Once renters decide to make the jump towards owning a home of their own, they must figure out if they could actually afford a down payment. There’s no point in even looking at homes until you know what you can afford! So, to help expedite owning your dream home someday, check out these tips that will assist you in saving for a home.
Saving for a Home 101: Where to Begin
Budgeting
When it comes to saving for a home, the ultimate goal is to spend less money than you make. This will require you to create a budget that lays out how much you spend each month, what you’re buying and how much extra you generally have left over.
This breakdown of your spending habits will help you understand where exactly you can cut down. Of course, there are bills and necessities that must be accounted for, but maybe you can start with something simple like grocery shopping instead of going out for dinner.
Whatever you do, there needs to be some change in your spending so you can stop buying and start saving. By figuring out how much you are saving every month, you should be able to determine exactly how long it will take for you to afford a down payment.
Savings
If you’re trying to afford a down payment, one simple way is to save up all of your windfalls like annual bonuses and tax refunds. Unlike making small changes to your spending habits, windfalls can actually make a sizeable boost in your savings and even help you reach your goal sooner.
Otherwise, some people will even cap how much they’re putting into their 401(k) at 6%, which is where most companies stop matching it. Then, they will be able to put what they aren’t spending into their home savings.
However, if you’re desperate for a home, you can even dip into your retirement savings and funnel it towards the down payment. A home is an asset after all.
Downsizing
Sometimes, before you make the ultimate upgrade, it’s a good idea to downsize your living arrangements for a little while. For instance, if you’re living in a two-bedroom apartment, moving to a one-bedroom place for a period of time can save you way more than you’d think.
However, downsizing can also be applied to your future home. For instance, lowering the expectations and requirements on your ideal property will give your more flexibility in terms of financing. Besides, this may help you afford the down payment sooner.
If you’re attempting to save for a home and really aren’t sure how, consult these tips and you should be able to afford your down payment in no time!
