Saving for Your Dream Home While Renting
If you’re renting, but desire to own a place of your own, you’re not alone. Only one in 10 people who rent said they prefer renting over owning. Home ownership is viewed as an accomplishment to be proud of or a dream come true. However, the biggest barrier to achieving that dream is having enough money for a down payment.
The standard 20% down payment is not always required anymore. In fact, options may be available for down payments as low as 3% or 3.5% for different loan programs. The first step is figuring out how much you need to save, based on how much home you can afford and which loan programs you’re eligible for.
Get Yourself on a Budget
You build savings by spending less than you earn. Financial goals begin and end with a monthly budget. Stick to a fixed plan as much as possible. Print out a list of your monthly expenses and check them off — both to make sure they get paid, but also to have the satisfaction of knowing you are on track.
Set up a Separate Savings
Many people have trouble saving money. The simplest way is to create a dedicated bank account just for your housing fund, and then quarantine it from any spending. You’ll still have your regular checking account to pay the bills, but that special savings account is off-limits no matter what.
Once you have a dedicated savings account, tell your payroll department that you want a fixed amount deposited there every payday with the balance sent to your regular checking account. The savings will roll in happen and you won’t even notice as long as you’ve built a good family budget.
Save 100% of Any Windfalls
Getting a $3,000 tax refund or a nice year-end bonus? While it’s tempting to splurge a little, building up a down payment requires a lot of restraint. That applies both to your day-to-day expenses, as well as one-time infusions of cash. After all, if you’ve built a good budget, then you don’t really “need” any of that money … so it’s perfect for saving.
Save in Big Chunks
Cutting down on expenses can save you a few bucks each week. But you can make the biggest impact by cutting out the biggest expenses. Skipping your annual vacation won’t be easy, but take the money you would spend and put it directly into your separate savings. Cutting out the big bills where you can instead of pinching pennies is an effective way to build up savings quickly.
Look Into First Time Homeowners Incentives or Grants
First time home buyers are often able to take advantage of grants or incentives. While every lender is different, from their interest rates to the type of loan products they offer, it’s important to qualify about offers for first time home buyers.
Do your research. Reach out to a local real estate professional before locking into a mortgage lender.
Downsize Before you Upsize
Moving to a one-bedroom apartment from a two-bedroom apartment can drop your rent by 20% to 30%. Living small before you move into a new home is a great way to reallocate the unused rent into your housing fund. An added bonus? A smaller place will mean fewer boxes to move once you finally do find your dream home.
Spending less is the obvious way to save. However, working more and bringing home more money can supercharge your savings. If you are eligible for overtime, take every opportunity that comes your way.If you’re not, consider taking a second job on the side even if it’s only a few days each month.
Don’t Punish Yourself
The math of saving for a house may be straightforward. However, if saving feels frustrating every single day, you’re much less likely to be successful at it. Don’t let the frustration build up, take comfort in a simple pleasure once in a while.
Cut down on eating out, but consider cooking a fancy dinner once a week at home. Cut down on going to movies, but perhaps subscribe to Netflix instead. The idea is to save money, not to spend zero. You will find it much easier to save if you’re actually enjoying your life while doing so.
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