Although the idea of buying your first home is exciting, the reality can be another thing altogether. Whatever age you are as a first home buyer, the struggle is real. When it comes to saving for a down payment and closing cost, finding the property you want within your budget and being able to pay the mortgage, our brains go into struggle mode.
Don’t give up just because it seems hard. It is possible and if you follow these tips and stay committed to your goals, you too can become a homeowner.
Be Realistic and Clear About What You Want
Remember it’s your first home – which is not necessarily your dream home. Being clear about what you want requires focus on more than just picket fences and granite countertops in the kitchen. It means thinking through why you want to buy a home, how long you think you will keep it for, and what return you’d like to make on your investment.
To avoid distraction and overcommitting yourself, start by outlining the details of your ideal property – number of bedrooms, location, features etc. Don’t think about budget to start with. Just get the basics down on paper first, then you can scale your ideal up or down to fit your budget, as you start to research the market.
Consider taking a detour through a lower-priced neighborhood first. Remember it’s your first home not necessarily your dream home. Buying a lower-cost home means you won’t have to save as long for the down payment. As the home’s value goes up, you can use the equity you’ve built to help you get into a higher-priced dream home later on, particularly if you find a fixer-upper and you’re good at repairs.
Start Start Saving Now
The benefits of setting up a savings routine early in your life cannot be undervalued. Even the smallest savings can make a difference and solutions such as Acorns are a great way to get into a routine of saving and understand just how easy it can be. The habit of taking incremental amounts from your income on a regular basis is no doubt already in place in your life hence- $2 ATM fees, in-App purchases on your smartphone, gym membership fees auto drafted from your bank account. You’d be surprised how easily you can transform that habit into one of savings!
However, the process of saving a few dollars here and there, will take you forever to save for a down payment. Since you already have these habits in place, it’s time to upscale them. Find high interest earning bank accounts and dedicate a specific amount every month or pay period to your savings. If you know how much you want to save, and can calculate the time it will take to reach your goal, this may motivate you to cut back more, save more and reach your goal faster.
Begin to manage your money, if you don’t your money will manage you. Create a really detailed money management plan and stick to it. Take out only the cash you need each week to limit incidental purchases and cut back wherever you can on general expenses. Anything that’s available or leftover can be channelled into savings.
Strategic Savings and Investing
Taking a strategic approach to saving can also be useful. Work out how much your down payment is going to be and get a rough idea of your mortgage payments, then try to integrate these numbers into your budget now.
Divide your down payment by the amount of time you would like to be buy your home say 2 years and see how you can allocate that savings into small increments that you save each pay period. For instance if your plan to buy a $200,000 home with an FHA loan that requires 3.5% down, then you need $7,000 for your down payment. If you plan to buy your home in 2 years that would be $291.67 a month or $134.62 a pay period if you're paid bi-weekly. Once you figure it out automate your savings.
Here’s another great idea for those of you who still live at home as you are in the best possible position to do this. Decide what your proposed mortgage will be and put this into a savings account, along with other perceived expenses such as a monthly amount for the electricity bill, internet, insurances etc. Not only will you save a huge chunk of cash towards your down payment, you’ll also train yourself in a pressure free environment to start to live with the expenses of a home owner. As well, as being well on your way to having excellent financial management skills.
Get Your Hustle On
To raise money quickly, it pays off to turn your spare time into money-making opportunities.
Turn those baskets you been making for friends into a part-time, money-making enterprise. Or those fabulous girlfriend getaways you plan for you and your girls into a part time travel business. Babysit, tutor, or other part-time work.
Down Payment Assistance
There are many down payment assistance programs available. Take 2 minutes of your precious time and see whether you qualify for down payment assistance.
Whether you are living at home, all expenses paid, or living independently and struggling from paycheck to paycheck, there are always possibilities for you to achieve your home buying and wealth building goals. The essential ingredient is of course money, but creative thinking, commitment and patience are also pretty important and if you want it badly enough, the dream will be yours in no time.
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© 2017, Tonya Brown. All rights reserved
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