Buying your first home is a very exciting time, but it can also be stressful when you think about saving for a down payment – no one wants to live on Ramen Noodles for 3 years! Aside from dealing with realtors, trying to keep up with lingo, and not becoming emotionally attached to your dream home before your offer is accepted, you should be making sure your finances are in order and you have money saved for the down payment.
Two of the most important things to consider before you even start looking at homes include:
How much you are looking to finance – what can you comfortably afford?
How much you will put down as a down payment?
When it comes to the down payment, more is always better, especially if you’re looking to avoid private mortgage insurance, required if you are putting less than 20% down.
Here are 5 things you can do to save more money to buy your first home.
Get a second job. It’s not feasible for everyone, but working a few extra hours a week can result in quite a bit of savings. If you already work a traditional 9-5, try picking up a waitressing or bartending gig a few nights a week. It doesn’t have to be forever, but bringing in some additional income is a great way to beef up that down payment quickly.
Cut back on luxuries. Many people are cutting the cord on their cable and land line services. With so many other ways to watch television – like Netflix, Hulu, Sling, cutting the cord on cable is a no brainer. Most people have cell phones these days, so ditching the land line is a simple fix that could save you $30 a month!
Make it automatic. Once you determine the amount of money you can safely put aside each month, have it automatically taken from your paycheck or transferred from your checking account to a savings account. It will prevent you from getting the urge to splurge on something that you probably don’t need – but still accessible in an emergency.
Get a gift. If borrowing money from a family member is an option, this could be a viable solution to help you obtain some of the funds you need. There are some requirements that need to be meet, so make sure your family member is willing to provide the documentation needed.
Bonuses, tax refunds, etc. If you are expecting a tax refund, end of year bonus, or a raise – funneling all those additional dollars directly into your down payment savings fund is a great idea. It’s extra money that typically isn’t earmarked for monthly bills, so you probably won’t miss it anyways.
When it comes to saving for a down payment on a home, try not to get too overwhelmed with your goal. Lower your expenses, seek out extra streams of income, and look out for any and every way to save extra money that comes your way. But if 20% down is not in the realm of possibility, you still may be able to get into a house with a much smaller sum down.
Have questions on any part of the mortgage process? Give me a call, I’d be happy to help!
Vice President, Senior Mortgage Lender
NMLS MLO ID: 532621