Saving for a new home has become easier, with some mortgages requiring lower down payments. While you can pay as little as 3% of the purchase price, it’s still best to save more money before you start your new home search in Herriman. Remember that you’re not only saving for a down payment but also for closing costs, funds for unexpected repairs, and homeownership expenses. Here’s how you can bulk up your savings:
1. Skip expensive habits that are not necessary.
While you shouldn’t say goodbye to all of your life’s luxuries, it’s best to consider cutting down on your expensive habits that are not actually a necessity. You can try to cut back on your daily Starbucks coffee, taxi rides, frequent online shopping, salon visits, fancy meals out, pricey cocktails, and movie dates.
Keep these things as a treat and go for other affordable alternatives. If you’re a smoker, use your home buying goal as your motivation to quit. Giving up this habit will not only save you about $2,617 per year but will cancel out all other costs that come with being a smoker.
2. Cut down on household expenses.
Another way to save the most money for your home is to find significant expenses that you can cut from your budget. You can cut down on your cellphone bill by using apps like Skype to connect with your family and friends. You can consider getting rid of your costly subscriptions such as Netflix, magazines, and cable service. If you have a spare room in your apartment, you can earn a side income by renting it out.
3. Open dedicated savings account for your down payment.
Keeping your down payment funds in a separate savings account can pay off in the long run. Since it will be out of sight, you’ll be discouraged from reckless spending. You’ll be forced to budget and learn to live on the funds available on your checking account. You can also opt for high-yield savings account if you want a higher interest rate for your savings.
4. Pay down existing debts.
Debts such as student loans, credit cards, and auto loans can make it more difficult for you to save for a new home. This debt load will also negatively impact your debt to income ratio and can lower your chances of getting approved for a home mortgage with a better rate.
Prioritize paying off high-interest debts while giving minimum payments on all others. Do whatever you can to pay off your debts. If possible, you can take overtime work each week, get a weekend job, or take on freelancing opportunities.
5. Don’t splurge with financial windfalls.
Holiday gift checks, tax refunds, work bonuses, and rebates can bring extra money to your household. While it’s tempting to be an extravagant spender after getting a windfall of cash, remind yourself of your savings goal. Use the money to increase your savings or pay off bad debt.
Saving for a house requires constant hard work, determination, and discipline. These strategies will help you grow your savings so that you can soon have the keys to your dream home.