First-Time Homebuyer Saving Tips
Saving may seem self-explanatory. However, when you get down to the brass tacks of it all, saving for a home isn’t as simple or straightforward as it sounds. That’s why first-time homebuyer saving tips can be so useful.
Since the amount needed to buy a home is fairly substantial, the usual saving tricks don’t typically get the results on their own. Combining those little tricks with these bigger ideas is a great strategy to get a down payment ready.
Eliminate as Much Debt as Possible
Before the real saving begins, it’s important to eliminate as much debt as possible. If you want to get into a home before student loans are done, that is usually an okay financial move. However, credit card debt is another story, and reducing it should be a priority. (Please note that everyone’s situation is different!)
You should also generally evaluate your recent financial health. Check your credit report for errors. Make timely payments on credit to keep your credit score up. Mortgage lenders will be checking your credit history and credit score, so it’s best if you are aware of the details, especially if there are any errors to correct.
If you have recently taken out any cash advances or payday loans, you may want to reconsider buying a house. Take some time to get your finances stable and out of credit trouble before making such a big commitment.
Check out this infographic to see the results of ACCC’s poll on homeownership.
Downsize or Eliminate Luxuries
Life can get very comfortable with the latest luxuries. However, less money spent equals more money saved for a down payment. There are all sorts of ways you can downsize. Consider the following items to downsize to start saving money for your financial goal
- Trade in your car for a cheaper model.
- Rent a cheaper house or apartment.
- Downgrade electronic needs like phone plans with data. Stick to Wi-fi or basic phones.
- Cancel or shorten upcoming vacations.
Save a Bigger Down Payment- 10-20%
Currently, there are several loans available that require either no down payment or one that is just 3-5% of the cost of the home. While this is very enticing and may be just the ticket for some, this next first-time homebuyer saving tip suggests that you should save for 10-20% of the down payment.
A 20% down payment means you won’t need Private Mortgage Insurance (PMI). This additional cost can be avoided by saving longer. You will save money and have more of the mortgage paid off this way. Some lenders allow borrowers to cancel the PMI once they reach a point where they owe 80% or less, but not all do.
Another way to gain savings is to choose a bank or credit union that matches your saving efforts. Researching different lending institutions, in general, will give you the best chance of reaching your down payment savings goal quicker.
Once you have made the choice to begin the home buying process and your finances are stable, you can begin to save.