You’ve seen the mortgage commercials and lately all your close friends are buying homes and it has you wondering “Can I also afford to buy a house?” No time like the present to start saving. Create a nest egg for your new home by following these tips. Traditionally, home buyers will need a down payment between 5-20% of the purchase price. The lenders look at this as an upfront investment. If you are a first time home buyer, veteran or have a low income — it’s possible to qualify for down payment assistance. Try HUD, FHA, VA or local homeowner programs database.
1. Pull your credit report. Know what is on there and what your current score is. Go to annualcreditreport.com to obtain all 3 bureaus for free.
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2. Calculate all your debt. Pull out your budget sheet and simply calculate how much you spend each month on your debts, and it will quickly show you that eliminating this debt is the fastest way to free up money. Once this money is freed up from payments (paid off) it can easily be re-directed to your savings account. Plus, the sooner you pay off the debt, the less interest you are paying and that too can be money saved! Consolidation loan is also a great idea to save on interest. Pay one loan payment opposed to several monthly.
3. Decide how much you can afford. Do your research to determine how much you can afford. I found FHA calculator very helpful in determining if I can afford the mortgage and how much I need to make/save. Start with the end in mind by finding the average home of the area you wish to live in. Never buy a home with high payments that will leave you strapped and unable to provide for financial future.
4. Use your future home purchase as your motivation. Whether your down payment is going to be $10,000.00, $15,000.00 or even more, the bottom line is…it’s going to take awhile to save up this money. Start with making yourself a visual reminder of what you are saving for. Find a house similar to your dream, take a picture of it, print it out, clip one out of a realtor magazine or even get really creative and design a motivation board! Write things like “My future home!” draw a jar with dollar levels and fill it in with color to show how much you have saved. Having a visual always helps us stay on track.
5. Now that you have identified your budget, conquer it! At this point you have your numbers, goal and motivation. It can be a long process saving to buy a home, so now is the time to start saving money! Celebrate your saving milestones along the way to keep from getting bored.
Remember that when buying a home, everything is open for discussion. From the price you pay, to mortgage interest rate & fees. All of these are negotiable. If you want to save money, you really have to shop around and be informed. These are just a few tips that can help you save money, doing your homework is the crucial part. Have fun with it and good luck on your journey!