Buying a home is definitely one of the most exciting moments in your life.
The idea of buying your first home and all you can do to make it yours is exciting. You can paint the walls your favorite colors, decorate all the rooms, and make your yard a place of beauty — you’re in control.
Buying a house is rewarding. Once you turn the key and walk through the door, you realize that one of your dreams has come true.
However, once you start thinking about how to save for a house down payment or how to budget for your house payment, you may start feeling intimidated — especially if you’re barely making it from paycheck to paycheck.
Owning your own home means committing to making mortgage payments for the next 10 to 30 years. It is definitely a big commitment.
The idea of saving for your home can be overwhelming, especially if you are a first-time home buyer.
The trick is to take everything step by step. Don’t get discouraged. Here are some tips to help you save and be a little closer to buying a home and making your first down payment in no time.
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Know Your Budget
The very first step is to assess your budget. Once you start working towards a down payment, you need to check your monthly income, the savings you have, and if you have wiggle room in your current budget.
Be sure to take advantage of the free printables and spreadsheets in this post we have made to help you create your own budget and get started on the path to home ownership.
The amount of money you will need for a down payment depends on your situation and the purchase price of your very first home.
You may qualify for loan programs that require as little as 2 percent for the down payment to as much as 20 percent. But, keep in mind that the higher the down payment, the lower the monthly mortgage payments will be, as you are putting more money toward the actual principle, not the interest.
Loan programs with less than 20 percent down payment may also include higher closing costs and private mortgage insurance for your monthly payments.
Check Your Debts
We’ve all been there. You may splurge on a thing or two, which may easily result in thousands of dollars added to your credit card debt before you know it.
Before you start the process of buying your own home make sure you examine any debts you have: Credit cards, medical bills, student loans, car mortgage. Do you have any outstanding debts to pay?
If you are envisioning yourself as a home owner in the near future, be aggressive about paying your debt down. Once you have a debt payoff plan and/or have paid your debt in full, start saving for an emergency fund of $1,000 to $2,000 before starting the process of your home purchase.
Set A Down Payment Savings Goal
Once you have set your budget and your debt is paid off, it is now time to decide how much you need and start saving for your down payment.
A good rule of thumb is to aim for a mortgage payment that is 25 to 28 percent of your monthly income. If you have a $200,000 mortgage, you need to save about $40,000.
Aim for a 15-year mortgage. If you plan to have a $200,000 mortgage with a $40,000 down payment, you will pay about $1,000 per month, excluding the property tax.
The more you know, the more you can plan ahead, and the better off you’ll be in the long run.
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Set Automatic Deposits
One of the easiest ways to save money is to set it aside where you can’t touch it.
If your bank provides direct deposit, you can send a part of your paycheck directly to another savings account. If you can’t do that, then see if your bank has an option to do automatic transfers. Make an automatic monthly transfer to your savings, so, you don’t have to think about it or miss it.
Save All Your Extra Money
Put any gifted funds, side job earnings, and windfalls in your down payment savings.
Did you receive a bonus from work? Put it to your savings. Did your father give you $100 for your birthday? Put it towards your down payment.
No matter how small it is, every little bit helps. It helps you build the habit of saving and that will be a big plus once you’re a homeowner.
Meet With Advisers
Once you’re ready to start discussing the available home loans for you, book an appointment with a financial adviser from your bank or trusted financial institution.
Ask the experts in the field about any areas of concern or if there are potential roadblocks once they start reviewing your finances.
During the discussion, speak honestly about whether you still have any outstanding debt, the status of your finances, your job, as well as your plans. Being straightforward about your financial situation will help an adviser get a bigger picture of how to guide you through the mortgage process.
The financial adviser can tell you exactly how much you are working with, the time frame, and the possible monthly mortgage.
Start Small And Slow
If you think you are still far away from being a homeowner, don’t worry, you can still get the ball rolling! Start small and slow with your future savings goal.
Start putting aside $50, $100, or $200 every payday into your down payment savings account. This will help you set your intention and put you on a path towards saving more.
Are you trying to save for your first home? What do you think can make saving easier and faster?
“That is the heart and soul of the American dream, homeownership, the idea of being able to buy a house and start to build your family.”
– Wendell Pierce
