Homeownership is one of the most significant achievements in a person’s life. Most people hope to become homeowners but the high cost of buying property can make some feel hopeless. But, hang on to that hope!
Coming up with the funds to cover a down payment for a house can feel like an overwhelming or impossible task. Saving up enough money to make this initial deposit is no small effort. You may feel as if your income is too low and your debts, responsibilities, and other costs are too high. But, you can do it!
There are a number of strategies you can use to start saving for your home down payment. The real trick is to employ a rigorous savings plan and make sure you are committed to putting in a genuine effort. When it comes to saving up for a home, you cannot afford to cut corners. Always keep in mind your ultimate goal – home ownership.
To help you achieve your dreams of homeownership, here are eight savvy things you can do to save enough money for a down payment.
1. Create A Budget
The first thing you need to do when you are saving for a house is to determine a realistic budget.
Prior to looking at housing options, you need to decide what you can comfortably afford. Do not look at property listings and assume that is the total cost of a home. In addition to the purchase price, you also need to account for mortgage fees, property taxes, home insurance, and an emergency fund for repairs on your future home.
Determining what your actual cost will encourage you to create a more realistic savings plan. Far too many people under-save for their first home and face a great deal of stress when they discover they have made a purchase they cannot afford. Remember, lenders want you to take out a mortgage. You need to be certain a house is actually affordable for you.
Budgeting is one of the most critical aspects of any holistic savings strategy. Once you have your budget and a proper savings goal, you can move forward.
2. Reconsider Your Transportation Expenses
Transportation is one of the biggest expenses most people have. While everyone needs to get around, most of us direct more money to this expense than we have to.
Anyone who has had to take a car to a mechanic knows how expensive vehicle upkeep is. If you are saving for a home with a partner, you can always consider downsizing to one vehicle. While it may not be quite as convenient, carpooling and vehicle sharing is an excellent way to save money.
Not only are you potentially generating savings from selling a vehicle, you’ll save money by cutting in half your costs for gas, auto insurance, or repairs. If you do not own your vehicle, you know how expensive vehicle payments are. On average, it costs roughly $9,000 to keep a car on the road for a year. Think of the difference that money would make if you could put it towards saving for a house.
3. Pay Off High Interest Credit Card Debt
Saving money is difficult if you spend heavily on interest. Most credit cards carry an interest rate of between 16 and 30 percent. The best approach is to tackle accounts with the highest interest rates first.
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Rather than paying only the minimum payment, cut costs elsewhere so you can apply extra to your principal. You’ll begin eliminating these high interest debts one at a time. Once you have paid off one debt, you can pay off the next one even faster by applying the amount you were paying to the first card to the second card. This is on top of the minimum you’ve been paying all along. Not having to make as many minimum payments allows you to direct even more money to the next debt.
Saving money by reducing the amount of interest you pay helps you save for a home even faster. Also, if you are carrying too much consumer debt, sometimes that is enough to disqualify you from receiving a mortgage loan.
4. Eat Out Less
Restaurants and take out establishments are expensive. If you are trying to free up some money to put towards your house fund, you can always spend less on food.
Cooking at home is almost always cheaper and as a bonus, homemade meals are usually healthier. You should also consider packing lunches for work rather than eating out or ordering in.
5. Spend Less On Entertainment
There are plenty of ways to trim your entertainment spending. If you go out to the movies often, consider streaming movies online instead. If you buy books often, consider using a library card.
Think about your hobbies and consider ways to make them less expensive. Any money you are saving, you can add it to your house fund.
6. Spend Less On Clothing
There are ways you can reduce your clothing costs. Try to make your current wardrobe last a little longer. Keeping up with the latest fashion seems trivial when you compare it to owning a home.
When you do buy clothing, sometimes spending a little extra on a quality item is a wise investment. Replacing clothes often can eat up your funds. Again, your clothing savings can go into your house fund.
7. Spend Less On Vacations
Vacations are almost always expensive. Consider vacationing less or redefining what a vacation is. Staycations are becoming more popular and are a great way to save money.
Consider taking a road trip rather than paying for a flight to an exotic location. Explore your own backyard and try camping. You can still get away without spending thousands of dollars. Put those savings towards your house!
8. Get The Most Out Of Your Paycheck
When you get any sort of raise or bonus from work, you should not use that money to live more lavishly. This extra money should go directly into your house fund. If you lived comfortably off your previous income, why change things?
Even without an increase in pay, there are always ways you can trim your spending and free up more of your paycheck for your house fund. Consider automatic transfers. When your paycheck is deposited, have a set amount go directly into a savings account you have earmarked for your house fund.
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