways to fix damaged credit are great ways to help you in your pursuit of owning your dream home. By paying off high interest cards as fast as possible, you will be able to save more money towards your down payment as well as raise your credit score. I can also give you some suggestions and help guide you on additional ways to raise your credit score.
Create a budget and follow it
This is the most obvious way to get a handle on your expenditures and find ways to save. Creating a budget is uncomfortable and sticking with it can be even more unpleasant, but in the end, it will be worth it. Create a spreadsheet of all your expenses. Find ways to eliminate as many of the nonessential bills as possible. Look at how often you eat out and go to the store. By eliminating trips to the grocery store and cutting down on take-out you can literally save hundreds of dollars a week.
Many experts will tell you that budgeting using envelopes is a good way to go. Taking out how much you budgeted to spend on groceries for the month, what you need for gas, and one for extras, etc… will help make your budget more concrete and cause you to take a hard look when you cheat! When you are thinking about eating out, you can just look in that envelope and see what funds you have available for the rest of the month. If it’s empty, you know you have to get cooking.
Cut the subscriptions
You may not realize how many subscriptions you have each month. Make a list of all of them, and get rid of all the ones that you don’t use on a daily or weekly basis. Many people are up to 3-5 streaming services. Yikes! That is a lot of television time, or you really aren’t using them enough to justify paying for it every month: $12.99 may not seem like a lot, but take that times four and you have saved almost $60 a month! Maybe you have cable instead, or maybe you have both! In that case, you really should evaluate. Should you give up cable? Yes, it’s hard to give up the 150 stations because you never know… but let’s face it, you likely only watch five of those stations. Determine if you can stream your faves rather than paying for cable.
Determine how much you spend on magazine subscriptions and apps, how about that clothing company that you subscribe to. Do you really need it or just want it?
Take all the money that you save each month and put it in a separate savings account. Even if you have a savings account, it is best to open another account that can’t be touched. If you have a larger chunk in savings and aren’t going to look for a home for a while, check with your financial adviser. They can help find a home for those funds to draw more interest and help you save even more!
Negotiate your salary
Have you been working without a raise for a long period of time? Have you asked for a raise recently? If not, it never hurts to ask. If they say yes, you can take any additional pay and put it straight into savings for your dream home. If not, no harm, no foul!
Get a side gig to help save a little extra money each month. Side hustle money will add up quickly. Drive for Uber a couple nights a week, shop with Shipt an hour a day, bartend on weekend night, and put that money into savings. It will add up quicker than you think.
Go small, save big
If you are renting, consider downsizing for the next year or two. Move from your two-bedroom to a one bedroom or go from a floor plan with high square footage to lower square footage. It might be a tight fit, but the money you will save will add up quickly.
Save less for other things
Maybe you have been socking away a ton of money into your retirement account. Good for you! While you are saving for your dream home, consider saving just a little less into that account. If you are a long way from retiring, you won’t notice the difference. Again, talk to a financial advisor before you make big changes.
Pay down your debt
As I mentioned above, getting some of your high interest credit cards off your plate will help with your credit and get your savings moving in the right direction. The less debt you have, the better you will look to a lender, and the more you can save towards your down payment.
Do you really need it?
Ask yourself that question about all the nonessential things that you are purchasing. Give yourself 30 days to wait to purchase any of those items. You can write down the date, where the item is located and how much it costs. Then, after a month, reevaluate whether you need the item or want the item. Many times, you will find that you have lost the desire for that item!
Whether or not you are looking to buy in a year or five years, saving for your dream home is a good idea. You don’t want to live with your best friend forever, and someday those noisy upstairs neighbors will have driven you completely insane. So, start saving now, and contact me, Tricia Carlson at Five Star Realty; I can help!