A first home is a special milestone. This is a chance to leap into the first steps into full fledged adulthood. One of the most important aspects of buying a new home is finding the funds for a down payment. Most lenders require the prospective applicant to demonstrate they have saved a certain amount of money in order to qualify for a home loan. Fortunately, there are many ways to save that sum.
Find Out How Much You Should Save
Many potential first time home buyers do not know how much they need to save in order to pay for a home. Now is the time to find out. In general, mortgage lenders expect all buyers to have at least ten percent in savings. A good mortgage will typically account for no more than a third of the buyer’s take home income. It’s also important to keep in mind that lenders also do not want to see that you’re carrying much debt. Now is the time to think about how to accomplish other goals such as paying off any credit card debt and student loans.
Think About Your Time Frame
Buying a first home can take time. It’s good to start the process of thinking about it right now. Set up a short time and long term time frame. The short term should include thinking about your present housing situation and where it may fall short. Over the long term, it should include looking at potential neighborhoods in person. Stroll areas that appeal to you directly. Go to open houses and see what’s on offer. Open houses let you see houses directly and examine them from attic to basement in great detail. Know where you want to be six months from now, a year from now and five years out.
Create a Streamlined Budget
Now is the time to create a streamlined budget. You can still travel now and then, however, it’s also important to pay close attention to all the little details that will add up over time. Avoid spending money you don’t need. Make coffee at home rather than buying it on the way to work. Buying items like toilet paper in bulk can save money. The same is true of other changes. Put off buying that second car. Continue using your current model. Think about using public transportation to get to work or take a walk there and save on the fares.
Bank Any Windfall
If there’s an unexpected windfall, it’s best to bank it rather than spend it. If you file for the Earned Income Tax Credit, take the money that’s being deposited in your account and keep it right there. The same is true of any and all raises as well as an inheritance, a bonus check or any other funds that are not needed right now. Designate them as part of your home down payment plan by putting them into a separate account designed solely for this purpose.
While working hard and saving money for a down payment are good, keep in mind that life may have other plans. You may face other bills such as car payments, health issues or a sudden layoff. It’s crucial to have an emergency fund on hand that you’ve built up in advance. This will make sure you can meet such expenses with ease. Any sudden financial issue should also not push you away from your ultimate goal. Your goal is to keep saving up enough money for the kind of first home you’d like to live in going forward.
Taking the long view is crucial. Saving up enough money for a first home can take lots of time. You should never lose sight of what you’ll get in turn. You’ll have a first home where you can set down roots and enjoy life.