Among the list of very important to-dos when you are contemplating buying your first (or next) home is the somewhat daunting concept of making sure you are able to fund this adventure. Writing out your “must-haves” and picking out features you’d really love in a home is the fun part. Unfortunately, without the proper finances, your “must-haves” will quickly disappear into “never-wills.”
Before you even start setting money aside, there are a few things you should do to ensure that your money-saving plan is as effective as possible:
Check Your Credit Score
Knowing your credit score and what your credit report looks like will give you a better idea of the kind of financing you’ll be able to qualify for. Checking your credit early in the process means you will have ample time to work to bring up a low number and contact the credit bureau(s) if any errors are found on your report.
Keep Track of Your Monthly Finances
For at least several months before you even begin searching for homes, make it a priority to know precisely how much money your bank account sees coming and going on a monthly basis. This will help in two ways: you’ll get in touch with reality about how much mortgage you can potentially afford, and you may be able to zero in on some poor spending habits. The sooner you reign in your spending, the more you’ll be able to save.
Think About the Long-Term
In order to get the most bang for your buck, look ahead a few years before you buy a home. Even if you’re single now – do you want to get married and have kids? Maybe you’re a newlywed with no desire for children. All of these factors are good to consider before deciding on a home purchase. You’ll be much more likely to end up with a home that lasts rather than needing to move again in a few short years.
Once you’re prepared, it’s time to start saving for that down payment! You’ll also be putting money away in an effort to stick to a budget so that you’ll be able to easily pay your mortgage payment every month without stressing. While you’re saving, incorporate these tips into your daily life:
Create (and Stick To) a Budget
It may sound trite, but all you have to do is spend less money than you make every month, and voila! Anything left over after all of the bills are paid can go right into your house fund.
Open a Savings Account
While it is possible to start saving money with just one account, it can be challenging to reign in your spending when your checking account is just so full of money! By separating your money into two accounts – one for monthly expenditures and one solely to save for a new home, you’ll be more likely to keep your hands off the savings.
Talk to Your Payroll Supervisor
If you have trouble parting with your money, make it easier on yourself by asking your work payroll department to send a portion of each paycheck to your savings account. The bulk of your money will still go to your main bank account so you can maintain your life, but this way you’ll be saving money without even thinking about it.
Refrain from Spending Gifts
Anytime you receive financial windfalls (in the form of birthday or holiday gifts, work bonuses, tips, tax refunds or even an inheritance check), resist the urge to splurge and put the entire amount directly into your savings account.
Eliminate your Biggest Expenditures
While making small changes like buying generic fabric softener can make a difference, the most impressive way to save big is by cutting out some of your larger expenses. These may include things like cable or satellite tv/radio packages, vacations, cell phone plans and even buying a new car. If your old car is still running – make it work until you’ve bought that house.
Consider Downsizing Temporarily
It may sound strange at first, but if your current mortgage or rent payment is prohibiting you from saving enough for a down payment, think about making a move to a small, inexpensive apartment or a relative’s basement for a pre-determined length of time. It’s more work to move twice, but it is a great way to spend less and save more.
While it may seem like common sense, some people simply don’t think about taking on extra work to earn more while they’re saving. Take on any overtime opportunities at your current job and/or consider working a part-time job on the side. It will be a busy time, for sure, but in the end, you’ll have a new home and less debt to show for your efforts.