Even though people recommend putting a 20% down payment on a new home, there are first time home buyers who put down as little as 3%.
That being said, there are significant benefits of being able to put down a good chunk of change.
Opting to put down a substantial amount upfront inevitably means better loan rates.
Plus, when you start saving for a down payment, it’s crucial to create a budget that sticks.
Are you saving for your first home?
Here are some essential tips for saving for your next big purchase.
The first and most obvious step in your journey is to start saving!
You can start by setting up auto-withdrawal from your checking account into a savings account every time you get paid.
Save as efficiently as you can by following our next steps, like getting rid of extra expenses and knowing what you can afford.
Know What You Can Afford
The bigger your down payment is, the higher-priced home you can afford.
It’s important to remember that in addition to a down payment, you’ll also pay for closing costs and agent fees.
Opt to work with a lender who offers a low agent fee and cashback options.
As a rule of thumb, you don’t want to pay much more than 25% of your take-home income on your new mortgage.
If your monthly income is $5,000, don’t invest in a home where your mortgage payments are higher than $1,250.
Get Rid of Unnecessary Expenses
When it’s time to hunker down and start saving for a house, take a closer look at all of your current expenses.
Do you utilize ALL of your monthly subscriptions? Could you cut back on going out to dinner?
The more ways you find to save, the faster you’ll be living life in your new home.
Be Prepared to Put down at Least 10%
Even though you might be able to finagle putting down less than 10% on a new home, don’t do it. The best rates will be yours to choose from when you have at least 10% to put down.
If you can strive for 20% when you’re saving for a down payment, you’ll set yourself up for success with a competitive loan rate.
Get out of Debt
Although it might be tempting to go into more debt by purchasing your dream home, it’s often a better idea to get out of prior debt before saving for a down payment.
If your debt isn’t too high, you can work to pay off your debt WHILE you save for your new home.
If you have to wait a little bit longer to wake up in your new house to alleviate debt, it’ll be that much more gratifying.
Stick to Your Budget
Don’t deviate from your budget. If you cancel certain subscriptions, don’t sign up for new ones. If you make a food budget, stick to it, and check-in to make sure you’re not overspending.
You’ll be putting into practice valuable habits to carry you through your mortgage payments and any future home maintenance and renovations.
Saving for a down Payment Is Exciting
Saving for a down payment for your first home is both exciting and empowering! Just make sure you take the right steps to ensure you’re saving enough money and setting yourself up for success.
If you have any debts, work toward paying them off first. The faster you eliminate debt, the closer you’ll be to waking up in your dream home.
Start saving now! Take a look at some of our listings in your area to start getting excited about saving for a house!