Saving for a Down Payment
Here are a few tips for how to save up for a down payment for a home.
One of the challenges many buyers face, especially first-time buyers, is saving up enough cash for their down payment and closing costs.
The first step is to set a goal. The best way to set a goal is to speak to a loan officer. They’ll look at your income, determine how much your monthly payments can be, and translate that into a purchase amount. They can then estimate what you’ll need for closing costs, so you’ll know how much money you’ll need to save to afford a home.
To figure out your income, you not only have your day job, but do you also have a side gig or second job that brings in extra money? The idea right now is to bring in as much cash as possible. Next, take a look at your expenses such as rent, dining out, groceries, utilities, cable, and more. Identify where every dime you bring in goes, then see what you can cut.
Can you cut out bad habits, move to a place with cheaper rent, or go out to eat less? Did you know that the markup for going out to eat is 300% compared to cooking at home? A $15 lunch can be made for about $5 at home. Just doing that will save you quite a bit.
"Identify where every dime you bring in goes, then see what you can cut."
Look at your cable and other TV bills; how much are you spending? Remember that every nickel you spend is not going toward your new house. Sink every penny you save into a savings account; you won’t get much interest off it, but at least it’s money you won’t touch.
The next thing to look at is your debt. How much are you spending on credit cards, and are those debts increasing or decreasing? Pay off your credit cards, then the money you’d be spending on those payments will go toward your house. Paying off credit cards also raises your credit score and makes you look much better to mortgage lenders.
Certainly, get your credit card spending under control. One of the best ways to do that is to put your credit card in a resealable bag, fill it with water, then put it in the freezer. If you don’t have easy access to the cards, you won’t be as tempted to use them.
If you want more ideas of how to save or have any questions, give me a holler via phone or email. We’ll find a way to get your savings on track.