In a modern real estate market, the idea of saving money to buy a home may be intimidating. As median prices within the Triangle and due diligence fees have continued to rise, the thought of purchasing a home may feel completely out of reach if you aren’t already saving toward that dream. With a focused effort, however, saving for a home can be manageable and the dream of homeownership can be a reality. Follow these 7 tips to make it happen faster.
Plan wisely for a down payment
When you buy a home, you’ll most likely pay a down payment, which is money you pay up front on large purchases, especially houses. While conventional loans typically require 20 percent down, you may want to start talking to a trusted mortgage lender to discuss the options that are available to you.
Depending upon your circumstances, you may be able to pay less on a down payment. Knowing the types of loans available to you, particularly if you’re a first-time homebuyer, will be helpful. For example, if you’re a veteran, a VA loan may not require a down payment. For other types of loans, if you don’t have a full 20 percent down, you may be required to pay private mortgage insurance (PMI). Also, remember that saving more will also help you get better mortgage rates. Talking to a lender will help you know how much money you will want to save to purchase a home as well as what your objectives might be.
You may also want to talk to an agent about the cost of due diligence fees. These fees are in addition to a down payment but may result in the need for an additional large sum of money. Know what to expect so you can plan for the appropriate amount of savings.
Pay off your debt
If you have debt, one of the easiest ways to ensure you can purchase a home is to remove that debt completely. Paying off your debt will allow you to save more toward the purchase of a home. It will raise your credit score, which allows you to get the best rates on a home loan.
It also helps you maintain a good debt-to-income ratio (DTI), which approves your odds of getting a loan.
If you have credit card debt, it’s smartest to either pay off the debt completely or get your debt lower than 30 percent of the maximum allowed on your card. Keep your balances low, consolidate them if necessary, and pay them off every chance you get. The key is to make sure your debt is no more than 28 percent of your income and to prevent racking up additional debt while you’re in your home search. These details help lenders decide the details of a mortgage for you.
Budget
Creating a budget can help you reach your financial goals. You’ll want to begin by shooting for a specific goal. Put a number to how much you want to save, then give yourself a timeline so you can set realistic goals as you look for ways to stick to your budget.
Next, track your spending on paper or in a spreadsheet and begin looking for ways to stick to a tighter budget. From there, you can start to find places to prevent unnecessary spending and to identify where you can pull from for savings. Be sure to review your goals regularly to make sure you’re sticking to your budget and saving the appropriate amount you need.
Find a side hustle
One of the quickest ways to save up a little extra cash is to start a side hustle. Fortunately, in today’s work climate, there are easy side jobs that can help cash add up fast. Gigs like food and grocery delivery continue to stay popular and can quickly provide you with a financial reserve. So can online tutoring, babysitting, dog walking, freelance writing or graphic design, or cleaning houses.
To find the side hustle that works best for you, look at your skill sets, then take advantage of what’s available to you. You never know; a side hustle may even turn into a full-fledged career once you have your mortgage lined up.
Ask for help
Do you have a friend or family member who could offset some of the costs involved in saving for a home? If you do receive assistance in the form of “gift money,” you’ll need to talk to your lender about any stipulations and formal documentation needed for this kind of money.
There are even some down payment assistance programs that may be available to you. You could potentially investigate borrowing against your 401(k), but you’ll need to understand the tax implications involved with taking out retirement money early. Talk to your lender before you go through any of these routes.
Automate savings
A simple tool to save up money is to automate. Some employers allow you to designate a total that can be tucked away into savings, so check with your HR group to ask if it’s an option.
You can also use tech companies and apps like Acorns or Stash to save on a set schedule. With these tools, if you spend money, they round up for you and stick the extra cash into your savings account. In addition, some of these tools provide budgeting and investment tools that allow you to better plan for your savings. At the end of the year, you may have hundreds — or even thousands — of dollars saved up without even thinking twice about it.
Find a builder that offers incentives
If you’re willing to buy new construction, start looking into the incentives builders are offering. Many builders are currently offering thousands of dollars in incentives to potential buyers. Those incentives can typically be used toward closing costs, toward the home price, or toward upgrades. Talk to a Realtor or start doing some research on your own to find builders with the incentives that can make your dream a reality.
Get started today
It’s never too late to start saving. With these simple tricks and a little planning and effort, you can focus on saving up for the home of your dreams.
The Jim Allen Group provides access to information on this blog/website as a public service for educational purposes only. Although reasonable efforts have been made to ensure that all of the information made available is current, accurate, and complete…[read more]